We are in an interesting time in our housing market right now. It seems higher-priced homes are not moving as fast as they have been, while homes under $400,000 in the metro area seem to be flying off the shelves.
From what I’m hearing from the agents I work with, we may be seeing the results of the kinds of homes that have been built over the last six years. With land becoming so expensive, it is tough for a developer to buy land and build houses they can sell for under $400,000 in many parts of Metro Atlanta. And coming out of the recession, Atlanta boomed adding more than 90,000 new people to the area every year. There was so much demand that inventory had become scarce. So developers were buying what land they could find and building more expensive homes. Somewhere along the line, demand for those expensive houses started to wane and many are sitting on the market longer than they had been.
Not much has changed for the market of houses under $400,000, and as a mortgage banker, it is like two different worlds. When I qualify a homebuyer looking in the higher-priced markets, they get to make offers lower than the list price, there isn’t a ton of haggling and they ease into a contract on their new home. When I qualify a homebuyer looking in the under-$400,000 market, it is still a battle to get their offer accepted.
We haven’t built a lot of homes under $400,000, yet we have a significant demand for them. Homebuyers in this market are still in many cases having to offer list price or higher and are at the will of the seller as to when they will be required to close. Unfortunately, without increased densities for the properties that developers are buying, it will continue to be hard to build houses in that market if you want to build in a desirable area.
If you tried to guess how our market should look with what’s going on in the economy, you might say that the higher-priced market is behaving normally. There is a lot of tension in the world economy and many are in a wait-and-see mode. So in some ways, the market for higher-priced homes is mimicking our investor-economy. I have not dove deep into the numbers like I usually do, but while the higher-priced market may feel like it is slow, in reality, it may just be what we would consider a normal market right now. Investors say that having six months of inventory is a healthy market where house prices are rising, but not too quickly. We have been well under that kind of inventory since 2012. In fact, we’ve been hovering close to 2 months, which is the lowest in recorded history, for the last couple of years. Once our 2nd quarter numbers come out in a couple weeks, I’ll take a deeper dive into that data.
But in the under $400,000-market, you can probably bet that inventory is still at or near 2 months. It’s tough for folks in that price range to purchase, which is why the rental market is so hot right now. Apartments are being proposed in communities all over the area.
While the under-$400,000-market is already hot right now, it sure feels like the higher-priced market is waiting to explode.
Geoff Smith is a mortgage banker with Assurance Financial focusing on residential home loans for refinances and home purchases.
*The views and opinions expressed in this column do not necessarily reflect the views of Assurance Financial Group