By Bill Adams, Founder, Adams Realtors & Adams Commercial Real Estate
Welcome to the May 2023 Intown Atlanta market report. Along with the usual overview of this month’s numbers, I’ll talk about the drop in home sales in Atlanta and examine some of the possible causes.
For May 2023, the Average Sales Price (ASP) for the intown Atlanta market is $708,013, a $439 decrease in ASP over the last month and a 9% increase over the last year. This is the first time in recent memory that the market has experienced any kind of decrease in Average Sales Price. Although the drop is only .00062%, it may be an indicator of weakness in the Intown single family market.
The Average Number of Days on the Market (DOM) rose to 33 days. This is an increase of three days over the last 30 days and six days over the past 12 months. The increase in the Days on the Market is another sign of weakness.
Over the past year, 1,728 homes sold. This is a decrease of 52 units from April’s year-over-year number, a fall of 690 units over the last year and a decrease of 938 units from 24 months ago. Of the 39 markets that make up this report, only four markets – Cabbagetown (28%), Great Lakes (10%), Pine Lake (7%) and Poncey Highland (38%) – experienced a year-over-year increase in the number of homes sold. All four of these markets are relatively small, and thus any increase or decrease in unit sales is magnified.
This month, I would like to examine the causes of the drop in sales in the Intown Atlanta market. The sales numbers for this market reflect a nationwide trend in residential real estate. The increase in home mortgage interest rates is part of the problem. We often hear about buyers, especially first-time buyers, being priced out of the market because of higher rates. What we don’t often hear about, because it is harder to quantify, are sellers also being priced out of the market because of high mortgage rates. If a seller had the good fortune to secure a home mortgage two years ago, that mortgage had an interest rate of under 3%. If that person were to sell their home today, his or her replacement property would have an interest rate of close to 6%. They might not be able to or want to afford a new and higher monthly payment.
Higher home prices also play a big role in reduced transaction volume. For the first-time buyer and for the sellers that become move-up buyers, the combination of higher interest rates and higher home prices makes buying less appealing. As we all know, the move-up buyer frees up inventory by selling their home to purchase another, usually more expensive, home. If these folks don’t move, the market stalls.
Another significant part of the inventory problem is the role the huge Baby Boomer generation plays in the housing market. Many older homeowners are staying put. They may own their home free and clear or with little debt. They may be in a multigenerational community with friends and amenities close by. With more in-home health services available for seniors, many of them are quite satisfied to age in place in their long-time residences.
Finally, in the Intown Atlanta market, there are many barriers to increasing the housing inventory. One is the lack of available and affordable land. Most communities in our market are fully developed, mature neighborhoods with little available, buildable land. Zoning regulations often prohibit the level of density needed to make the numbers work where land is expensive. Also, in many cities, the time from applying for a building permit to getting a certificate of occupancy is unnecessarily long and filled with time-consuming hurdles which impact the availability of new inventory.
To end on a positive note, I do see some easing of the inventory problem. Interest rates, which have trended downward recently, will continue to fall making housing more affordable for both new buyers and move-up buyers. While I do not see house and land prices falling, the rate of price increases may slow or plateau. I do see zoning regulations easing to allow more density.
Finally, the Baby Boomers are not going to live forever. The first cohort of Boomers is turning 77 this year and they are bumping up against the actuarial tables. According to the Social Security Administration, a male born in 1946 was expected to live 72.7 years while a female was expected to live 78.4 years. The final act of one of the most impactful generations the country has ever seen may be to ease the housing inventory shortage by moving on to their eternal reward.
Looking for a home or need help navigating the Intown Atlanta housing market? Please reach out to us at 404-688-1222. Questions or comments about this market report? Reach me at wtadams@adamscre.com.