Q2+ Market Update
In this blog we will discuss:
· National v Local Real Estate trends. Economic woes and election year pros
· The state of inventory in the North Atlanta Suburbs
· How interest rates affect prices. Are prices going down?
· How the National Association of Realtors (NAR) lawsuit affects you and what changes we are making
· Who can afford a house – How the affordability crisis and population change is affecting the Atlanta market.
· And who is actually moving? The 5 Ds of Real Estate… Have you heard of the sandwich generation?
Are you wondering why the Q2 PLUS? The plus covers the extra time we took advantage of to see where unemployment is heading, and therefore where the economy is heading, hopefully shining light on where the Fed is heading. That plus has gifted us with valuable insight to be able to move forward with more accurate information.
Many stars have aligned which have the potential to make Fall 2024 a record-breaking real estate season in North Atlanta!! Those stars are:
· falling interest rates
· increased inventory
· increased buyer demand
· the presidential election cycle
We’re going to touch on each of these topics so that you can understand how the market will affect YOU in the coming months.
1) National Trends
National economic trends are concerning and encouraging. The concerning part is that we may be entering a recession. The Economic Times, in its recent article by Conor Sen entitled, Fed should Cut Rates Swiftly — Recession or Not, said:
“If we really are heading into recession, there’s not much disagreement on what the Fed should do: cut interest rates, a lot and fast.”
It’s no secret… Recession is bad. But its effect on the housing market is often good! This chart shows that home prices have actually risen in 4 of the last 6 recessions. Something to keep in mind during the next few months, especially if you are thinking of selling…
The same goes for election years… This chart shows that prices go up during the year following presidential election cycles for 7 out of the last 8 elections. The exception was 2008 and we all know there was a lot going on then.
But wait! There’s more. In 8 of the last 11 presidential elections, mortgage rates have gone down in the months leading up to the election.
I’m sure that’s just a coincidence. No conspiracies to be seen here! But are you getting this? There are some very interesting, pro-real estate, stars aligning that are encouraging for those wanting to make a move.
Take all of this information and combine it with what prices did in Q2 in the Top 10 North Atlanta suburbs, and it could get wild. Take a look at what happened with prices.
Milton GA had the biggest price increase in Q2 with a 23% increase to $1.6 million. Lake Lanier experienced the least increase remaining even at $1.2 million, which is understandable since it is more of a second-home market and covers a vast geographic area. Johns Creek, Roswell, and Suwanee also had significant appreciation at 15, 13, and 12%, respectively.
Now let’s discuss where national meets local, in particular, how lower interest rates will affect local buyers and sellers. Patrick Bet David anticipated this on his July 31st podcast when he predicted the flood of buyers coming into the market due to rate cuts:
“The moment rates start going, there’s going to be buyers… In markets like ours, like the one we’re in right now. The moment rates drop, watch the floodgates open of buyers coming back on.”
We are already seeing hints of this in each of our local markets. As inventory has increased, buyers have gobbled up whatever is available. These are wise buyers who realize they can date the rate and marry the house!!
2) Inventory
Is inventory rising in Atlanta? Definitely. Active listings in July 2023 were about 17,000. One year later they are about 24,000. Ansley’s market report breaks down statistics by area for all of metro Atlanta. It reveals many areas where inventory has increased so much that they have moved into a seller’s market, meaning they have approximately 6 months’ supply of inventory.
Some of those areas are South Atlanta with 5.9 months, Collier Hills with 9 months, Rabun County with 7.1 months, and Ellijay with 5.9 months.
Let’s jump back into our Top 10 North Atlanta Suburbs to see how many months of inventory we have heading into this potentially exciting fall market.
Suwanee and Sandy Springs have decreased inventory going into July, with 1.5 and 1.3 months of inventory, respectively. Only Lake Lanier has reached a seller’s market with 5.9 months of inventory followed by Milton with 4 months. Lake Lanier is partially a second-home market and Milton, with its $1.6 million average price tag, is understandably a slower market. The remainder of the suburbs range from 1.3 months in Dunwoody to 2.6 months in Cumming.
In Q2 we saw an increase in homes sold in Alpharetta and Johns Creek, but especially in Suwanee.
Even though inventory was up in each of these areas, prices still increased significantly! Pent-up demand is out there! Buyers have grown tired of waiting. Heading into July, only Sandy Springs and Dunwoody had reduced inventory so if interest rates fall, those two markets will be especially competitive.
Related to inventory is how many days newly listed homes remain on the market before going under contract, referred to as Days on Market.
Nationally, Days on Market were up from 45 to 50. Locally, the North Atlanta suburbs that followed that national trend were Lake Lanier, Roswell, Cumming and Marietta. The big local exceptions to the national trend with less Days on Market in Q2 2024 were Milton, down by 25, Johns Creek – down by 22, and Suwanee – down by 10. If we head into a market with lower interest rates, days on market will shrink even further!
The challenge with inventory is high buyer demand. This is exacerbated by the ever-increasing population in Atlanta. Josh Green of Urbanize Atlanta says:
“According to [the Atlanta Regional Commission] estimates, Atlanta’s 11-county metro added 62,700 residents over the year prior to April, for a total population of 5.2 million.”
Not all of these new residents want to buy homes, but many do and they have quietly joined the sidelines anxiously awaiting more inventory and/or lower interest rates!
3) How will interest rates affect the market?
How do interest rates affect supply, demand, inventory, and prices?? When interest rates are high, typically, prices are low. But these recent months have not born that out in the Top 10 North Atlanta Suburbs. Usually, when rates are high, the number of homes sold decreases. This makes sense because fewer buyers can afford to purchase a home. Demand goes down. But the current lack of inventory combined with the increasing number of buyers, plus their mounting frustration of taking so long to find a home has led to mixed results. Four of our 10 markets show an increase in number of homes sold, while six show the expected decrease.
Now let’s get personal. What is the real effect of interest rates on your mortgage?
If you bought a $500,000 house in April 2024 at a 7.52% interest rate, your monthly payment was about $3500. But if you bought in August, when rates went down to 6.4%, your monthly payment was about $3100. The monthly difference is $375 and savings over the lifetime of the loan is over $135,000.
If you want to dig a bit deeper, check out THIS chart. It gives you a more extensive view as to how interest rates affect your monthly payment. The difference on the same $500,000 house between an interest rate of 6 and 8%, is $671 per month, or $242,000 over the life of the loan.
What these charts don’t show is how much house you get for $500,000, because when rates go down, prices go up and therefore you get less house for your money. Buyers who can afford to buy BEFORE rates go down this fall may score a double jackpot by getting the most house for the best price and still be able to take advantage of future lower interest rates thanks to the free refinance option offered by our recommended lenders!
4) NAR Settlement
There have been lots of confusing headlines regarding real estate recently. The way we do business is changing and we’re here to give you the facts regarding buying and selling in Georgia. Many of the new rules won’t feel like much of a change in Georgia because we have always used Buyer Agreements, and commissions have always been negotiable. But there are new ways of doing business coming from the settlement you should know about. Starting August 17, 2024, buyers must have a signed agreement with a Realtor PRIOR to seeing a house.
In the state of GA, buyers have always signed agreements with their agents. The difference now is the timing. Buyers must make sure it is done first. Don’t worry. One strategy buyers can use to interview agents prior to signing an agreement is to visit Open Houses. It’s a great way to meet a variety of agents and get a feel for how they communicate, and generally see how you vibe with each other. We’ve always been a fan of this easy, no-pressure environment to get to know buyers and let buyers get to know us. We post our Open Houses in our weekend events newsletter linked below as well as our social media so be sure to check them out.
Another coming change for buyers is how their agents are paid. It was customary in the past that the sellers negotiated up front how much they would pay the buyer’s agent. Now, that compensation is “decoupled.” Sellers will decide whether they want to offer buyers’ agents compensation. Sellers should keep in mind, however, that it is a skilled BUYER’S agent who qualifies buyers, making sure they are financially able to close the deal, coaching them through the transaction process so everything stays on track. Sellers do not want a house full of boxes
and a moving truck outside only to discover the day before closing that the buyer is unable to secure financing and can’t close. Preventing this situation is just one way Buyer’s Agents are valuable to the Seller.
There are other changes coming with this settlement and we are happy to discuss them with you. For more information about our fees and services that we provide, please reach out to us. Our contact information is below.
What this all really boils down to is WHY do you hire a realtor (as opposed to buying and selling your home by yourself)? And what VALUE do Realtors really bring to you? Claire and I set out to partner with our clients. Real estate is a high-dollar low-frequency experience constantly changing due to market pressures and sometimes government regulations. Even if consumers have bought and sold many homes, they often choose to team up with an experienced Realtor with up-to-date expertise of what is happening in the local market.
That’s us! Some of the value we bring to this partnership is the people we know: inspectors, structural engineers, surveyors, lenders, attorneys, landscapers, plumbers, electricians, etc. Because we are repeat customers for these vendors, they answer our calls and provide excellent service to our clients because both of our reputations are on the line.
Another value we bring is the marketing machine we already have in place. As agents with Ansley Real Estate/Christie’s International, we have an entire marketing team at our fingertips, ready to create beautiful digital and/or print marketing pieces to blast out to the world, making your house very appealing to the largest global audience.
Yet another value connected to Ansley and Christie’s is the huge network they offer!! Christie’s is a world-wide network of actively searching agents looking to connect with someone who is selling what their clients want to buy! That explains why 30% of Ansley listings are sold within Ansley. That’s very valuable to our clients!!
A little side benefit of using a skilled agent is that YOU don’t have to advertise your phone number to the world. This protects you from years of endless spam calls. You’re welcome!!
Like we said, we are partners with our clients and together, our goal is to achieve a smooth move. We want our clients to consider the fees they pay us as an exceptional value! One they would heartily recommend to their friends and family.
With this in mind, we welcome the changes coming from the settlement. We are dedicated to being your trusted advisor in the process of selling or buying your home, represent your best interests, help negotiate the most favorable terms for you, and be your resource for all things real estate!
5) Affordability crisis. Who can afford a house?
Let’s talk affordability, and why it’s STILL a good idea to buy now if you can!
Merrill Private Wealth Management, in its article entitled, Will the ‘Great Wealth Transfer’ transform the markets? made a quick assessment of how real estate plays into the wealth-building strategy of older and younger investors with its subheading: “Real Estate: A Core
Investment for All.” The title is conclusive, but then it goes on to offer concrete hope to Millennials and Gen Xers currently frustrated by home prices.
“While millennials face steep barriers . . . to buying a first home in many markets, ‘that’s a for-now story, not a forever story’ . . . The Great Wealth Transfer should enable more of them to become homeowners — or trade up or add a second home — either through inherited property or the funds for a down payment.”
Affordability has been a challenge for many!
On this chart, the dotted horizontal line shows the affordability threshold. We took affordability for granted from 2011 to 2021.
Since 2021, interest rates, inventory, taxes, and rising prices have conspired to make home ownership more difficult. But remember, everything changes and nothing stays the same.
Merrill’s article predicts how things are about to change when they say, “this is a for-now problem, not a forever problem.” The article suggests we are on the precipice of the largest wealth transfer in history. And that will change things.
Nationally many consumers in areas with more serious affordability problems are taking matters into their own hands. Many are taking a fresh look at the national map, searching for areas that are more affordable. Many are choosing Atlanta! In the last year, 63,000 new residents have moved to metro Atlanta to seek a better life. This added population increases demand for housing. In Atlanta, the supply/demand variables are constantly changing. When inventory rises, buyers get excited and assume no other variables have changed. They don’t realize that, as they were sitting on the sidelines, additional buyers were quietly joining them. We won’t know the true impact of how many buyers we are talking about until the Fed lowers interest rates. I think it’s going to be a lot of buyers!
5a) Who is actually moving?
With all this talk about a worrisome economy and the affordability crisis, are you wondering who the heck has actually been moving? People are still buying and selling houses! We know because we have been busy with sellers and buyers alike. Life moves on, even through an iffy
economy!! People are still getting married, divorced, having babies, and sadly, dying. In real estate, these are called the 5 Ds: Diamonds, Diapers, Divorce, Downsizing, and Death. These are the life circumstances that usually drive a move.
One latest trend is combining some of the Ds into the Sandwich Generation. The Sandwich Generation are Baby Boomers, Millennials, Gen Xers and even Gen Zers, who are simultaneously caring for their children and parents. Sounds hard, but there have been some positive surprises!! A recent article by Julie Taylor, author of The Surprising Upside of Being in the Sandwich Generation: It Can Help You Buy a House on Realtor.com, reveals unexpected insights.
“Over half of adults within the sandwich generation who receive financial support from family members report that this support is helping them to afford a home.”
This phenomenon is an early taste of The Great Wealth Transfer which bankrate.com
predicts will transfer $84 trillion from Baby Boomers to their heirs over the next 20 years.
Many newly multigenerational households are leveraging the financial stability of the older generation to assist the younger generation in purchasing a home, a goal unachievable without the help from parents.
Claire and I have had the privilege of helping many Sandwich Generation clients find a home that will accommodate merging three generations into one house. And we can help you too.
Conclusion:
The North Atlanta real estate market in Q3 2024 will be exciting!! The stars are aligning! The seemingly inevitable interest rate cut expected from the Fed in September will likely add gasoline to the smoldering fire where frustrated buyers are ready to find a home!! I don’t think it will result in the same level of multiple offers during 2022, but it will be competitive. The increased competition will come at a time when the rules of the game are changing as well.
In preparation, Claire and I have spent countless hours in classes with attorneys teaching us how to confidently and competently show our clients the new way of doing business. We are prepared and ready to take all the new methods and leverage them in a way that benefits our clients, always representing their best interests. It’s going to be fun!! And profitable for those who know the way!
If you have questions about the market or about the current value of your home, give us a call. We would love to be your agents of choice!
If you are a buyer looking for agents who know how to walk you through the process of buying your first home or your next home, don’t hesitate to reach out! We would be honored to meet with you to discuss your goals and explain the process. This would give us a good opportunity to see if we vibe.
Give us a call! We look forward to speaking with you soon!!
