To this point, 2013 might be considered one of the most unpredictable and turbulent real estate markets in many years. There is no doubt that this is most fluid market I’ve seen and real estate has been my full time job since 1989. The boom and bust years were easy; there was no doubt about in which direction things were going. This year however, every week has introduced new variables, some expected and many not. The result has been a “buckle your chin strap” ride because the micro markets are very different, even in the same general areas.
There are a number of reasons that the market turned seemingly on a dime; no one more important but all combined to create a “perfect storm”. Mother Nature wasn’t involved, Father Washington DC was/is. The “recovery” is the lone positive national economic news; the economy has not fundamentally improved and the real estate nugget must be shined and protected, even propped up. The result has been the influx of billions of tax payer dollars which mixed with the following ingredients:
- Continued low rates that appealed to buyers
- Genuine fear of and resulting rising rates – and fear of future increases, especially after Bernanke spoke in the spring
- Fear of even tighter mortgage requirements and restrictions coming in January ’14
- “Boomerang Buyers” coming back – those that lost homes over the last several years
- Normal spring-summer buyer activity
- Renters being steadily hit with rent increases deciding to buy
- Institutional investors buying sub 200K homes in bulk gave the market a jolt of activity
- “Panicked” buyers reacting to that investor jolt and broadly applying it even when it doesn’t fit
- Low inventory of “regular” listings
- Decreasing inventory of distressed listings and chatter that bargains are over
- And of course, a real estate industry and agents that remind everyone that it’s always a great time to buy or to sell
Those were the general components and it seemed that once the trend started and activity picked up, things just took off and frenzy might be accurate for many micro markets.
So has there been a recovery? The data says yes but the devil is in the details. The influence of institutional investors clouded things; the media reporting that “Atlanta prices are up X% over the last 3 months as activity shows a strong rebound” is a nebulous headline, one simply designed to attract attention. Of course prices and activity are up, but they are up where prices bottomed out and investors are gorging. Up from what, the 50% drop due to fraud, speculation and flips? What goes on in East Point under 50K has little to do with what goes on in Milton over 500K but the media (local and national) operate at fifty thousand feet, not in the micro markets. And they aren’t interested in detail, headlines are fine.
The word “recovery” also needs to be carefully defined, it does not mean values and activities are going to return to bubble levels. It’s more accurate to define it as stability or continuity; some sense of predictability. Real estate in Atlanta is somewhat predictable, there are regular seasonal cycles and experienced agents understand what drives value in each of the local markets. Returning to those set patterns is recovery, not expecting 15% increases since January when talk of the great recovery began.
Since January we have spent hours and hours researching data for buyers in many of the most popular micro markets. This isn’t broad; this is looking down to the elementary school level and within different price ranges – literally in the mud of the real estate market where good agents work. In NO CASE have we found anything near double digit increases. What we see most is a sharp drop in QUALITY inventory and a resulting increase in sale to list ratio, decrease of marketing times and nominal median price increases – 1 to 4%. That has been the historical norm for real estate looking back over the decades. The market has recovered (stabilized) in many outlying/fringe market areas but at a price point that reflects the saturation of inventory and reduced buyer pool. Most desirable Atlanta area micro markets are in balance or have moved to seller’s markets, retail is the norm right now.
The spring ’14 market will test the results of the ’13 market. Rates are going to increase, mortgage loan qualifications will tighten again in January ’14 and sellers entering the market will lean on ’13 and expect that mythical 15% bump. The return of part time opportunity agents and discount listing firms will fuel this as they tell sellers what they want to hear simply to put a sign up. Lost in the euphoria of a “recovery” is the fact that about half of Atlanta owners remain underwater; they have few options. Also lost are the billions of taxpayer dollars squandered on “modifying mortgages”; almost half of those modified mortgages slide right back into default but yet the money flows. Perhaps the biggest variable on the radar is Washington’s incestuous involvement in the mortgage business. Federal agencies now hold the tab for 90 percent of outstanding home loans, in large part because the government’s role expanded under the federal bank bailout. But the government sponsored entities like Fannie Mae and Freddie Mac are gradually reducing loan purchases, hoping the private sector eventually picks up the slack. Hoping?
As I recall, Federal Reserve Chairman Bernanke broadly mentioned this topic over the summer…and we saw interest rates jump the fastest since the mid 80’s. He mentioned it and it was rough, what happens if/when they do it? But Washington has HOPE…and we have Washington.
Hank Miller, SRA
Associate Broker & Certified Appraiser
Atlanta Communities Real Estate
678-428-8276 direct
This email address is being protected from spambots. You need JavaScript enabled to view it.
HankMillerTeam
