Nine years after the housing bubble burst, the metro Atlanta market has scrambled into the new year like a runner on a muddy trail – gaining some speed but still struggling and slipping.
The residential market has been improving for more than three years, and it doesn’t take much in the way of higher temperatures for real estate brokers to declare the spring buying season underway.
But while industry experts think the market will be stronger this spring than last, they say housing has not yet outrun the overhang of the crisis.
“It is not a balanced market,” said Damian Cook, branch manager in Atlanta for Assurance Financial, Atlanta-based mortgage bank. “It is a hard core seller’s market.”
Inventory – that is, homes for sale – represent six or seven month’s worth of sales in a healthy market, most experts say. For several years, inventory in Atlanta has been half that or less.
The result: big price increases in some areas and frustration among buyers.
“I have a lot of clients in the marketplace who can’t find anything to purchase,” Cook said. “When something is listed, if it’s priced anything close to fair market value, there are two to five offers within the first 48 hours.”
Yet at the same time, there is short supply of a critical group of first-time buyers. Typically young adults, they lubricate the housing pipeline by freeing previous waves of buyers to sell and move up to more expensive homes.
In past booms, first-time buyers have also been key to Atlanta home construction, often opting for less expensive houses farther from the city.
Entry-level housing was huge in metro Atlanta during the bubble, especially in suburban and exurban areas. But since the bust the flow of young people into the housing market has been barely a trickle. Pummeled by the job market, many postponed marriages, lingered in school – or in their parents’ basements – and a disproportionate number rented apartments.
One problem is the lack of low-cost homes, said Lane McCormack, president of the Atlanta Board of Realtors and a senior vice president at Harry Norman Realtors.
“When I started in the business 18 years ago, my niche was the first-time home buyer, and there is no market like that there.”
First-time buyers want to live in certain areas, and they are looking in a certain price range, she said. “And there are very few places where those two overlap.”
Yet month after month, experts have been predicting a millennial turnaround.
It hasn’t happened yet, Cook said.
“First-time homebuyers are probably about 30 percent of my business and I think that in the past couple of months that has been trending downward.”
That means fewer entry-level purchases, which undermines this spring’s market’s growth. But it also poses a long-term threat: What if prices keep rising and salaries of young adults don’t? Then much of a generation will be forever priced out of homeownership.
Some say it’s not just about the money.
Young people prefer renting even when they have the money and the home price is within reach, said Dean Boswell, CEO of 13 After, an Atlanta-based real estate marketing and branding firm.
“When you factor everything in, I think it’s clear that it is cheaper to buy than to rent, but that doesn’t take into account the mindset of the millennials,” he said. “They are more interested in experience than in possession. Based on what we are seeing, I don’t think that’s going to change.”
‘I just don’t believe that’
David Haddow, president of Haddow & Co., an Atlanta-based real estate consulting company, says it’s just a matter of time.
He knows the conventional wisdom about the rise of a renting generation, he told a recent housing conference at the Federal Reserve Bank of Atlanta.
“I just don’t believe that. Their perception changes over time as recover as they age and as they have families. Don’t accept the status quo as a given.”
Alex Hoffspiegel is an exception to the stereotypes about millennials.
The 27-year-old and his wife had been renting. But in early February they bought their first home: a three-bedroom house in the Oak Grove area of Decatur that cost something over $400,000.
They had started looking in December and were soon discouraged. The homes they saw seemed to be either over-priced or under-repaired. Then they happened upon that Oak Grove home and were prepared to be frustrated.
“We really loved this house. There were already two offers on it, so we knew we had to move fast,” Hoffspiegal said. “We offered more than the asking price.”
The other prospective buyers wouldn’t match it, and now it’s theirs.
Sales and prices up
So far, the year is promising, with sales and prices up from a year ago.
Total home sales in metro Atlanta in January rose 3 percent from a year earlier, while the median price climbed 9 percent, according to a report from the Atlanta Board of Realtors.
Looking forward, the high-volume spring season looks good, if not spectacular, experts said.
That assumes larger forces keep moving in the right direction, said Tom Cunningham, chief economist at the Metro Atlanta Chamber, during the Fed conference. “At the margins, what determines what we do well is whether or not the nation as a whole does better or worse than it did last year.”
Global worries have focused on China, while dropping oil prices have hit the stock market and sapped the so-called “wealth effect” that can affect buyer psychology. But so far the market slump has not shaken housing.
Meanwhile, various U.S. economic indicators continue to show signs of healthy growth. Unemployment is low. Job growth has been steady, if not robust.
If that keeps up, it should be a good spring, Cook said.
“Spring has already come for us,” he said. “My business is up about 70 percent from the first quarter of last year.”
The number of licensed Realtors in metro Atlanta reflects the peaks and valleys of home-selling over the past few years.