Home prices in metro Atlanta are still climbing rapidly, a closely watched index shows.
Prices in October rose 19 percent year-over-year, according to the S&P Case-Shiller Home Price Index, released Tuesday. That marks the 11th consecutive month of double-digit increases for home prices in the region.
But the index also shows that prices dipped slightly from September, a sign the increases could soon moderate.
“We probably won’t be up double digits next year and the year after,” said David Blitzer, managing director of S&P/Dow Jones Indices. “We’re gradually coasting toward more normal numbers.”
The double-digit increases will likely continue for several more months, said Eugene James, Atlanta regional director of the housing information company Metrostudy. By the middle of next year, he expects the year-over-year increases to drop into the single-digits, as they’re compared to higher numbers.
Home price appreciation over the past year has been “just phenomenal” said James Marks, Redfin Atlanta managing broker. But it has also been way too much to continue at the current pace.
“At some point, you outpace affordability,” he said. “When you outpace affordability, that’s when you get into trouble.”
Atlanta home prices are now at the same level they were in June 2002. From the July 2007 peak, they fell as low as August 1996 levels.
Despite the large year-over-year increases, prices here still lag much of the rest of the country, said Aaron Edelheit, CEO of The American Home, an investment group that owns about 2,500 houses in the region. Nationally, prices have returned to 2004 levels.
As construction begins on new stadiums for the Falcons and Braves, and more jobs come with them, Edelheit said he expects prices to continue to increase, and demand for new homes to be high.
“There’s going to be shortages of houses in 2014, in Atlanta,” he said. “People looking for houses should start early.”
At Adams Realtors, president Bill Adams said he doesn’t expect the “feeding frenzy” for homes that it felt like this spring and summer.
Throughout 2013, foreclosures decreased, investors bought homes by the tens of thousands, and people kept their own houses off the market. It all led to record-low inventory, which pushed up prices. All-cash buyers won out over those who needed financing, and bidding wars erupted on properties across the region. Appraisers couldn’t keep up with the trajectory of home prices.
In intown Atlanta, Adams said, most people are no longer underwater. Millennials are starting to look for houses. 2014 likely won’t be as strong a year as 2013 was, he said, but he expects residential sales to decrease a little bit as prices still rise.
After a strong summer, sales slowed into the fall, said Todd Emerson, president of the Atlanta Board of Realtors. The board reported a 17.8 percent slip in sales in November from the month before, the latest date there are figures available. The median price was up 20.7 percent year-over-year, and down 3.7 percent from October.
“We’ll see it taper off a little bit,” Emerson said. “It’ll ramp back up in the spring and rebound again.”
James, with Metrostudy, said he expects more homeowners to realize that some of their lost equity has returned. That will mean more homeowners will put their homes on the market, which — with new construction — could ease inventory problems that have plagued the region for months.
But Atlanta’s housing prices may not return to peak levels for as many as five years, said Blitzer, of S&P/Dow Jones Indices.
He was quick to say that shrinking increases do not indicate a housing collapse. Normally, he said, increases should be in the low single digits.
“We’re gradually getting back to a more normal pace,” he said.
WHY IT MATTERS
Home values are important even to people who aren’t likely to sell or buy anytime soon. They contribute to the so-called “wealth effect” that helps drive the broader economy by making people more confident about purchases of all types.
By the middle of 2014, housing experts expect the monthly S&P Case-Shiller Home Price Index to show smaller price increases. Year-over-year gains should be in the single digits by summer.
Sales are likely to decrease slightly following a busy 2013, but Realtors still expect good growth in prices.
“2014 is going to be a strong year,” said Todd Emerson, president of the Atlanta Board of Realtors. “I’m optimistic and bullish on 2014.”
Metro Atlanta housing price gains
According to the S&P/Case-Shiller Index, housing prices in metro Atlanta have continued to increase over the previous year. This is the 11th consecutive month of double-digit increases.
Month…..Year-over-year percent change
Oct. 2012…..4.9 percent
Nov. 2012…..7.6 percent
Dec. 2012…..9.9 percent
Jan. 2013…..13.4 percent
Feb. 2013….16.5 percent
March 2013…..19.1 percent
April 2013…..20.8 percent
May 2013…..20.1 percent
June 2013…..19 percent
July 2013…..18.5 percent
Aug. 2013…..18.4 percent
Sept. 2013…..18.7 percent
Oct. 2013…..19 percent