Metro Atlanta is in the midst of a home price rally by one widely watched measure, but you might want to keep the champagne corked and on ice.
Though the region’s home values jumped a whopping 19.1 percent in March compared to a year earlier, according to a monthly index released Tuesday, the gaudy growth rate reflects just how far values had tumbled in early 2012.
Experts expect the annual growth rate to moderate in coming months, and they say it could be years before they return to the peaks of 2007.
“We need to be realistic about the kinds of appreciation we can expect to see going forward,” Mercer University economist Roger Tutterow said.
Metro values hit rock bottom in March 2012, forced by foreclosures and other factors to a level not seen since 1995, according to the S&P/Case-Shiller Home Price Indices report.
Despite an impressive rally in recent months, prices have rebounded to only late 1999 levels. Home prices nationally have returned to those seen in mid-2003.
In fact, metro values are still slightly lower than they were in March 2011, when the worst of the slide began here, according to Case-Shiller data.
Home values are a key part of the so-called “wealth effect,” and when the values of things like homes and stocks rise, consumers spend more, boosting the broader economy.
Metro Atlanta prices remain about 28 percent lower than their credit-fueled 2007 peak, by Case-Shiller’s measure.
Tutterow said the recent upswing in values should be celebrated, but the market still has a long way to go.
Interest rates, though rising slightly in recent months, remain near historic lows. New home construction is improving, but not at the pace of the boom. Many would-be sellers remain unable to sell their homes because they owe more on their houses than the properties are worth. Foreclosure notices are down.
Add it all up and it means the number of homes on the market is likely to remain near historic lows, too, Tutterow said.
That will continue to help values rise and ultimately could help more sellers put their houses on the market while motivating buyers to make a move.
“You are likely to see it remain a seller’s market for the near future,” Tutterow said.
Nationally, Case-Shiller reported home prices were up 10.2 percent compared to March a year-ago, and up 1.2 percent over this past February’s report. In metro Atlanta, values climbed 1.3 percent in March compared to February.
Phoenix led the top 20 cities with an annual increase of 22.5 percent, followed by San Francisco (22.2 percent), Las Vegas (20.6 percent) and then Atlanta (19.1 percent), according to the report.
Still, only metro Atlanta, Cleveland and Detroit have yet to return to their January 2000 values in Case-Shiller’s 20-city index.
“Other housing market data reported in recent weeks confirm these strong trends: housing starts and permits, sales of new home and existing homes continue to trend higher,” David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a news release. “At the same time, the larger than usual share of multi-family housing, a large number of homes still in some stage of foreclosure and buying-to-rent by investors suggest that the housing recovery is not complete.”
Craig Lazzara, a senior director of S&P Dow Jones Indices, said a 19.1 percent annual home value growth rate is probably not sustainable. For one thing, the year-earlier comparison number will start to improve in coming months, which will likely moderate growth numbers.
But a more typical 3 percent to 5 percent annual growth rate could help return metro Atlanta to its July 2007 peak in about 10 years, he said.
The sprawling metro Atlanta market remains fractured, with bidding wars erupting in some desirable areas and for-sale homes languishing in others.
In hot areas, low inventory, a recent uptick in interest rates and the return of sellers getting multiple offers to choose from, “is creating kind of a frenzy,” said Nancy See, president of the Atlanta Board of Realtors. Buyers want to find homes in prime school districts before the next school year starts, said See, a senior vice president and managing broker at Atlanta Fine Homes Sotheby’s International Realty
For potential buyer Stacey Seaver, the market is frustrating. Though she only started looking in earnest about a month ago, the supply has been disappointingly low, she said.
A builder outbid her for a ranch-style home near Decatur that she liked, Seaver said. She thinks it will be rehabbed or torn down and rebuilt as a much larger home.
“You’ve got to act fast in the area where I’m looking,” she said.
Measuring home prices
The S&P/Case-Shiller Index is one of the most widely watched measures of home prices - yet it includes no actual prices. Developed by economists Karl Case and Robert Shiller, the index uses a sampling of repeat sales of existing single-family homes in 20 major metro areas to arrive at a number for each market. The baseline is 100, which represents prices as of January 2000. Atlanta’s March index was 98.29, which means prices are still a bit below 2000 levels. The Atlanta region’s peak, by Case-Shiller’s measure, came in July 2007 with an index of 136.47.