Here is where I was (pleasantly) wrong. Up until 2007 the Atlanta housing market was the "tortoise" of the national housing market. Slow and steady with no volatile gains or decreases. The average appreciation for .the area ranged from 2-4% per year. From the late 1970's to 2007 there was only one time with 3 quarters of depreciation. That was in the early 1990's and was only about a 1- 2% decline in total. It was barely a blip in the big picture. (source http://www.fhfa.gov/Default.aspx?Page=216&Type=compare&Area1=12060&Area2=&Area3= ) I presumed that once the market dried up that we would resume to traditional rates of appreciation. What I didn't count on was the huge number of large institutional investors that would figure out what a great market Atlanta is to buy and rent. We have always had good rent to value ratios and with the decrease in prices and no decrease in rents that rent return was even higher!
Right now the market supply has swung to the opposite extreme. 2 years ago we had a 1-2 year supply of homes available in most areas and price ranges. Today it is 2-4 months of supply. Nice homes that hit the market are getting multiple offers in in just a few days! All of this has resulted in an average 16+% increase in Atlanta home values over the last year.
What happens when the investors stop buying or more importantly what happens when they start selling? In my opinion... not much. While the investors have rushed in to the market in the last 12-18 months they will exit very slowly. Some will decide they hate property management or maybe decide they can get decent returns with other investments. Others will stay in for the long haul and be very happy with the 10-20% returns they are seeing. Regardless, the exit will be over several years as the tenants move out and the homes become vacant. The influx of supply will be over several years and have little impact on over all values.
Even though prices are up dramatically and homes are selling like hotcakes the news is not all good. According to a recent article in the AJC home prices are up 16.5% but still only are back to the same level as 1999. In other words if you bought your home anytime in th last 13 years there is still a good chance that it is worth less than you paid. Metro Atlanta home prices regain lost ground
With the decline in prices there are also still a significant number of people that are "upside down" in their home. That is they owe more than the current value. Percentage of mortgage holders that are underwater, by ZIP code.
The upward momentum is VERY strong right now and momentum is very slow to change directions once it gets going. We should see many months of continued very strong appreciation. Eventually we will get back to a point of equilibrium and probably see more traditional appreciation in the 2-4% per year range.
So what does all of this mean to you? For all the hoopla about increasing prices we are still near the bottom of the market. There has been a enough of a shift to see that market has turned but it is a great time to BUY! Think about it. you can buy a home today for what it was worth in 1999-2000. Get the added bonus of record low interest rates! If you are a first time buyer there are a tom of houses available under $150,000. With taxes, insures and the works you are looking at a payment more or less around $1000 per month.
Are you thinking of buying a home to use as a rental investment? Those same factors are at work and rents did not decrease with values. My investor clients routinely get over 1% per month return in their value. So you can put your money in savings for 1% per year or invest in real estate and get 1% per month PLUS appreciating value,PLUS tax benefits!
If you are thinking of buying, selling, or investing, call me today!
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