28 Mar Metro Atlanta home prices climb faster than nation’s, says Case Shiller
Metro Atlanta home prices rose 6.5 percent during the past year, outpacing the national average and increasingly squeezing first-time homebuyers, according to a high-profile analysis issued Tuesday.
Atlanta’s average home price increase was the 11th fastest growing of the 20 largest metro areas and was stronger than the national pace of 6.2 percent, according to the monthly report from S&P CoreLogic Case-Shiller Indices.
“The home price surge continues,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. “While price gains vary from city to city, there are few, if any, really weak spots.”
After the national housing bubble burst in 2006 – a year before the bust hit Atlanta – average home prices hit bottom in 2012. But since then, home prices have risen at twice the rate of overall economic growth, which also means growing faster than wages.
The result is a market that is great for selling a home, but a potential problem for buyers – especially first-timers or people with marginal incomes.
That squeeze on affordability also keeps more people in the rental market, adding to demand there. Rents in Atlanta in the past year are up faster than all but four other metros.
What accounts for Atlanta home price increases?
Job growth and population growth have been steadily adding to demand for housing in metro Atlanta.
And while that climb may be enabled by economic basics, it gets an extra boost from low inventory – that is, the relatively few listings of homes for sale.
Nationally, that inventory amounts to 3.4 month’s worth of sales. That compares to an average of 6.0 months since 2000. And in metro Atlanta, the shortage is even more acute: 2.8 months of inventory, according to the most recent report by Re/Max of Georgia.
+ A shortage of homes for sale keeps Atlanta prices climbing, which makes housing less affordable. KENT D. JOHNSON / KDJOHNSON@AJC.COM
Blitzer cited a study by the National Association of Realtors that shows a family with a median income can afford a median priced home. But realtors in Atlanta have said that for first-time buyers – especially single-paycheck families – getting into the market is a challenge.
In Atlanta, for example, the number of “starter” homes for sale has plunged 42 percent in the past year, according to Cheryl Young, a senior economist at Trulia. “This inventory drop was matched by a stark 31.1 percent increase in starter home prices over the same period.”
Will homebuyers continue paying more?
Moreover, the Case-Shiller report includes only previously sold homes and averages prices over three months. Because new construction has increasingly been of more expensive homes in and around Atlanta, Case-Shiller often somewhat understates the market’s price increase.
Aaron Terrazas, senior economist at Zillow, said the imbalance in the market feeds on itself: “This year’s buyers may be competing against some of those buyers who have been unsuccessful during the past few months.”
Wannabe buyers often stay in the market longer, looking for the right price, he said. “More inventory is really the only cure for those pressures right now, especially for those at the entry-level end of the market, but it has proven frustratingly slow in coming.”
Ruben Gonzalez, chief economist for Keller Williams, said pace of price increases will likely continue and even pick up.
Inventory is the accelerant, he said. “If mortgage rates continue to rise, they could slow growth later in the year,” he said. “However, right now we see inventory constraints as the predominant factor.”
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Average home price increase: Past year
Fastest: Seattle, 12.9 percent
Slowest: Chicago and Washington, D.C., 2.4 percent
National average: 6.2 percent
Average large metro: 6.4 percent
Atlanta: 6.5 percent
* Not including newly built homes
Source: S&P CoreLogic Case-Shiller Indices