Wren Atlanta Market Report - 1st Quarter, 2020 & Beyond | Volume 2
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The current challenging environment has shifted the way we live and work. We are spending more of our time at home today than ever before. A recent survey by Colliers International found that 4 out of 5 employees who responded “would like to work from home one day a week or more after the COVID-19 crisis is over.” In addition to working from home, we are sheltering there, getting together with loved ones, teaching, eating and, in many cases these days, improving our health and wellbeing there.
The decision to move or buy a home is more than just a financial decision, it is also a lifestyle choice. Whether you are looking to own a home in a location that will reduce your daily commute time, one which puts you closer to your friends or family, or allows you to spend more time with them, or a home that offers more living space, privacy and other enjoyable features, these and other characteristics of the home will have an impact on you personally. Your home’s impact on your daily living conditions may easily exceed that of other types of investments you could make.
Our Observations: Spring 2020
While the full impact that the Coronavirus will have on the housing market is not yet known, when the economy does recover, several factors will likely support increasing residential property values in the Atlanta area during the recovery. These include a generally low supply of homes at mid- to low-price points, interest rates at historic lows, changing life events that continue in people’s lives, and one of the nation’s highest rates of population growth in the City of Atlanta.
Trusted market indicators show that buyers are resuming their home search as of May 2020. This includes home purchase mortgage applications nationally, as well as the total number of weekly showings both nationally and in Georgia. According to ShowingTime graphs as of May 26th, 2020, real estate showings in Georgia are up 6.8% compared to this time last year (as indicated by the 7-day moving average).
Mortgage lenders have implemented tighter lending approval standards, requiring higher credit scores and sometimes greater down payment levels. This adjustment to the recent coronavirus pandemic and measures to contain it is highlighted in a Fortune magazine article, published May 10th, 2020.
For those looking to purchase a luxury home in the City of Atlanta, priced $1 million and above, there is about an 8 months supply of single-family homes for sale and a 13 months supply of condos for sale as of April 2020 (based on FMLS InfoSparks). This indicates that for homes for sale over $1 million in the City of Atlanta, this is a Buyer’s Market, as is generally considered the case whenever inventory levels are above a 6 months supply.
For those looking to purchase their first home, we’ve helped buyers in this stage as well. In today’s housing market, it is possible to buy a single-family home or condo in the Atlanta metropolitan area where the total monthly costs of ownership (including mortgage payments of principal and interest, PMI, insurance, real estate taxes, and any HOA fees) will roughly match the cost of the monthly rental payments required for a 12-month lease on an Intown Atlanta apartment. Compared to an apartment community, home ownership may offer more square footage, possibly new appliances, hardwood floors, and a private yard, all in close proximity to nice restaurants and easy access to the city.
Key Takeaways:
Interest Rates At Historic Lows
According to Freddie Mac’s Primary Mortgage Market Survey, the national average interest rate for 30-year fixed rate mortgages on single-family homes was 3.15% on May 28, 2020, versus 3.99% a year earlier on May 30, 2019.
The 30-year fixed-rate mortgage has again hit the lowest level in our survey’s nearly 50-year history, breaking the record for the third time in just the last few months. — Freddie Mac Primary Mortgage Market Survey, May 28, 2020
Source: http://www.freddiemac.com/pmms/
Homeowners’ Equity
Owning a home allows homeowners to build equity over time, which makes home ownership a powerful wealth creation tool. Americans have built up a tremendous amount of equity in their homes. According to a monthly market report published April 2020, by Steve Harney’s Keeping Current Matters, 53.8% of all homes in America today have at least 50% equity.
The fact that homeowners in the U.S. have so much equity in their homes today makes the current market very different than the housing bubble experienced in the housing crisis of the Great Recession.
A FEW REASONS FOR UPWARD PRESSURE ON HOME PRICES TODAY
Booming Population Growth
According to the U.S. Census Bureau, the metro Atlanta area had the nation’s 4th highest population growth from 2010-2019, adding over 733,000 people. These trends are forecast to continue, with the Atlanta Regional Commission estimating metro Atlanta will add 2.9 million people by 2050.
Household Formation and Childbearing Years of Population
Currently about 46% of the U.S. population is under the age of 35, which should support prime-household growth for the next two decades, according to a CoreLogic report published March 2019. As this group of people ages into their peak marital and childbearing years, this will put upward pressure on the housing market until at least 2040.
Limited Supply of Land
Real estate values are supported by the fact that there will always be a limited supply of land, as is discussed in more detail for the Buckhead area in Wren Atlanta Market Report - Q1, 2020 | Volume 1.
Limited Supply of New Homes
New housing starts nationally dropped 29.7% in April 2020 compared with April 2019, according to a CNBC report. This reduction in new home supply will likely put upward pressure on home prices in the long-term.
CONCLUSION
Whether you are buying a starter home or a luxury estate, we are prepared to help you make informed decisions while providing world-class customer service at every step of the process. The Wren Team has served as problem solvers and advisors for many homebuyers in the past. We work tirelessly to ensure our clients have the best information and are immediately notified of as many homes on the market or coming soon that meet their needs as possible.
We also look out for our clients best interests during contract negotiations and due diligence, as well as providing them with reminders from contract acceptance through closing. After closing, we following up to check on things and answer any questions.
The Wren Atlanta team at Harry Norman has already seen signs of the housing market picking back up. We currently have a number of homes under contract and have seen a significant increase in buyers contacting us. In 2020 alone, we have helped our clients at all stages of their housing journey.
Just out today is another indication of the strength of housing the market, with CNBC reporting that the Mortgage Bankers Association’s latest weekly survey showed that mortgage applications for home purchases have increased 9% compared with last week and 9% compared with the same week one year ago. According to the Mortgage Bankers Association, this is the 6th consecutive weekly increase and is up 54% since early April 2020. Life events continue to happen and this drives housing demand.
COMING UP NEXT WEEK
Wren Atlanta Market Report - Q1, 2020 (Volume 3): Understanding Atlanta Submarkets including Buckhead, Midtown, and others
Note: This report was created by Matt Wren and is meant to be informative. The postings on this site are my own and don’t necessarily represent Harry Norman, REALTORS®’ positions, strategies, or opinions. Data in charts is from First Multiple Listing Service only, and is believed to be accurate but is not warranted. Data excludes off-market transactions or any transactions not listed in FMLS.
