Atlanta’s housing market has been tricky this year, to put it lightly. The Federal Reserve Bank of Atlanta officially cited the city’s homes as “unaffordable,” the national benchmark 30-year-fixed-rate mortgage rose to nearly 7% in October and Atlanta households are only earning 54.9% of the necessary income to stay financially above water as homeowners. It all begs the question: Precisely what is going on with Atlanta’s housing market?
“The federal hikes in the prime rate to slow inflation have caused mortgage rates to rise and as a result reduced buyer demand,” Atlanta Realtors Association president Karen Hatcher told The Atlanta Journal-Constitution. “The future of Atlanta, Georgia could be great if all stakeholders work together and get housing right. We have a strong economy and job growth, we just need to work together to ensure people have places to live and available inventory at prices they can afford.”
Georgia MLS reported that the median sales price for homes in Atlanta for November was $370,000 — a 4.2% increase year over year. To remain within the 28% debt-to-income ratio threshold suggested by most accountants, an Atlanta household needs to earn roughly $116,890 a year before taxes in order to afford a median-priced home. According to the 2020 U.S. Census, the median income for an Atlanta household is only $64,179.
“Higher rates have slowed demand, but inventory is still low in the market,” Hatcher said. “When demand slows, builders halt/slow building — effects of the previous recession. However, we need builders to build - and at lower prices to offset the increased interest rates. Owners that have purchased a home in the last couple of years or refinanced are not as likely to sell their home because they have such a low rate locked in. Therefore we may not have a lot of resale inventory to transact and will need new construction to fill the need. New construction and starter homes are a necessity.
“Buyers need to still move forward with purchasing a home. 7% is historically more normal than 3%. Because this hike happened so fast, it has been difficult for buyers to adjust psychologically to the reduction in their spending power. Buyers should continue to save, and be prepared financially to look for a home and make offers. A positive for buyers is that ‘no contingency offers have subsided’ and we are also seeing sellers contribute to closing costs again.”
While rising mortgage rates have cooled median sales prices significantly, prices are still up — making it a good time to sell.
“Sellers are still realizing double digit increases in prices over last year and with low inventory it is a good time to sell,” she said. “Sellers should be prepared for a normalizing market with longer days on market. Sellers should also work with a Realtor to ensure their home is positioned properly on the market and showcased to reach the greatest number of potential buyers.”
Ultimately, Atlanta needs more inventory to offset prices.
“It’s difficult to predict since there are so many factors at play,” Hatcher said when asked about the future of the city’s housing market. “If builders can’t build at lower prices, that will affect inventory and opportunities for home ownership. We need to see prices reductions across the board in materials, labor, supply chain, etc.
“We need to see zoning changes to increase density, and reduce other exclusionary zoning ordinances i.e. 4-sides brick, minimum lot requirements, minimum square foot requirements, which can reduce the cost per unit, and result in lower home prices for the Buyer. If we can get all the stakeholders involved, educate and make the right decisions, metro Atlanta can get housing right.”
While inventory remains a struggle, Hatcher said things are better in Atlanta than in many other major cities across the U.S.
“Atlanta is faring well compared to the national market with strong domestic migration,” she said. “We just need to ensure we have places for people to live at prices they can afford.”
Cobb County district one commissioner Keli Gambrill offered some additional insight into the local housing market and the importance of ensuring that available affordable housing remains about single-family ownership and not renting.
“Home prices have been trending upwards for years – just as the size of the home,” she said. “Cobb’s zoning code allows for homes with minimum sq. footage of 950 – 1,600 (depending on current zoning classification). However, developers often bring forth homes that are 3,000 – 4,000 + sq. ft. Most first time home buyers do not need that large of a home – nor can they afford the price.
“Until builders/developers are willing to supply a product that is within the budgets of our police, fire, teachers and public health workers – the ability to purchase a home will not improve. When more affordable homes become available, safe guards will need to be in place to ensure that they remain single family ownership and not rentals.”
While Hatcher pointed out the importance of builders expanding Atlanta’s inventory, Gambrill said that inventory has one major limiter — space.
“Inventory will continue to decrease – as the amount of land available to build on is reduced,” she said. “This will only increase price as low supply brings about higher sales values. Most elected officials think density is the answer to help achieve ‘affordable housing,’ however, this will only drive up land prices as developers will be able to build more homes. Higher densities also bring about other expenses due to infrastructure improvements to handle increased traffic, expansion of police, fire, schools and health facilities to name of few. The later are funded by SPLOST or reduced service time.”
In the end, hopeful sellers should put their homes on the market. Buyers, unfortunately, will have to come to terms with the mortgage rate hikes. The days of 3% rates are gone for now.
“Sellers are still realizing positive gains over last year, so if they have a home to sell, they should consider selling it,” Hatcher said. “Buyers should continue to make offers and if interest rates go down in the future, they can just refinance out. Buyers have to understand that if they missed the abnormally low interest rate period of time, that period is gone and these are the current rates. They should not put off being a homeowner due to rising rates. What’s the saying - Marry the house, date the interest rate - continue with that thought process and purchase a home.
“Buyers should also attend community planning meetings where voting on rezones for more density, affordable housing developments are taking place and speak up regarding the need.”
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