‘Housing will remain weak throughout the winter,’ expert says

There is one troubling word that Freddie Mac’s chief economist Sam Khater uses to describe the winter 2023 housing market: weak.

“The housing market remains in the doldrums with declining sales, inventory and prices,” Khater said in a December 2022 market report. “The declines in sales and deceleration in home prices began swiftly earlier in 2022 but have moderated more recently. While the intensity of weakness is moderating, the market continues to decline and forward leading indicators suggest housing will remain weak throughout the winter.”

Khater touches on the decline in sales and drop in home prices that the U.S. has been experiencing for the past year. The reason for these drops is largely laid at the feet of rising interest rates — a fire stoked by federal prime rate hikes meant to slow nationwide inflation.

“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.”

While U.S. 30 year fixed mortgage rates reached 6.48% on January 5, nearly 50% higher than in January of 2019, Hatcher noted that current fixed mortgage rates are more historically normal than 2019′s much lower rates.

“Buyers need to still move forward with purchasing a home,” she advised. “Seven percent 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.”

As home prices and interest rates continue to moderate, inventory remains one of the largest issues for the Atlanta housing market. But even once homes become more readily available, affordability will remain an issue for most residents.

According to the Georgia MLS, the median sales price of an Atlanta home was $370,000 in Dec. 2022, a 2.8% increase from the previous year. The U.S. Census reported that the median household income in Atlanta was $69,164 from 2017 to 2021. Following the “28% rule” of money management used by most accountants, Atlanta residents at or near the U.S. Census’ household income estimations should spend no more than $1,613 a month on their mortgages.

Unfortunately, even with a 20% down payment of $74,000 and credit score of 700, a buyer would have to pay around $2,360 for a mortgage on a median house.