Atlanta’s Housing Market: 2017 Trends and Predictions
In 2017, home prices nationwide are anticipated to increase 3.9 percent and existing home sales are forecasted to increase 1.9 percent to 5.46 million homes. Housing prices in the U.S. finally exceeded levels reached in 2006, mortgage rates remain low and Millennials, a generation feared never to buy homes, are starting to enter the market. Realtor.com is forecasting the homeownership rate will stabilize at 63.5 percent after bottoming out at 62.9 percent in 2016. New home sales are expected to grow 10 percent, while new home starts are expected to increase 3 percent.
According to a number of media sources that track the state of the U.S. housing market, including Kiplinger, the market will continue to grow in 2017 roughly at the same rate as in 2016. Modest construction of new housing and the low turnover of existing housing stock will continue to keep inventories low and elevate prices of houses on the market. Builders will continue to face the same challenges as they have in recent years, including lack of available land and lots, shortage of labor and limited availability of financing for construction. Nevertheless, builders will try to keep up with a steady demand for new housing. The level of building permits indicate that further growth is in store for residential construction early in 2017. Single-family permits grew 4.7 percent in December.
Inventory is likely to remain low in 2017. Limited inventory, particularly for lower-priced homes, has made it harder for entry-level buyers to join the market. Low inventories and modest economic growth should push up the price of the median home by about 5 percent. Eventually, rising mortgage rates will put a damper on price growth, but that may take almost a year to materialize. In any case, real estate markets in most metro areas will remain a seller’s market.
Now let’s turn to the metro Atlanta market. According to FMLS:
- There were 3,663 closings for Residential Single Family Detached in January 2017. This reflects an increase of 3 percent over January 2016.
- There were 784 closings for Residential Single Family Attached in January 2017. This reflects a decrease of 0 percent over January 2016.
- The average sale price for Residential Single Family Detached was $265,129 for January 2017 vs. $254,126 for January 2016.
- The average sale price for Residential Single Family Attached was $234,200 for January 2017 vs. $211,446 for January 2016.
- Active inventory level for Residential Single Family Detached continues to increase with 19,649 active listings as of the end of January 2017 vs. 17,805 active Residential Single Family
- Active inventory level for Residential Single Family Attached continues to increase with 2,647 active listings as of the end of January 2017 vs. 2,410 active Residential Single Family Attached listings as of the end of January 2016. This represents an increase in active inventory for Residential Single Family Attached of 10 percent.
- There were 9,562 new listings entered for all property types in January 2017 vs. 9,130 new listings entered for all property types in January 2016.
We believe there are a number of trends, both new and existing, that will impact the housing market in general and Atlanta in particular:
- Political and policy changes: President Donald Trump’s policies and priorities could meaningfully impact the housing market. His plan to spend more on infrastructure, lower taxes and reduce bank regulations should all have a positive effect on the housing market for 2017.
- Slow but positive demand: Homebuyer demand will be stronger now than it was at the same time last year due in part to the recovering economy.
- Mortgage rates: There will be movement in mortgage rates; however, no one is sure where the 30-year fixed rate will land. Estimates range from between 3.75-4.6 percent — not far from where it is today. Mortgage rates will probably go higher based on a positive economic environment.
- Limited supply of new homes: Right now there is limited short-term supply of new homes, but as the economy improves, which should create additional demand, there should be an increase in new home construction. However, construction is unlikely to increase the number of new entry-level homes because most building is on the high-end, where builders can get a better return on their investment. Also, the cost and availability of land is at a premium making it more difficult to build lower cost homes.
- Millennials as renters and homeowners: Millennials will continue to make up a larger and growing portion of the buyer pool. This is because Millennials are now the largest adult generation and make up the greatest percentage of the workforce.
- Fiercer competition: Sellers will continue to maintain the edge over buyers as demand is expected to increase and inventory to remain the same or lower than last year.
- Low existing home inventory: The metro Atlanta real estate market will continue to be a seller’s market. One reason for low inventory is that people who might otherwise put their properties on the market are sometimes hesitant to sell because there are limited replacement options. These people often opt to remain in their existing home rather than “downsize” or “upsize.” They can often make improvements or changes to their existing home with less financial impact than replacing their home.
- Atlanta affordability index: Metro Atlanta home and rental prices are some of the most affordable when compared to other metro area in the United States. In addition, a $50,000 salary in Atlanta has the same buying power as $63,632 in Seattle, $58,551 in Chicago, $83,954 in San Francisco and $111,569 in New York City.
Metro Atlanta continues to be an attractive place to live and work based on not only on the cost of living but also based on the mild climate, availability of jobs, accessibility to a world class airport, strong educational system, diverse cultural options, professional sports and many lifestyle choices. All of the above will help keep the Atlanta housing market strong.
At KNOWAtlanta Real Estate Services, we give expert advice and guidance to anyone buying or selling a property, whether you are new to the area or relocating within metro Atlanta. Buying and selling a home is a deliberate step-by-step process, and at KNOWAtlanta Real Estate Services, we are structured to get you the information you need on neighborhoods and schools, give you valuations of properties in specific areas and provide you with the services of a qualified real estate professional. We are unique in that our staff consists of both real estate professionals and licensed appraisers.