Housing Inventory Down – Prices Moving Up

If you are one of those investors that have been waiting for the bottom, you’ve missed it!  Foreclosures are seeing multiple offers with “up bidding” because these are the properties that are perfect for investors wanting high cap rates from rentals. Monthly sales were considerably stronger in January through May compared to both of the last two years and June sales will likely be equal or higher once lagged closings are processed.  The usual seasonal low points in January were higher in both 2011 and 2012, possibly indicating a firmer base for continued sales growth following distortions caused by government purchase incentive programs in 2009/10.  While sales have increased during 2012, the number of Active Listings in Atlanta are at a 12 year low.

Chart 1

Chart 2

The good news for the Atlanta Real estate Market is that 2012 Metro Atlanta’s home prices reversed months of declines.  As noted in Chart 3, for the first time since the second quarter 2010, the second quarter median sales price increased by 5.9 % (the 2010 exception occurred during the period of government purchase incentives early in 2010, after which the effects of a large inventory of distressed properties again took over) Monthly median sales prices reached another new low point in January, 2012 (Chart 4). A strong, steady increase during 2012 will be watched to see if the lower inventory and increased competition for inventory will continue to overcome the effect of a large quantity of distressed properties and allow prices to continue to rise.

Chart 3

Chart 4

Median Sales Prices shown monthly, by year, illustrates the degree to which prices have declined compared to other recent years. For the first time, median sales prices have increased over the previous year (Chart 5).

Chart 5

Short sales and foreclosure sales add up to make distressed sales, shown here in Chart 6 as a percent of total sales. The percentage of second quarter 2012 distressed sale transactions was -6.5 percentage points lower than in second quarter 2011 and down by -15.2 points from first quarter 2012. Shown by price range, Chart 6 demonstrates the degree to which distressed sales are present in all price groupings. Nearly 3 of every 4 sales in the

Chart 6

What does this mean for Investors?  Low-ball offers on high-value properties may result in missing out on a great opportunity. Prices are still low, but most properties under $200,000 are experiencing multiple offers with agents calling for “highest and best” offers with deadlines.  Median Prices will most probably continue rising especially in many markets of north Atlanta.  The quantity of distressed properties is still quite high and afford opportunity for those looking to acquire great deals for rental or flipping.  Although cap rates on most rentals are above 10% for properties under $200K, cap rates are declining with the competitive nature of multiple offers causing prices to increase. As a matter of fact, over 20% of sales are over list price last quarter and that number is rising.  Quick action and serious offers are required when high-value properties are found.

In summary, cheap properties, low interest rates, and high cap rates make this the most opportune time in our history to be buying real estate. Don’t miss out on the greatest time to be building great wealth in Real Estate.

(This statistical market data and charts are provided exclusively to Keller William Realty-Rawls Group by Chuck Carr of Chartmaster Services, LLC. which cannot and does not warrant the accuracy or completeness of the data. The source of all data contained herein is FMLS listings data for real estate transactions occurring in 41 FMLS areas including Fulton, Dekalb, Cobb, Gwinnett, Forsyth, Cherokee Douglas, and Paulding counties, and does not necessarily represent all market activity either for those areas or for the Atlanta Metro area).