Are Atlanta homes becoming less affordable?
ATLANTA - For the past several decades, Atlanta has traditionally been seen as one of the more affordable metro areas in which to buy a home. But that may be changing.
During the first half of 2022, as mortgage rates surged, several major US cities flipped from being favorable to buyers to being more favorable to renters, including Atlanta.
Why did this happen?
For decades, the overall cost of living and availability of cheap land has caused real estate in metro Atlanta to be more affordable than in other major cities. The city has no natural boundaries.
But a recent study claims to show that it is now smarter to rent in metro Atlanta than it is to buy - at least for now.
What has happened in our economy to push the needle to renting?
1. Increased Supply of Rentals
You may have noticed the large number of construction cranes hovering on the Atlanta skyline over the past 12 to 18 months. In most cases, those are evidence of new multifamily housing. Specifically, we are talking about high-end apartments designed to offer up-and-coming Gen Xers the lifestyle they want: lots of amenities and less commitment than buying a home.
2. Stubbornly Low Inventory of Resale Homes
According to economists, Baby Boomers are supposed to be retiring and moving to the beach by now. That would cause an increase in the supply of move-up homes, making way for the next generation to move into ownership. But it hasn’t happened yet.
The surge in long term interest rates has had the desired effect of slowing down the skyrocketing home prices we saw during the pandemic. But instead of lowering seller price expectations, owners have simply decided to stay where they are. And by refusing to sell, the end result is that home prices refuse to decline and inventory remains low.
3. Sellers Are Living Longer
At a time when most Baby Boomers should be selling their homes and cashing in on decades of rising prices, owners are deciding on droves to simply stay put. Today’s senior homeowner is, from a generational standpoint, healthier and wealthier than their parents were at this stage of their lives. This condition means they have options - and one of those options is to do nothing.
4. Current Homeowners Are Sitting on Lots of Equity
As FOX 5 real estate expert John Adams has discussed before, residential real estate prices tend to be inelastic downwards. That means that most owners don’t have to sell if they can’t get the price they want. Economists at the Federal Reserve reasoned that if interest rates were raised, home prices would decline, and that has happened to a small degree, especially in markets where prices were overheated to begin with.
But with plenty of undeveloped land in all directions, Atlanta has traditionally been a relative bargain among major metro areas. And with a flood of apartments coming on the market, renting is now seen as perhaps the better option.
That view may be short-sighted as the cost of everything seems to be unsustainable, but renting in Atlanta is more affordable than it has been over the last few years, and unless things change, Adams expect rents to remain the option of choice for some time to come.
The bottom line is, Adams says we will not have a housing collapse in 2023. If you are waiting for lower prices, get over it.
In response to huge demand, developers in metro Atlanta have added significantly to the supply of upscale rental housing. It’s not cheap, but it is more affordable than buying at today's prices. How the administration plans to deal with this situation remains to be seen.
Don't expect home prices to drop in metro Atlanta!