A prospect of mine sent me the article below with “This is a good read” attached to it. The author believes the real estate sky may be falling. I used local data to try to analytically recreate the concerns of the author. My analysis is at below.
The Apartment Glut Cometh – Adios Housing Market
From Fund Manager Dave Kranzler:
My analysis of our local suburban Atlanta market in relation to Mr. Kranzler’s article:
That IS a good read. Personally, I have noticed a small push back on retail pricing of residential real estate in my own business, but nothing that has me overly worried. Interest rates have popped up about 3/4 of a point in the last 9 months or so. Interest rates go up, buying power goes down. Something has to give. We’re at the beginning of the interest rate increase. Some buyers are putting more money down or buying their interest rate down in order to keep their monthly payment in line with mortgage underwriting requirements. Some sellers are offering extra incentives to create value in the eyes of their buyers. It’s a bit of a tug of war between buyers and sellers and that’s what makes a healthy market work.
I ran some numbers just to see if I could analytically show the concerns, indicated in that article, here in our local area. To keep the numbers in line with +/-90% of the activity, I only used sales between 200k and 600k.
Q3 15: 2,831 sales at avg sales price of $335k and avg days on market of 47.
Q4 15: 2,102 sales at avg sales price of $335k and avg days on market of 58.
Q3 16: 3,202 sales at avg sales price of $347k and avg days on market of 42.
Q4 16: 2,342 sales at avg sales price of $338k and avg days on market of 52.
So, yes, Q4 16 avg sales price contracted about 3% versus the previous quarter. We did not see a similar contraction the year before, so we can presume this is a market event. Average days on market increases from Q3 to Q4 about the same amount in ’15 and ’16 so we can likely ignore that.
To go back to the article, we’re not Miami, Aspen or the Hamptons. In my opinion, those places have a more volatile real estate market. When you limit your buyers to 1% of the population, you’re more likely to have bigger swings in pricing. But, here in Atlanta, I think we’ll see a normal market that pendulums back and forth around a healthy market that continues to increase at 1 to 4% per year and rarely swinging too wildly.
Thanks for sending me that article. Gave me an opportunity to think about things and do some analysis I can share with others.
Whenever you decide the time is right for you to buy and/or sell, I’ll be ready to go to work for you.
Have a great day.