Atlanta Home Sales, Prices Keep On GrowingBy Lisa R. Schoolcraft Atlanta Business Chronicle
Atlanta's housing market roared on in the third quarter, with strong sales and strong prices showing no signs of abating.
Homes sales rose 6.3 percent and the average sale price rose 7.1 percent, to $210,860, in the third quarter, according to data from the Georgia Multiple Listing Service. The figures are for the 20-county metro area, compared with a year earlier.
But a slowdown still could be possible in the fourth quarter, and if it comes, the causes are more likely to be slipping consumer confidence and rising gas prices, rather than rising interest rates, said David Boehmig, president of the Atlanta Board of Realtors and chief operating officer at Jenny Pruitt & Associates Realtors.
"Interest rates would have to go up precipitously" to undo Atlanta's strong housing market, he said. "I think the demographics, the job market and the general economy being positive is going to drive this market, but if we are at risk it is those things [taking a downturn]."
The fourth quarter may contain the first signs of a slowdown, said Roger Tutterow, dean of the Stetson School of Business and Economics at Mercer University.
"As we move forward, the fourth quarter is going to be interesting to watch," Tutterow said. "Inventory has started to creep up and the Federal Reserve is starting to make variable-rate mortgages less attractive."
Variable-rate mortgages, particularly interest-only mortgages, were contributing to the national housing surge, he said.
In 2004, 50.4 percent of all purchase mortgages (those used to buy, not refinance, a house) issued in Georgia were interest-only, according to Loan- Performance, a San Francisco-based real estate research firm that's part of business information provider The First American Corp. (NYSE: FAF). In Atlanta, 55 percent of mortgages issued last year were interest-only, LoanPerformance's research showed. Interest-only mortgages tend to be riskier than 30-year fixed mortgages.
"The higher variable-rate mortgage will do two things," Tutterow said.
First, it will "slow down the pace of the housing market" for those consumers who used variable-rate mortgages to buy a home, he said. "Second, households with variable-rate mortgages will see their mortgages repriced and that can have a dampening effect on consumers."
Still Brisk For now, the housing market is just as robust as it has been for the past few years.
For August, home sales grew 7.8 percent nationally and in the South that figure was up 7.5 percent, he said.
"So that's in line with what we are seeing [locally]," he said.
Atlanta's housing growth pace being just less than the national average is a good thing, Tutterow said.
"Atlanta has been more affordable than other parts of the country," he said. Atlanta's ability to expand its housing stock has meant prices have not skyrocketed, as they have in areas like Las Vegas, Miami, California and the Northeast.
"People fail to realize that's what makes Atlanta a great place to relocate to," Tutterow said. "It's so affordable to live here."
Home builders believe the Atlanta market will remain strong; they are seeking nearly as many building permits this year as they were at the same time last year.
Through Aug. 31, the most recent data collected, 49,202 housing permits have been pulled since the beginning of the year, according to the U.S. Census Bureau. That compares with 49,535 housing permits sought during the same time period in 2004.
In 2004, metro Atlanta counties authorized 74,007 housing permits, making Atlanta the top metro area in the nation for home building, Census Bureau data showed. Phoenix ranked second with 65,259 housing permits.
Despite the building boom, finished inventory dropped in the the third quarter, according to preliminary data from Metrostudy Inc., which tracks the housing market in the 20-county metro area.
Finished vacant home inventory is down to a 3.2-month supply, compared with 3.3 months in the third quarter of 2004, said Philip Rassel, vice president of Metrostudy's East division in Atlanta.
"That tells us we're not building up stale inventory," he said. "That's good news."
Inventory of homes under construction did increase slightly in the third quarter to a 4.8-month supply, up from 4.6 months a year ago, and overall inventory stands at an 8.4-month supply, compared with 8.2 months in 2004, he said.
"But that finished inventory is the lowest it's been since second quarter 2004," Rassel said. "That tells me we are very healthy, assuming the economy clicks along as it has been."
Construction started on 14,840 homes during the third quarter, compared with 13,104 homes in third quarter 2004, he said.
For the 12 months ending Sept. 30, 54,201 homes were started, compared with 51,797 during the same time a year earlier, Rassel said.