For at least the last four years in Atlanta the job market has been on fire. People have been moving to Atlanta and homebuilders have had trouble keeping up. The story has been big, but the same – until now.
Inventory levels were dropping so low and at such a rapid rate that Norton Agency President Frank Norton declared that agents needed to start preparing for the day when they hit 0. He was being a little dramatic at the time but was very serious about the point he was making. That was two years ago, and since then inventory levels kept dropping until last year when they seemed to bottom out at about three months (inventory levels are measured in months it would take to buy up all the existing listed houses with no new houses coming onto the market).
But today, something very different is happening. Inventory levels started dropping again for houses priced under $400,000. And they have started rising for houses priced above $400,000. It is truly night and day.
Some of us in the Atlanta Assurance branch noticed that our clients who were buying houses under $400,000 were running into scenarios with multiple offers on houses that were listed for only a couple of days. It was taking months for them to finally land a contract on a house. While our clients in the above-$400,000 market were waltzing in with contracts on the first houses they went after. To confirm that inventory levels were indeed moving the way we suspected, I reached out to the man that would certainly know: Mitchell Palm with Smart Real Estate Data.
Smart Real Estate Data is an Atlanta-based data firm that has positioned itself as the top source for residential real estate information in the Southeast. Most of Atlanta real estate firms buy information from them so they can develop their marketing plans for future growth. The news story I thought I was breaking, Palm had already known for months.
“Yeah, $400,000 is a pretty good tipping point for these higher-end areas,” he said.
Then he ran the numbers. I concentrated mostly on north Atlanta from Sandy Springs north through North Fulton into Forsyth County, and west to Marietta, Smyrna and Woodstock. I also included a couple of ZIP codes inside Atlanta. The numbers were clear. For houses priced under $400,000, there are 2.6 months of average inventory on the market. For houses over $400,000, there are 5.5 months. Most experts consider a healthy market to have 6 months of supply.
Woodstock and East Roswell had the lowest sub-$400,000 inventory levels at 1.9 months. While Alpharetta had the highest above $400,000 inventory level at 8 months.
For those not familiar with how the housing industry works, 2.6 months of inventory is very, very low. If you list a house in that market and price it right, you will have multiple offers within a week. There will be little negotiating. You will get what you want. Those listing in the above $400,000-market are back to doing business as usual. They’ll have open houses, negotiate with buyers and will actually have to clean up before potential buyers visit.
These numbers confirm at least two things that I’ve been hearing. The first is that it is becoming harder and harder for lower-income workers to find housing. Our police, firefighters, restaurant workers and others are having trouble finding homes to buy. On top of that, the low inventory is pushing home values up quickly, making it more difficult for them to afford the homes they want to buy.
The second thing is that home builders may be starting to over build the luxury market. For the last several years, because of the increased number of jobs and influx of people into Atlanta, they have had no trouble building higher-end homes and selling them prior to putting a shovel in the ground. Not many builders have been building the sub-$400,000 market. A homebuilder friend of mine told me that he just finished a $450,000+ townhome community in what I consider a very desirable location. And he’s having trouble selling them.
If you are wondering why apartments are going up everywhere you look, go try to buy a house under $400,000 and you’ll know.