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Subprime Lending Causes Slowdown in Atlanta
By Ryan Ward | July 16, 2007
The Atlanta real estate market does not have as many buyers as it has had over the past several years and there is one underlying reason that this has changed: The dissolution of the sub-prime real estate mortgage.
Over the past few years, it did not take very good credit or very much money to obtain a loan to buy a home. Pressured by congress, large institutions have had enough of some mortgage programs that have caused many of today’s current problems.
- During the first 6 months of 2006, 94,161 homes sold in Atlanta.
- During the first six months of 2007, 88,919 homes sold.
- This represents a 5.5% decline in overall sales.
A closer look:
Taking a closer look at which segments have been most effected by the tightening of lending standards, we see the largest impact has been on first time home buyers and investors, or, homes under $200,000.
- In 2006 41,070 homes sold.
- In 2007 37,744 homes have been sold
- This represents an 8% reduction in homes sold and 42% of the total number of Atlanta homes sold.
The next major home buyers segment is between $200,000 and $500,000. Let’s look at the slowdown here:
- In 2006, 40,850 homes sold.
- In 2007, 39,016 homes sold.
- This is a 4.5% decrease.
- This represents about another 44% of the total homes sold.
The last segment of the Atlanta real estate market, which represents a much smaller portion of all homes sold is homes over $500,000 and the luxury homes segment. For our purposes here it will be fine to group them together.
- In 2006, 12,586 homes sold.
- In 2007, 12,516 homes sold.
- Home sales are basically flat at this price point.
- This represents the remaining 14% percent of all homes sold.
Clearly there has been a slowdown and clearly that slowdown has affected home sales more as we look at lower price points.
The two major mortgage programs that have caused most of the problems are stated income loans and the subprime B/C mortgage loans, which are most frequently used on lower priced homes. When the real estate market is hot, lenders do not have as much liability lending money at 100% of the sales price - especially in real estate markets where annual appreciation was 10% or higher annually. In today’s real estate market where home appreciation is stagnant or depreciating, the risk to lenders is much higher if a home is foreclosed on. In the past, a bank would have still been able to sell a foreclosed home without losing much, if any money.
Until we reach a balance later this year or perhaps as far off as next spring, we should expect this trend of slower home sales to continue for homes under $500,000. The best option for selling homes right now and for the foreseeable future remains traditional marketing strategies such as yard signs, flyers, open houses and listing in the MLS as well as having your home listed on the internet with methods that will allow buyers to find your home independently of what a real state agent finds for them.
We have gone to great lengths to provide maximum exposure to all of our listings to help buyers find our listings first. Here is an example of where your home can be found:
- If you Google the term “featured Atlanta homes”, your homes will be the first ones seen.
- We are on the first page for “atlanta real estate”, “brookhaven real estate”, “alpharetta real estate”, “buckhead real estate”, “atlanta luxury real estate” and numerous other terms that will bring buyers to our website where we have your home listed prominently on maps linking to your property details. In fact, we receive thousands of pageviews from buyers every week that you cannot receive anywhere else.
- On our Atlanta homes for sale page, our listings are featured above regular listings providing even more exposure.
- Here is a link to the featured Atlanta homes map page.
If you have any questions about specific areas of the Atlanta real estate market, please fill out the comment form below and we will be happy to help with questions.
Topics: Atlanta Real Estate |
July 17th, 2007 at 6:32 pm
The Austin market has seen a drop in lower end home sales as well. The new subprime “rules” have hurt a lot of people. Some people equate subprime with something bad, but that just isn’t true. There are people with credit problems who need help. Many can still get financing, just at higher rates with new investor-backed programs.
July 17th, 2007 at 6:36 pm
Hi Sam,
I think you are right about not equating these buyers as ‘bad’. It just seems that they need more cash to close than they needed prior to this change in lending rules and many of these buyers just don’t seem to have the cash to qualify.