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Where is the Breaking Point in the Market?
By Ryan Ward | May 1, 2008
Jonathan Miller writes an astute post about some of the misleading logic volleyed about on the internet today about the real estate market. The long and the short of his post is that basic economic principles dictate that the market will not on its own begin to shift back to a more balanced market and that there must be some force at play to cause the directional change. It’s very easy to see the impact on housing values in the Atlanta real estate market. Prices have been on a steady decline (7.1%), sold home listings are down about 35% year over year and a little bit of additional activity due to the historic upswing in spring is not driving inventories down.
So, the question becomes, what is the breaking point? Clearly the answer is not that homes are more affordable so we should see an upswing because that is not causation - it is simply an observation and an incomplete one at that. The fact of the matter is that housing is not perceived to be affordable and perception is reality. Justified or unjustified buyers feel housing is overpriced and when you couple that with underwriting guidelines that are more strict than in the past few years, affordability looks to be even farther away.
Population increase itself is not enough to overcome the market. Even though Metro Atlanta is the fastest growing city in the United States since the year 2000, the inventory levels remain unchained or increasing slightly.
So if I had to answer this question, I would say that the breaking point is when the average sold price drops another 4-5%.
Topics: Atlanta Real Estate |
May 2nd, 2008 at 1:54 pm
This is the identical thing we have been seeing in the Tucson Arizona real estate market, just recently since prices have fallen 25% in some areas people are buying on a pure affordability basis. The other influencing factor is that all buyers I mean all buyers in Tucson are looking for “Deal Of A Lifetime” so much so that we have had several clients let an amazing value go only to not be able to find the same deal again, they thought the seller wasn’t being reasonable enough. (All those homes sold and closed quickly after)
May 2nd, 2008 at 9:56 pm
Buyers need to understand that a buyers market does not mean that sellers will give their houses away. I wrote a post a while back that went into a real world example of this. Ultimately, they need to trust the advice of their agent and if they don’t they need to find one that they do trust.
May 7th, 2008 at 9:49 pm
[…] Where is the Breaking Point in the Market? (Ryan Ward) “The fact of the matter is that housing is not perceived to be affordable and perception is reality. Justified or unjustified buyers feel housing is overpriced and when you couple that with underwriting guidelines that are more strict than in the past few years, affordability looks to be even farther away.” […]
May 8th, 2008 at 11:44 am
In Key West the market look like is going to bottom out by September to December, after that who know….
May 8th, 2008 at 4:16 pm
Daniel,
Is that prime time for you guys? Fall/Winter? I haven’t been to Key West in years. I grew up in South Florida (Coconut Grove) and we used to go down pretty frequently. I bet it has changed a lot since I was last there…
May 9th, 2008 at 3:19 am
In Az (Phoenix Metro), I’ve been noticing more activity as of late. In January we sold approximately 2,000 homes, February 3,000, March 4,000 . I haven’t checked the numbers for April yet…. These are traditionally busy months for us though.
May 12th, 2008 at 9:42 am
Hopefully we are close, but, we aren’t really seeing too much additional activity for the time of year and inventories coan’t seem to begin a slide back down so we are sort of stuck in the middle right now.