The number of foreclosures hitting the market has steadily fallen, while the number of buyers coming back into the market to take advantage of low interest rates and favorable prices has increased.
That’s a recipe for a turnaround.
In some submarkets within metro Atlanta, the conditions have gone from tepid to red-hot.
“Prices are going off the deep end,” said Steve Palm, a housing analyst with Smartnumbers LLC. “They were up 26 percent in January and 29 percent in February (over last year’s levels).”
Granted, 2012 was the low point for housing prices, so even though there’s been a healthy uptick, buyers are still able to find attractive deals.
“The median price got so low in first quarter of 2012 that we lost historical context because our stats only went back to 1994,” Palm said.
“We still have people who can’t sell and move up to the next level of house because they’d have to bring a check to closing. We have a long way to go.”
But things certainly seem to be heading in the right direction. The number of metro Atlanta home sales closed was up 60 percent in January compared to the same month last year, according to Smartnumbers.
“It’s switched back so quickly that I don’t think most people even realize what’s happening,” said Johnny Sinclair, a Marietta Realtor and city councilman.
“All of a sudden, there are multiple-offer situations everywhere,” he said.
Well, almost everywhere. If the home being marketed is in a good school district and well maintained, it won’t sit on the market, Palm said. Some are being snatched up in a matter of a few days — even hours.
Sinclair said he started noticing a change in the market about four months ago, and fellow real estate agent Lori Pugh has seen the same phenomenon.
She had an east Cobb family put their home on the market last Saturday afternoon, and before midnight she had several offers and ended up setting an early cutoff date for potential buyers to put in bids.
“It was crazy!” she said.
Pugh said if a home is in good location, well-maintained and feeds into good schools like Walton High, it’s a great time to sell.
“It’s nice that the market has shifted because they have gotten beat up enough with home values,” she said of the clients she has helped.
These particular homeowners were asking $375,000 for their four-bedroom, two-and-a-half-bath home that’s a little more than 3,600 square feet in size.
It sits on about a third of an acre in the Princeton Corners subdivision off Old Canton Road.
And while home prices still are nowhere near the peaks reached before the recession, they are creeping back up after hitting bottom in the first quarter 2012.
“We thought $375,000 was a really good price for this home,” Pugh said.
Fewer homes on the market
What’s driving home prices up is the depleted inventory of houses on the market. Anyone looking to buy a house definitely has to be on their toes, watching the market daily, even hourly, to catch the new listings as soon as they pop up.
“The inventory is radically reduced,” Sinclair said. “I’d say there’s less houses for sale now than there were even a year and a half ago.”
He said in many recent cases when a house has been placed on the market, he has called a Realtor to put in a bid, and within a few hours, nearly a dozen, if not more, others were looking at purchasing the same home.
Pugh is seeing similar patterns.
“I’m bidding on lots of houses, and they are all going to the highest and best (bidder),” she said.
This could be a good problem for Cobb County in the long run.
“I think it means the problems we’ve traditionally had with a lot of vacant homes will go away,” Sinclair said. “That could add stability to neighborhoods, help utility companies and it will help increase property values.”
Builders reacting to opportunity
There is also some question as to how long the trend toward a seller’s market will last. Will it get out of control and lead to another untimely bubble?
Builders are already responding to the need for more inventory. Hundreds of new homes are now in the pipeline, with blueprints working their way through city and county planning commissions.
February building permits were up 67 percent metro-wide over the same month last year, according to Smartnumbers.
Cobb County issued the most February building permits for single-family homes than it has since 2007, said Palm.
“We had 127 permits (for February), versus 77 last year. It’s still a far cry from the 2001 record of 539, but it’s at least going in the right direction now,” Palm said.
Most of the construction is happening in north Fulton, Gwinnett, Cobb, Cherokee and Forsyth counties. Those areas account for more than 70 percent of all construction going on in metro Atlanta, Palm said.
The other caveat is mortgage rates. They are hovering around 3.75 percent and have stayed under 4 percent for most of the past year.
“We are still in an environment of generational lows for mortgage rates,” said Roger Tutterow, professor of economics at Mercer University. “And I think everyone realizes that, going forward, rates are more likely to rise than fall. It’s hard to imagine they get much better in the coming months.”
But even though home prices have been rising – they’re up 29 percent in February over the same period a year ago in metro Atlanta – Tutterow doesn’t see the market getting anywhere close to overheated. In other words, he doesn’t see any danger of a new bubble forming.
That’s because a relatively few well-positioned builders have feasted on cheap lots left over from the less fortunate builders who didn’t survive the recession. That trend, which allowed builders to compete with low-priced existing homes, may have run its course.
“The amount of fire sales on those lots is rapidly waning,” Tutterow said. “As we go forward, builders may not get as good of a deal on lots as they have over the last two years. So current home builders are hoping that existing home prices will continue to rise because it’s going to be tougher to compete with those homes if they don’t.”
Tutterow said location is still key.
“Builders in Cobb, north Fulton and Gwinnett are reporting that their product is moving about as fast as they can build it,” he said. “But we don’t want to confuse that with broadly saying the entire housing market is hot. There are pockets of weakness and pockets of strength throughout metro Atlanta.”
According to the Case-Schiller Home Price Index, housing prices are up 13 percent for the last 12 months in metro Atlanta, compared to the previous 12-month period. So prices are still off 27 percent from their peak in April 2007, Tutterow said.
That means there are still plenty of homeowners who are “upside down” on their mortgage – their homes are worth less than they owe the bank. They are basically trapped in their current houses unless they want to sell at a loss or let the home go into foreclosure.
If home prices continue to rise, more potential homebuyers will be turned right-side up. That would free them to move to another house.
“So we could see some unlocking of potential buyers,” Tutterow said.
Buyers and sellers agree
Jim and Barbara Luca are Sinclair’s clients who just bought a home in Powder Springs.
“They had to be very aggressive to get the house they wanted,” Sinclair said.
In the long run, the couple got their 5,033-square-foot home off Mars Hill Road in west Cobb for more than $500,000, but Sinclair said they had to be creative in doing so.
The home was only on the market for a day, and they decided to make a full price offer and pay in cash.
“I asked them, ‘Would you be devastated if you lost the house?’” Sinclair said. “So, we decided to make the offer as attractive as possible to the sellers … it was phenomenal.”
The Lucas also agreed to give the homeowners two-and-a-half months to move out.
“We wanted to craft an offer that made us the most attractive offer for them,” Sinclair said.
Jim Luca, a 64-year-old electrical engineer, said he and his wife were fortunate in both selling the home they have lived in for the last 18 years and in their new purchase.
“It took a while, quite a while, to come up with what we were looking for … but we got our asking price on the house we sold and got the price we wanted on the house we bought,” Luca said.
They have been looking for about two years for the perfect home and are moving into Cobb to be closer to their grandchildren.
Their search took so long because of the lack of inventory.
“It’s a difficult process that you have to go through because of there not being that many houses out there, but you can’t get discouraged in your first few months of looking,” Luca said. “Just keep plowing away, and if something comes on the market, you have to be able to go see it fast.”
On the flip side, 30-year-old Erin Stuntz’s family is going to put their three-bedroom, one-and-a-half-bath home off Polk Street on the market in May because of the success of other sellers.
“We heard that houses are selling better,” she said. “Friends are having success with it.”
So, the couple contacted Sinclair and asked him to help them out.
Stuntz has lived in her home for eight years.
“We think we have a great home, and it’s bittersweet, so we’re really sad to sell it, but we’re excited about making new memories in a new house,” she said.
The couple is buying a Marietta home that belongs to her parents, who are moving to their lake house.