MarketNsight is a leading real estate data and analysis provider across the Southeast and tracks pending sales weekly to identify the latest housing trends faster than anyone else. Most recent data confirms that the prolonged period of elevated mortgage rates post-pandemic has created a new normal in the housing market.
Sales are down 20% from 2019. The missing 20% is made up of either discretionary buyers – who do not have to move – or potential buyers who cannot qualify at today’s mortgage rates. The 80% still buying are either cash buyers or non-discretionary buyers who are moving for a job, death, birth or other life circumstances.
“The missing 20% will not come back as long as rates remain above 6%,” said John Hunt, Principal and Chief Analyst at MarketNsight.
With that in mind, MarketNsight compared 2024 to 2023. Viewing the overall pending sales trend, homebuyers are increasingly overcoming interest rate sticker shock and entering the market. Since hitting a bottom in November 2022, year-to-year pending sales have improved and are back in positive territory for the first time since the second week of June 2022, when interest rates first went over the Sensitivity Threshold of 5.25.
“This was reflected in our June MarketWatch webinar poll with over 1,300 builders, developers, bankers, realtors, and other housing industry professionals in attendance. 78% of respondents said that their sales from January to May 2024 were just as good or better than the same period in 2023,” states Hunt.
To date, in 2024, pending sales are up 2%, or basically flat.
Supply and Demand
Total inventory at the midpoint of July 2024 is up 5% over June 2024 and 60% over July 2023. The additional inventory is badly needed, but Atlanta is still a long way from reaching equilibrium at six months of supply (MOS).
As of mid-July, the Greater Atlanta metro area has 3.4 months of supply. After four-and-a-half years, inventory is returning to pre-pandemic months of supply. Actual inventory is still 20% lower than pre-pandemic levels, but this return to familiar territory is a positive sign for the market’s stability. Atlanta needs an additional 34,000 units of inventory annually to get back to equilibrium.
“With some additional supply from the resale side, we have chipped away at the housing deficit in the first half of 2024. However, we are still well below the equilibrium of 6 MOS, and the ultimate goal is a housing deficit of zero,” commented Hunt. The last time we were at equilibrium was in August 2012.
If rate cuts begin in September, MarketNsight anticipates interest rates will moderate slowly throughout the balance of 2024 and through 2025.
“This is actually a good thing because if rates were to drop dramatically, and the 20% of potential buyers on the sidelines jumped back in, there is not enough capacity to satisfy the demand. The result would be a drain on already-low inventory and a return to sharp price increases,” comments Hunt.
What About Price?
July 2024 prices are up 10% year over year. For the year to date, prices are up 9% over 2023. This is nearly double the 50-year average annual home price appreciation of 4.6%.
The average price in Atlanta hit a record high of $540,000. July 2024 prices are up 26% over July 2021, up 52% over July 2020, and up 65% over July 2019. As long as new and resale inventory remains constrained, upward pressure on prices will continue.