Case-Shiller Home Value Index for October 2010

The latest Case-Shiller Index was published on Tuesday, October 28, 2010.  As always, the index reports on data 60 days in arrears.  Therefore, the index reports Metro Atlanta home values for August 2010.  So what does the latest index show and what does that mean for home values in metro Atlanta? 

Before we provide the answer, we want to make two caveats.  First, the Case-Shiller index of home values is very different from average sale prices which only reflect what was actually sold in the market.  If lower priced homes are selling more, then the average sales price will show a lower value than what market value may be for higher priced properties.  This index also reflects “the averages” for all of metro Atlanta.  Remember, people do not buy houses in America or even in metro Atlanta.  They buy a specific property on a street in a local community.  Real estate is local and every market is different.  Your local agent expert can help you understand the specific metrics in your local market.  However, these metrics are a good general indication on what is happening in our market.   

Now for the news….  The August index showed a slightly negative result after positive gains for the 4th month in a row.  The March 2010 established a new low for Metro Atlanta and showed the 7th drop in a row after 5 positive months in a row.  There is a normal seasonal pattern which tends to see home values rise in the spring and summer months with a drop in the fall and winter.  The August index is 109.09 which is .85% down from last month and still 5.17% up from the March low.  Atlanta home values reflect levels similar to May of 2000 according to Case-Shiller.  Click on the link below to open the Excel spreadsheet that shows the details of the latest index.

Case-Shiller Index for Atlanta (August 2010 Index)

The peak of our market was July of 2007 according to the Case-Shiller index.  Since July of 2007, our homes values have slipped 20.06% – which is an improvement from previous lower months.  Driven by the expiring tax credits, the spring selling season was very active in March and April which translated to increases in closings for May and June.  Remember, Case-Shiller reflects closed sales and not pended sales.  Since the tax credits expired, we have seen an expected drop in closings for July and August.  The fall season is typically slower  due to normal seasonality.  Therefore, we expect to see the Case-Shiller index begin to show declines in the fall and winter months.  The big factor to watch next year will be the pace of short sales and foreclosures entering the market.     

We do not expect to go beyond the low point of March 2010.  Remember, you will not know the bottom of the market until it is already passed.  The AJC recently published a report from the Economic Forecasting Center at Georgia State University that estimated our net job growth in 2010 at only 5000 jobs.  However, that same report predicted we would see over 60,000 jobs in 2011 and over 78,000 in 2012.  Our conclusion is that we are passed the bottom of homes values for Metro Atlanta but do not expect a robust recovery.  We expect to see annual home values slowly increase over time with a few bumps along the way.     

If you look at the average annual Case-Shiller index for each year, here is how homes purchased in recent years would compare to the current index: 

• Homes Bought in 2000 – Gain of 5.67%
• Homes Bought in 2001 – Gain of .07%
• Homes Bought in 2002 – Loss of 3.64%
• Homes Bought in 2003 – Loss of 6.68%
• Homes Bought in 2004 – Loss of 9.85%
• Homes Bought in 2005 – Loss of 14.18%
• Homes Bought in 2006 – Loss of 18.09%
• Homes Bought in 2007 – Loss of 18.62%
• Homes Bought in 2008 – Loss of 11.05%

Yes, we are slowly climbing our way out of this unprecedented housing crisis – but we are not there yet.  So where will home values go from here?  The key factors that will impact our home values include the following: 

1. Demand From Buyers (We expect to see normal fall demand.)
2. Mortgage Rates/ Credit Availability (We expect to see incredibly low mortgage rates for an extended period with increases coming sometime in the second half of 2011.  We also expect to see adjustable rate mortgages and other more exotic loan options disappear in 2011.)     
3. Supply/ Inventory Levels (We expect inventory to remain at normal levels with a heavier mix of short sales and foreclosures for the next two years.) 
4. Competition from Short Sales/ Foreclosures (We expect to see significant numbers of short sales & foreclosures for the next two years.  However, we do not expect a flood of foreclosures that drives the overall inventory too high.  Banks are not going to harm their own values.)  

You and your agent should be carefully watching the trends for short sales and foreclosures.  Look for some juicy headlines that show big year-to-year drops in the late fall.  Remember, last year we had the state and federal tax credits expiring at the end of November.  Therefore, we had an unusual spike in closings.  The federal tax credits ended up getting extended but that was not formalized until December.  We expect normal demand this fall which will be less than the previous year.         

Yes, we will continue to see some ups and downs along the way, but home values are on the rise.  In 5 or 10 years, many will look back and regret not buying their dream home when they had the chance!   Check back for our next posts with the latest facts and insight that can make you money!