Case-Shiller Index for November 2010

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 another negative result – as expected.  The March 2010 index 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 September index is 107.82 which is 1.04% down from last month and still 3.94% 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 – Atlanta – September 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 20.99%.  Since the tax credits expired last spring, we saw an expected drop in closings for July, August and September.  The fall season is typically slower  due to normal seasonality.  Therefore, we expect to see the Case-Shiller index begin to show additional small declines in the 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 4.44%
• Homes Bought in 2001 – Loss of 1.09%
• Homes Bought in 2002 – Loss of 4.76%
• Homes Bought in 2003 – Loss of 7.76%
• Homes Bought in 2004 – Loss of 10.90%
• Homes Bought in 2005 – Loss of 15.18%
• Homes Bought in 2006 – Loss of 19.05%
• Homes Bought in 2007 – Loss of 19.57%
• Homes Bought in 2008 – Loss of 12.09%

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 demand to continue to be slower than normal with gradual increases in 2011.)
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.  Analysts predict that short sales and foreclosures will be over 60% of the transactions in 2011.  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.  Yes, we will continue to see some ups and downs along the way, but home values will rise again.  In a few years, short sales and foreclosures will return to normal levels.  The new homes inventory will remain low.  That means we will see an undersupply of homes for sale and values will begin to 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!