The July Case-Shiller Index was published on Tuesday, July 27th 2010.  As always, the index reports on data 60 days in arrears.  Therefore, the index reports Metro Atlanta home values for May 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 reflect the average prices of what is being sold in the market.  This index reflects the averages for 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 May index shows positive gains for the 2nd month in a row.  This March established a new low for Metro Atlanta and showed the 7th drop in a row after 5 positive months in a row.  The May index is 107.82 which is 2.02% up from last month and 2.62% up from the March low.  Click on the link below to open the Excel spreadsheet that shows the details of the latest index.

Case-Shiller Index For Metro Atlanta – May 2010

The peak of our market was July of 2007 according to the Case-Shiller index.  The bottom was March of 2010.   Since July of 2007, our homes values have slipped 20.98% – which is an improvement from previous lower months.  The spring selling season was very active in March and April  showing year-to-year increases in pendings of 47% and 28% respectively.  Inventory remains down from last year but is increasing from the previous months of March & April.  Remember, Case-Shiller reflects closed sales and not pended sales.  We expect to see the index continue to show slight gains over the summer motnhs and then begin to trail off in the fall and winter months.  We do not expect to test the low point of March 2010.  Remember, you will not know the bottom of the market until it is already passed.  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 home values slowly increase over time with a few seasonal 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 1518%
• 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 to see continued demand through spring and summer months.)
2. Mortgage Rates/ Credit Availability (We expect to see incredibly low mortgage rates for an extended period with increases coming in late 2010 and 2011.)     
3. Supply/ Inventory Levels (We expect inventory levels to remain lower than normal.)
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.)  

You and your agent should be carefully watching the trends for short sales and foreclosures.  Right now, home affordability is exceptional.  We still have the combination of low home prices and the lowest mortgage rates in 50 years.  Many wonderful properties are available below their replacement costs.  But this scenario will not last forever.  Rates will go up over time.  Home values will be increasing – slowly but surely.  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!

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 reflect the average prices of what is being sold in the market.  Right now, the heavy volumes in the market are on the lower end for 1st time home buyers and short sales/ foreclosures.  The luxury market is slower so that makes the average sales price lower than a normal market.  Second, real estate is local and every market is different.  Your local agent expert can help you understand the specific metrics in your local market. 

Now to the news….  The July index shows the 5th positive gain in a row for metro Atlanta home values.  If you look at the numbers, you will see the % gains this month are less than the previous few months – signaling a slowing of momentum.  Click on the link below to open the Excel spreadsheet that shows the details of the latest index.

Case Shiller Index – Metro Atlanta – August 2009 Index

This means that home values have actually increased from March 2009 by 5.8%.  That is good news!  The peak of the index was July 2007 and the bottom of the index was March of 2009.   But remember….  home values are still down from their peaks and sellers must be realistic about pricing.  Home values are still down 17.19% from the peak of July 2007.  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 3.76%
• Homes Bought in 2001 – Loss of 1.57%
• Homes Bought in 2002 – Loss of 5.16%
• Homes Bought in 2003 – Loss of 8.10%
• Homes Bought in 2004 – Loss of 11.33%
• Homes Bought in 2005 – Loss of 15.65%
• Homes Bought in 2006 – Loss of 19.15%
• Homes Bought in 2007 – Loss of 19.67%
• Homes Bought in 2008 – Loss of 12.20%

Homes values are essentially the same as November 2001 right now.  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 value include the following: 

1. Demand From Buyers (We need to see ” extension and expansion” of the Housing Tax Credit!)
2. Mortgage Rates/ Credit Availability     
3. Pace of Short Sales/ Foreclosures Entering the Market  (See latest blog post on short sales & foreclosures – http://atlrealestatescoop.com/changing-trends-foreclosures-short-sales/)

You and your agent should be carefully watching the trends for short sales and foreclosures.  The status of the federal housing tax credit will also have an impact on demand from buyers.  We will continue to keep you informed with the latest facts and insight that can make you money!  Stay tuned….  

Click the chart image below to view the data for the big 4 counties of metro Atlanta – Fulton, Dekalb, Cobb and Gwinnett.   Contact us if you are interested in see the data for each individual county.  This chart shows some interesting facts:

• Pre-foreclosures are still very high (yellow bar)
• Properties that become foreclosed or bank-owned are significantly lower (red bar)
• Sales of bank-owned properties is higher than the rate of new properties becoming bank-owned (purple bar)
• Market sales (resales, new homes, land) are significantly smaller than the number of pre-foreclosures (green bar)
• The percentage of REOs or bank-owned properties compared to total sales is shrinking in recent months (green line).        

The case is clear – REO listing inventory is shrinking.  We also know this to be true from the “word on the streets” since many REO specialists do not have the listing inventory volumes they has back in the spring and early summer months.  There are two root causes for this situation.  One is that more banks are supporting and promoting short sales.  The second is that banks are simply sitting on inventory and not bringing properties to the market for sale.  Short sales make sense since it costs the bank less money to process.  But why would a bank sit on inventory and not bring to market for sale?  Some speculate that banks are holding assets to defer losses.  Others believe that banks are using these assets to negotiate with the government to establish a “toxic bank” similar to the model used for the RTC (Resolution Trust Corporation).  Only time will tell the real reasons. 

So what does this mean to sellers or buyers in metro Atlanta?

For sellers, it means that you and your agent need to carefully watch the trends for future listing inventory in your local area.  This includes notices of foreclosure or pre-foreclosures that will become short sales or bank-owned properties.  This also includes the “shadow inventory” that banks are holding.   If the banks decide to dump the inventory onto the market too fast, it will have a negative impact on market values.  Yet another category to watch includes the “sideline inventory” of sellers that are expected to come into the market if values slightly improve.  Right now our inventory levels are down 28% from last year.  Pended sales are running at about the same pace as last year.  For now, we are consuming our inventory.  If that remains the case, property values will remain stable and may even pick up slightly.  It is all about the balance for buyers and the current listing inventory.  Prudential Georgia Realty created our award-winning Advanced Property Marketing System specifically for these types of market conditions.  As the market changes, we will see the trends first and can help you optimize your value proposition to stand out from your competition.     

For buyers, there are still tremendous deals in our market.  There are fabulous resales, builder short sales, residential short sales and bank-owned properties.  Many of these are priced below their replacement costs.  It may be wise to work with a specialist who understands both the short sale and REO markets to evaluate the best opportunities.  Prudential Georgia Realty has hundreds of trained and certified specialists that can help in your local area.  These specialists have foreclosure searches powered by RealtyTrac plus our new custom Short Sale search.  PGR is the only brokerage that provides these powerful tools to our agents.

If you want THE EDGE in the market, please contact your Prudential Georgia Realty agent to get started today!

Scott estimates that Atlanta home values have dropped by 10-25% since the peak in July of 2007 depending upon your local area.  As always, real estate is local and every market is different.  Scott suggests that many of our local markets are now stabilizing and showing some signs of recovery.  However, that may not be reflecting in the appraisals used by lending servicers.   

Scott discusses big changes with the new HVCC process and the new 1004MC form.  He also makes specific recommendations for sellers and real estate agents to impact the process.

Prudential Georgia Realty agents are receiving specific training on this process and using the right information tools for CMAs (competitve market analysis) and the 1004MC forms.

• For all FMLS counties, the report shows 4481 pending versus 4853 last month and 4410 in July of 2008.  Therefore, pending sales are up on a year-to-year basis but down from last month. 
• Closed sales were 3734 versus 4413 last month and 4378 in July of 2008.  Therefore, actual closed sales are down on a year-to-year basis and down from last month.  Closed sales have been running 10-20% less than pending sales in the last 4 months.  This is due to the longer timeframes for closing short sales & foreclosures which represent over 50% of the transactions in the market.  The new Truth in Lending disclosure rules will also have an impact on closing timeframes.  See our post and audio podcast for details.  
• Inventory for all FMLS counties continues to drop to 42,521 homes for sale.  Inventory is down 3% from last month and down 35% from July of 2008.  We expect to see inventories rise as more short sales and foreclosures come on the market in the next few months.
• Equity Depot announced 14,000 new “notices of foreclosure” for the September auction.  Last fall, these pre-foreclosure notices were running aroun 7,000-8,000 per month.  In August, there were 12,000 and July 16,000 pre-foreclosure notices.      

Click Here To View The Trendgraphix Market Summary Chart

 If you have additional questions about the local real estate market, please contact your Prudential Georgia Realty agent.  They have access to many market reporting tools plus foreclosure information, short sale information, tax records, liens, mortgage balances and more.  You may also contact us directly by submitting a question below. 

The Case-Shiller Index reports 60 days in arrears so the current index reflects home value estimates for May 2009.  The latest index for metro Atlanta shows a positive increase of .26% from last month.  This is the second increase in a row for metro Atlanta.  So what does this really mean?   First, this is a broad measure of home values for metro Atlanta.  Every local market is different.  Second, this signals that we are likley to be seeing the bottom of values for our market.  Of course, that could change if short sales and foreclosures flood the market too quickly with additional inventory.  Current home values are back to levels last seen in October of 2000.  Your local Prudential Georgia Realty real estate expert can give you the facts in your market.   The following chart shows the index from January 2006 to July 2009. 

2006 - 2009 Seasonal Trend

You can see a pattern of home values increasing over the spring months for the past three years.  This is due to the higher demand for homes in the spring and early summer market.  This year, we expect an “extended summer sales season” due to the expiring federal & state tax credits plus fears of mortgage rate increases over time.  We expect to see positive Case-Shiller Index results for metro Atlanta through the summer months.  In the late fall and winter, we believe the index will start to report negative numbers again.    

The following chart shows the Case-Shiller Index over different periods of time.   The average appreciation historically has been in the 3-5% range.  The chart below shows the impact of the drops in the past few years.   

The future trends for Atlanta real estate are very positive.  Please view of video report at AtlantaRealEstate2009.com for a detailed report on future value trends for Atlanta real estate.  If you have question, please contact us.  We have many community experts that can help you better understand the current home values and trends in your local market.  There is no doubt that right now is a great time to buy real estate in metro Atlanta!