The latest Case-Shiller Index was published on Tuesday, April 26, 2011. As always, the index reports on data 60 days in arrears. Therefore, the index reports Metro Atlanta home values for February 2011. 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 or median homes 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. The median price is simply the home sales price in the middle of the properties selected. The Case-Shiller Index reports on repeat properties sold and other factors which are generally better indicators of home values. Second, this index reflects the average home values 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 February index continues a 7 month streak of falling home values. The March 2010 index was the previous low before these past few months in Metro Atlanta. The current index reflects values similar to home values in the winter of 1999. But we are returning to a more normal seasonal pattern which tends to see home values rise in the spring and summer months with drops in the fall and winter. The February index is 99.47 which is 53% down from last month and 5.85% down from February of last year. The root cause for these results are the aggressive prices of short sales and foreclosures in our market. Click on the link below to open the Excel spreadsheet that shows the details of the latest index.
Case Shiller Index Atlanta – February 2011 Index – Reported April 2011
The peak of our market was July of 2007 according to the Case-Shiller index. Since July of 2007, our homes values have slipped 27.11%. We expect to see lower index numbers in March with increases in the spring and summer. If you average the Case Shiller Index for the past 12 months, we are down 23.30% from the peak. We expect the get to the 25% down range based upon the 2010 annual index over the next few months. We believe it is more effective to use the ”average of the past 12 months” or “trailing 12 months” as an indicator instead of reacting to a specific month. The big factor to watch will be the pace of short sales and foreclosures entering the market.
Remember, you will not know the bottom of the market until it is already passed. We believe that we are seeing the bottom of the market this winter and early spring. The AJC recently published a report from the Economic Forecasting Center at Georgia State University that predicted we would see over 60,000 jobs in 2011 and over 78,000 in 2012. A report from the Atlanta Regional Commission forecasts 3 million new residents in the next 30 years. Our conclusion is that we are seeing 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. In approximately 2013, we expect to see a seller’s market return and higher than normal appreciation for a few years. Contact us to learn more about future predictions and how that impacts your decisions.
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:
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:
- Demand From Buyers (We expect demand to improve for 2011.)
- Mortgage Rates/ Credit Availability (Average mortgage rates in the past 50 years were 8%. We expect to see historically low mortgage rates but expect to see rates rising during 2011. In a few years, we expect to see rates 1-2% higher. We also expect to see adjustable rate mortgages and other more exotic loan options disappear in 2011.)
- Supply/ Inventory Levels (We expect inventory to remain at slightly low to normal levels with a heavier mix of short sales and foreclosures for the next two years.)
- 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 approximately 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 likley 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!
