This is a great article from the AJC – Atlanta Journal-Constitution. Atlanta’s market is still strong and is better than most markets. In the coming weeks, I’ll post some statistics which will surprise many people.
Georgia home prices remain stable despite perceptions
By John Adams
Published on: 11/18/07
Believe it or not, your home is likely worth more today than it was a year ago.
Two recent studies have highlighted the strength of metro Atlanta housing prices, even as most other parts of the nation have seen price declines of up to 10 percent over last year.
The first study is the widely followed S&P/Case-Schiller Home Price Index, which claims to be the leading measure of U.S. home prices. It covers data through August of this year and shows declines in the prices of existing single family homes in 15 of the 20 metro areas surveyed. The area with the largest decline was metro Tampa, with a double-digit drop of 10.1 percent since August of 2006.
Atlanta was among the five gainers, but claimed less than a 1 percent increase over the period.
Areas reporting the biggest price gains were Seattle at 5.7 percent, followed by Charlotte at 5.6 percent. Portland showed a 2.8 percent increase, while Dallas squeaked out a gain of half a percent for the past year.
The Case-Schiller team of economists recognized in the 1980s that home prices tended to be “inflexible” downward. That’s because many owners will refuse to sell at a price less than what they paid for a property.
This inflexibility is observed most strongly in residential real estate and has been shown to have a strong stabilizing effect on home prices.
In addition to Tampa’s weak performance, home price drops were seen in Las Vegas, Phoenix, Miami and New York. In addition, both San Diego and San Francisco made the list of losers, leading to the conclusion that those areas hardest hit were the same ones that had experienced rapid price run-ups in recent years.
I suspect part of Atlanta’s ability to retain even a minimum level of price appreciation is that our price gains over the past decade were modest compared with many parts of the nation. It seems that Atlanta’s housing prices were fueled more by job growth and relocation than by the frenzy and speculation that drove some areas.
This conclusion is supported by a recently released study of America’s metropolitan areas by the Brookings Institution, called Blueprint for American Prosperity. This study concludes that America stands in a position of economic strength, but that we need to leverage key assets such as innovation, human capital and infrastructure. The study suggests that these assets tend to concentrate principally in our nation’s major metropolitan areas.
This study produced what it calls MetroNation Profiles, a sort of state-by-state review of the top 100 metropolitan areas, and gives statistics associated with those areas, highlighting the importance of these economic engines. In this study, metro areas often cross state boundaries.
For example, Georgia contains all or part of three of the nation’s 100 largest metropolitan areas — Atlanta, Augusta and Chattanooga — which alone account for 60 percent of the state’s population, 62 percent of the state’s jobs, and 71 percent of the state’s gross domestic product (GDP). All 15 of Georgia’s metros constitute 81 percent of the state’s population, 84 percent of the state’s jobs, and 89 percent of the state’s GDP.
It is a widely established fact that home prices tend to follow job growth, and if an area’s prices are holding up well in the current real estate market, there should be a correlation with job growth. The good news is that the study found metro Atlanta to be ranked 10th in job growth among all metro areas nationwide, with some 67 percent of all jobs in the state being Atlanta-based.
Yet, the fact that home prices in metro Atlanta are up will come as a surprise to most Atlantans.
I conducted a completely unscientific poll over the past couple of weeks, asking everyone I talked with whether they believed home prices were up, stable, or down over the past year. Almost everyone was convinced that real estate prices were down significantly.
Stay tuned for the release of the Federal House Price Index coming up on Nov. 29. This report is a study of price movements based on a much larger sample of homes than the Case-Schiller Index, and includes both resales and refinancings through the end of September.