The numbers are in for the first quarter of 2018, and the real estate world is abuzz with reporting on the state of the current market and what it means for homebuyers and sellers. The top-line update is that sales are on pace with where they were this time in 2017, home prices are up and inventory is low. But we all know there’s more to consider behind the numbers!
As specialists in the Intown neighborhoods of Buckhead, Brookhaven, and Chamblee, our team has studied the numbers for Atlanta neighborhoods inside I-285. Let’s take a look at how those results stack up within the three main factors that affect the real estate market.
#1 – Home Sales
In 2016 and 2017, about 5.5 million homes were sold nationwide. Numbers for Q1 2018 are on pace with the two previous years. Interestingly, in Atlanta we are down 1% in sales from the first quarter of 2017. This is due to lack of inventory, which we will talk about in a minute.
#2 – Home Prices
Home prices are up both nationally and locally. The national median sales price is $247,000; in Atlanta, it’s $395,000. While the average appreciation rate for home prices is 4% per year, prices increased 5.7% nationally in 2017. This is a higher rate than a person’s salary typically appreciates each year, which means what the buyer is able to afford has decreased.
#3 - Supply
The following simple equation is used to figure out the months of supply on hand (how long it would take to sell every home currently on the market), which in turn tells us what kind of market we are in:
# of homes currently listed Average # of homes that are selling each month
If there is under six months of inventory, it is considered a seller’s market. Sales happen quickly, and multiple offers on a home often drive up the price. If there is over seven months of inventory, this is considered a buyer’s market. When there are more houses available than people to buy them, the buyers have more to choose from, and they have the luxury of taking longer to make a purchasing decision. Overall, we are currently in a seller’s market in Atlanta and nationwide. Atlanta inventory is 3.6 months; nationally it is 3.9 months of supply.
Keep in mind, the important factor to look at in all of this is how each price range breaks down. There may be a lot of hype about how fast houses are selling, but it is imperative to look at the higher price ranges and how that market is different. Once you do this, you can see a different story.
As you can see from the graph below, if you are in a price point below $750,000, there are many buyers looking and fewer houses to purchase – a seller’s market. The higher you go over $750,000, the market changes to a buyer’s market because there are plenty of homes from which to choose. There is nine months of inventory for homes in the $1 million-1.5 million range and 16.9 months of inventory for homes prices over $1.5 million.
What is the good news? If you are buying over $750,000, you have many options to choose from and may be able to get a better deal than you could have gotten last year. If you are selling below $750,000, you are probably at a point where you will get the highest price for your house. We are at the top of the real estate market, and prices are slightly higher than they were at the top of the last cycle in 2007. If you are thinking of selling, sell now!