As the temperatures fell in October, the metro Atlanta housing market showed some surprising heat.
About 4,600 homes were sold in the dozen counties centered on the city of Atlanta during the month, 5% more than September and 7% more sales than the same period a year ago, according to data released by the Georgia Multiple Listing Service.
But even as sales grew, so too did listings. The number of listings has been growing amid softer demand caused in part by higher interest rates, which makes the cost of buying a home more expensive for borrowers.
That growth in supply has tempered home prices, compared to explosive growth seen during the COVID-19 pandemic.
“We are seeing a slow drift toward a more balanced market,” said Derek Varnadoe, broker for HomeSmart, a real estate brokerage.
After several years of a near-drought in listings, the number of homes listed for sale — inventory — has been rising. It was 49% higher in October than a year earlier.
In a balanced market in which sellers and buyers have roughly equal negotiating power, inventory typically represents at least six months of sales. But coming out of the pandemic, inventory fell at some points to less than one month of sales, forcing buyers to bid against each other for desirable properties and giving sellers a tremendous negotiating advantage.
But now, listings represent close to four months of sales and it’s a different picture, said broker Kristen Jones, owner of Re/Max Around Atlanta. “Sellers today are negotiating on price and concessions. Today, buyers have some leverage.”
That market shift has slammed the brakes on what had been rapid price hikes.
In mid-2022, with mortgage rates just starting to climb past 4%, the median sales price of a metro Atlanta home was soaring, up more than 20% year over year. As rates kept rising, price hikes slowed.
Last month, the median sales price of a home sold was $399,900, just about the same as the year before.
Even so, current prices are a stretch — or just impossible — for many potential buyers. The median household income in metro Atlanta is about $86,000, and while it is up, home prices are up more, according to Census Bureau estimates.
Higher mortgage rates add to buyers’ monthly costs, at least if they cannot pay in cash and take out a loan. Expensive debt also chills wannabe purchasers, whose buying power is cut, but they also often “lock in” potential sellers who fear they won’t be able to afford their next home because of higher rates.
The rise in mortgage rates started when the Federal Reserve, aiming to fighting inflation by slowing the economy, began raising its benchmark borrowing rate. Mortgages are not directly pegged to the Fed rate, but they typically follow its lead.
And the average 30-year, fixed-rate mortgage rate reached nearly 8% a year ago before starting to fall this spring as the Fed signaled an end to the rate hikes. The Fed then cut rates by a half-point in September.
Between April and October, mortgage rates declined, hitting 6.12% as October began.
Despite the Fed’s moves, mortgages stubbornly edged up again. (A second Fed rate cut of a quarter-point followed last week.)
However the previous slide in rates — along with the rush to avoid getting priced out as they started rising again — fueled a spurt of buying in October, said HomeSmart’s Varnadoe. “Some people who were on the fence have been jumping back in.”
Some are still holding back, hoping for another dip in rates, he said.
The average mortgage rate was 6.79% on Nov. 7, according to the most recent data available from Freddie Mac, which buys mortgages in the secondary markets and tracks rates.
As rates bounce back, it could chase new homebuyers out of the market, but could also lock-in current owners who might have wanted to sell their homes, said Danielle Hale, chief economist of Realtor.com, an online home listing company.
More than four in five homeowners with a mortgage have an existing rate of less than 6%, she said.
Still, rates should dip as the Fed continues to trim its benchmark, and the end of the presidential election season is also a positive, Jones said.
“We expect a stronger 2025,” she said. “Real estate historically picks up after an election year. Consumers do not like uncertainty, and regardless of the election results, the fact that it is over is a good thing for real estate.”
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