A rapid increase in mortgage rates didn’t prevent home sales from rising in metro Atlanta last month as demand pushed the median home price to an all-time high of $400,000, according to reports out this week.
Late spring typically spurs the hottest demand for homes, and buyers in a 28-county area centered around Atlanta defied the concerns about higher rates in May, buying 7.9% more homes than during April.
That surge came despite the jump in borrowing costs and was partly fueled by a shortage of listings for sale, but also by a significant number of all-cash buyers like investors and institutions whose bids are not affected by borrowing rates. The result: Home prices were up 3.9% in May compared to April.
The trends were similar although the median price was slightly higher — $409,000 — in the 12-county area covered by the Georgia Multiple Listing Service, according to John Ryan, the organization’s chief marketing officer.
“The marketplace is strongly tilted towards a sellers’ market,” he said.
But the market is not even across a range of prices, he said. “The competition is hyperactive at the $400,000 price range and below.”
That is because young professionals have been increasingly interested in homeownership. Rising prices are bad news for them.
The median list price of a metro Atlanta home has climbed 28% in the past two years, according to Realtor.com.
Many first-time buyers struggle to put together the sum they need for a down payment that many lenders require. Moreover, wages and salaries have risen healthily through the past several years, but not at a double-digit pace.
The recent jump in mortgage rates has been expected to cool the market, mainly by chilling demand.
And the change had to be painful for some wannabe buyers who were stretching to afford a house. A 30-year, fixed-rate mortgage was 2.77% last summer and 3.11% in late December, but it’s been over 5% since mid-April.
The increase can add hundreds of dollars a month to a mortgage payment.
Meanwhile, the purchase price has also kept climbing. That’s because higher rates haven’t yet reversed the supply-demand equation. For several years, the supply-demand balance has been tilting ever-further to the advantage of sellers. And while higher mortgage rates have meant fewer bidding wars and fewer purchases that exceed the asking price, there are still more buyers than sellers.
In a market where buyers and sellers have roughly equal negotiating power, the number of homes listed for sale — supply — should equal six months or more of sales. Yet, for a range of reasons, supply has shrunk to historically low levels, often forcing buyers to bid against each other as prices rocketed skyward.
Last month, the number of listings of homes represented less than one month’s worth of sales. For first-time buyers, the situation is even worse than it looks. Relatively few homes are for sale overall, but the scarcity is acute at the lower end. That means many would-be buyers are priced out of the market. There is not enough inventory to cause a major shift in the market.
Atlanta continues to draw transplants from around the country.
But homebuilding virtually stopped during the Great Recession of 2008-09 and has never made up for the ground lost. Meanwhile, many homeowners have chosen to stay put, some of them because they fear they cannot afford another home.
Experts say it will be years before the market evens out.
In the meantime, sales have cooled a little so far this month, but it’s not just the rising rates. This primarily is a seasonal trend with the end of school and the beginning of summer.