Mid-Year Real Estate Report

Metro market still strong despite interest rate hikes, low inventory

By Kathy Dean

Real estate markets have been thriving across the U.S. for the last few years, and the Atlanta scene has been especially robust. Still, the local housing market has been affected by the recent interest rate increases, as has the rest of the country.

Compared to April 2022, the number of sales in metro Atlanta, covering 11 counties, has dropped 33%. There has been a 24% decrease in new listings and an increase of 14% in total active listings. Still, the average home sales price of

$497,864 has stayed the same since April 2022.

We checked in with several area professionals for the local perspective.

“The first half of 2023 has been interesting, to say the least,” said Erin Yabroudy, Lead Realtor, Erin Yabroudy & Associates, Harry Norman Realtors. She and her team cover the Buckhead, Intown, Sandy Springs, and Vinings areas.

“When interest rates began to approach 7% in late third quarter and early fourth quarter 2022, the market softened considerably. The overall economic forecast seemed relatively dismal, and buyers and sellers really paused,” Yabroudy stated. Rates are currently down from those highs and buyers seem to have accepted the new normal, she said. “We are seeing even more multiple offer situations and properties selling above list price than we were last spring. Certainly, rates are higher than they were in recent history, but they are far lower than historical highs — they are actually lower than the average since 1971!”

According to Yabroudy, “Initially, we were expecting historical seasonality trends to continue in 2023, including a slight pause in the market in the early summer months when kids are out of school. However, the volatility of mortgage rates and inventory constriction felt earlier this spring has likely delayed sales activity that I believe will re-emerge during the upcoming summer months as inflation and interest rates continue to cool,” she said.

Multiple offers

Chrissy Neumann, agent with Neumann & Co., Ansley Real Estate, covers the Sandy Springs/Buckhead area. She stated that despite news reports, those areas have done extremely well. “Inventory is still low and buyer demand is still high. Looking at the $1 million to $2 million price point in 30342, there are still only 16 active homes, eight are pending and 32 have sold in the last six months.”

She said those numbers show that there is still a large demand for housing in the area. “The average days on the market with that same data is only 19 and the average list price/ sales price ratio is 99.6%. In other words, if you put a good home on the market that is priced right, we are still seeing multiple offers every time.”

Neumann said that the good news is the slight increase in interest rates has seemed to take the “insanity” out of the market. “In spring 2022, all sense of making offers based on market data was thrown out the window. Buyers were making offers, sight unseen, $100,000 to $200,000 over list price, waiving their due diligence, appraisal, and finance contingencies.”

While the demand hasn’t decreased, things have settled back to a more balanced market in which buyers may only be competing against one or two offers and being allowed to have a due diligence to inspect the property.

“Overall, I think the rate increase was very positive for our area and something that needed to happen to ensure a more balanced market,” she said.

Neumann expects inventory to stay low for the foreseeable future and said that there is talk of a rate cut. “You couple those two together and I think we might actually experience a big surge of activity in the second half — more than even the first half!”

Serious buyers or kicking the tires?

The first half of the year has been busy for Matt LaMarsh, Atlanta Real Estate Advisor and Director of Communications for Engel and Völkers Atlanta. He covers the Sandy Springs area, and says “Low inventory, bidding wars, and increasing values still make the metro a great investment.”

“The uncertainty of interest rates for the last eight to 10 months has created a separation of buyers between the serious ones — those who have to move, relocations and exhausted renters with healthy down payments — and the tire kickers trying out the market passively,” LaMarsh added.

He noted that economists are predicting that there will be fewer sales this year “and the data definitely supports that so far.”

“The low inventory is making it a challenge for those would-be sellers to become buyers. I hear several times a month, ‘Matt, we would love to sell and realize that great equity jump, but where would we move? There’s nothing on the market in the area we want to live.’”

In LaMarsh’s own neighborhood of Mount Vernon Woods, comparable sales range as low as $300,000 and as high as $1.3 million. “That is a really wide gap for only 270 homes,” he said.

Looking forward, LaMarsh expects activity to pick up during the summer.

“So far in 2023, average prices inside the perimeter (ITP) are up 10.6% at the end of April over where we started in January,” reported Kristen Pollock, Real Estate Advisor, Engel & Völkers Atlanta. “But that’s only part of the story. We’re also seeing homes selling a little slower on average than they were in the spring of 2022, which is to be expected.”

Although she’s licensed to help clients throughout the state, Pollock often works with clients in Intown areas including Morningside, Virginia Highland, Druid Hills, Midtown, West Midtown, Candler Park, Lake Claire and Decatur. She said that a year ago, the market was at its height with frequent multiple-offer scenarios.

“Rates had already started to rise, and buyers were trying to secure a home before they got much higher,” Pollock reported.

“Now, rates are higher, and with fewer buyers in the market, some of the frenzy we were seeing back then has gone out of the market. Still, the pace of sales is faster than it was pre-pandemic. On average, homes ITP sold almost two weeks faster this April than in April 2019, a typical real estate year.”

Pollock stressed that Intown real estate is holding its value, and she’s not seeing the steep price drops that some buyers were expecting. New listings were down 22% in Intown this April compared to last, which can be in part attributed to sellers who are perhaps happier with their locked-in interest rate than their current home.

Intown Atlanta has been in a low inventory situation for years and metro Atlanta would need 62,000 more homes this year to reach a balanced market, she explained. “We’re not on track for that. For this reason, we expect housing prices to hold, and an investment in Intown real estate to be a wise one for years to come.”

Still, Pollock is optimistic that the next dip in rates will result in an increase in sales and inventory as more sidelined buyers and sellers come back to the market. “I am seeing so many buyers and sellers waiting for the right opportunity to come their way. Even a slight dip in rates can set that in motion as it improves home affordability,” she said.

Low inventory remains

For Allen Snow, Broker Associate / Vice President, Developer Sales and Marketing, Atlanta Fine Homes

Sotheby’s International Realty, the overall Intown market has remained strong.

“Atlanta still has exceptionally low housing inventory, which is driving the strength of the market despite rising interest rates,” he said. “In my experience, the impact of higher interest rates is affecting home sales differently depending on price point. Homes of all types priced under $550,000 are moving quickly and the luxury market over $1.2 million remains robust.”

Snow noted that homes priced between $550,000 and $1.2 million are remaining on the market longer than the other two price point categories. As rates rise, purchasing power lowers, which explains why the lower price point homes are selling quickly, he said.

“Buyers in the luxury home market appear unphased by the higher rates as most of them are purchasing with cash or mostly cash with a small mortgage,” Snow explained. “From what I see in the market, the higher rates are impacting the mid-priced — $550,000 to $1.2 million — market the most, due to the aforementioned reduction in purchasing power and because the majority of buyers in this price range are obtaining larger mortgages.”

Snow said he’s hopeful interest rates will settle in 5% to low 6% vicinity later this year. “Even if they don’t drop and remain at the current rates between 6.5-7%, they are reasonable compared to historical averages,” he stressed.

“Additionally, I’m not seeing any evidence Intown housing inventories will rise significantly for the foreseeable future.”

Leigh Schiff is a Real Estate Advisor with Atlanta Fine Homes Sotheby’s International Realty. She and her husband Michael head The Schiff Team; she’s the lead listing specialist, and he’s the lead buyer specialist.

In their territories of Buckhead / Sandy Springs, activity has been strong and constant in the first half of 2023, according to Leigh. “The homes that are priced correctly and in move-in condition are the properties that receive multiple offers the first weekend they hit the market. Roughly one-third of new listings are selling the first weekend they are on the market,” she said.

Leigh said she thought the higher rates would reduce the number of buyers looking for homes, “but there are still plenty of buyers looking for a new place to live. Until inventory levels start rising to a level where it is a balanced market for buyers and sellers, it appears that the higher interest rates will have little to no impact on the buyer pool in Atlanta.”

And there’s no slowdown in sight. “I hate to be repetitive, but this is due to the limited inventory on the market and the constant influx of buyers into the local market. I feel that the market will stay stable for the unforeseeable future,” Leigh predicted.

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