Conflicting signs on metro Atlanta home prices

Conflicting economic signals make for confusion. But confusion is better than what we’ve been experiencing for much of the past two years — one piece of negative news followed by another and another.

Today, an important real estate index said average metro Atlanta home prices dropped about 1 percent in March from the previous month. During the past year, average prices fell 16 percent, according to the S&P Case-Shiller index.

But two local industry veterans say conditions are improving.

Real estate agent Julie Sadlier, who’s been in the business for 30 years, swears she’s considerably busier now than last year — her worst in at least 15 years.

“I think the confidence level is up with buyers,” said Sadlier, who works for RE/MAX Greater Atlanta Intown. But, she added, many prospective buyers are looking for super deals on foreclosed property.

Steve Palm, president of SmartNumbers, a real estate research firm in Marietta, told AJC reporter Michelle Shaw that the local market hit bottom in February, according to his figures.

“February was still the bottom, and I say that because we have every closing tracked, so I know February was the bottom,” Palm told Shaw.

Lending some credence to the views of Palm and Sadlier is today’s consumer confidence report.

The Conference Board said its Consumer Confidence Index for May reached its highest level since last September, surpassing economists’ projections.

You know we’ve been through the wringer when conflicting numbers are a welcome sign.

6 comments Add your comment

john

May 26th, 2009
6:45 pm

Listen to salesmen much? Real estate agents always think it is a great time to buy.

I’m dubious as to a rebound anytime soon. Wasn’t there an article just last week stating that there is
a 3 year oversupply of condos in Atlanta? Foreclosures are still going up, credit is still tight and the jobs market now considers it a good news when we only lose less jobs than we did last month.

It seems to me the whole economy of the last 8 years was a fake based on oversupply of loose credit. The oversupply of credit caused housing prices to skyrocket, which led to many people borrowing against their properties for items like new cars, and other big purchases based on the fact that it was free money to them since their houses were now worth so much more than they paid for it. Everyone thought if I just buy a house it will be worth twice as much in 5 years, so why not spend that money I am going to make.

Landlady

May 26th, 2009
8:50 pm

Condos are always a volatile investment. We can not predict the future based on condos. However, we can determine our future based on decreased inventory, housing affordability index, population growth, and unemployment. We have decreasing unemployment, a record high affordability index, declining inventories, and our population is growing. I am a 3rd generation R.E. investor, have been in the bus. for over 10 yrs,and stayed out of the Atlanta Market my entire career(properties in the Carolinas). My portfolio is still doing well. However, Atlanta is looking attractive. A rule of thumb, when you look at a property and wonder how your neighbors can afford it, run. Home values are always tied to employment and salaries.

what_what

May 26th, 2009
9:22 pm

FYI-not that you might be interested in data accuracy, but it might be useful to know that the consumer confidence index is based on a sample of 5,000 households.

That’s to gauge the confidence level of the entire country.

Stump Barnes

May 27th, 2009
1:17 am

I’ve seen Steve Palm’s prognostications of housing optimism pop up twice in the AJC in the past week. However, I’m not sold. I have several reservations about his claims. Perhaps, my problems are really due to the lack of information presented by the AJC. However, I think the following issues are worth considering when you hear the bottom calls from the real estate industrial complex:

First, Steve Palm’s SmartNumbers, according to its own website, sells “residential real estate information, analysis and forecasting for brokers, builder/developers, and mortgage and banking professionals.” There’s nothing wrong with that, but it’s quite likely that Palm falls into the trap of rooting for his clients to do well so that they will have the resources to continue to pay for his services. This the same phenomenon you see with the perma-bulls on CNBC.

Second, I would find Palm’s certainty more convincing if there was more color given on what he means by the $10,000 rise in April home prices. Seasonality plays a big part in real estate sales volume and to a lesser extent in sale prices. Go look at the charts on Calculared Risk’s blog for reference. Specifically, the spring buying season always shows improvement over the winter months. However, that does not mean the market has turned. That’s why year-over-year comparisons are thought by many to be more accurate.

Third, a big problem with Palm’s claim that February was the bottom due to the $10,000 uptick in sales price is that it’s quite possible for the median sales price to go up due to changes in the relative sales ratio of lower priced, mid-priced, and high-end homes.

For example, if in February, ten homes that once sold for $125,000 a piece were resold for $100,000 each, the resulting median sales price would be $100,000. Then, if in April, five homes that were once $125,000 each were resold for $100,000 each while another five homes that were once $150,000 each were resold for $120,000, the resulting median sales would be $10,000 higher than February. However, that median price would mask a noteworthy decline of 20% in home prices.

The above example is why the S&P/Case-Shiller Home Price Indices are probably a better indicator than Steve Palm lets on. The S&P/Case-Shiller Home Price Indices are compiled by measuring the change in resell prices for the same homes over many decades. Thus, the index uses exact comps for measuring home prices not a constantly changing, seasonally influenced mix of different houses.

As far as quoting actual real estate agents for an assessment of the housing market, I can only assume the AJC was doing this for the sake of irony.

The bottomline is that even if February was the bottom and the housing market has picked up, real estate markets do not bounce back with V-shaped recoveries like the recent stock market rally. It’s highly likely that prices will stay this depressed for some time to come. Furthermore, Atlanta’s median prices are back to year 2000 levels. On a chronological basis, that’s among the worst for the top 20 MSAs. Ouch.

Can't you do any better?

May 27th, 2009
9:15 am

I’m suppose to believe a real estate agent’s anecdotal and single data point opinion?

I’m suppose to believe Palm because he emphatically says “oh, I know it because I know it?. Hey. Mr. Smart Numbers, how about some data to back up your bold assertion.

Case/Shiller is actual data that gives evidence. The other points of view are uncorroborated opinions aka crap.

a housing researcher

May 27th, 2009
9:09 pm

Smart numbers data may be technically accurate in the sense that they track all sales, but unless they are able to control for changes in the types, sizes, and condition of houses being bought, they cannot say a whole lot about changes in the value of the typical house. Case Shiller does do this. Comparing simple medians or averages does not tell you how YOUR house price is likely to change. If bigger houses were sold this month than last, medians or averages would show an increase in “price” but that would not mean much.