By Kirsten Ricci
The real estate market right now is in a unique, and in all honesty, precarious position. There is a lot of good news but also some challenges, as multiple economic factors are putting pressure on the market.
The yin to the yang is that while mortgage rates are still historically low, they are on the rise, and those entering the market will feel the impact. We have seen the last of interest rates under 4% and those under 5% will likely disappear by years end. That is one of the bigger drivers causing buyers to absorb much of our current inventory in the first two months of 2018. They are tired of waiting for perfect, and do not want to pay more for even less in a few months.
This movement has put more pressure on the market, resulting in a form of a housing shortage. Simply put, we do not have enough homes on the market. This is not just in our neighborhoods. Nationally, the number of homes available for sale fell for a third straight year in 2017, and there were 10% fewer homes on the market in Dec. 2017 compared with Dec. 2016. New home construction was, at best, sluggish in 2017 as total housing starts rose less than 4%, short of expectations of 6%.
New home construction in our area is tricky and there are really no easy fixes. We have multiple factors at play with limited space to build and opposition to any new large-scale projects leading the way of problems for new home construction. When you bring all of this together plus the rising cost of labor, lumber, and land, we have a continuing price increase with the power clearly in the hands of the seller, at most price points. It is a solid seller’s market for homes priced under $450,000 and a steady seller’s market under $750k with homes being updated to current stylings.
American policy on housing has historically been a one-way street. We encourage people to buy, subsidize mortgages, issue tax breaks, have crazy low interest rates all designed to move product and those tricks usually worked as builders swooped in and a steady supply of new houses were the result. Look at how our area has transformed during this century.
Now that dynamic is being broken at the local level. Municipalities hold the key over residential construction and local laws are reining in homebuilding rather than accelerating it. There is a strong sentiment of “not in my backyard” opposition and that opposition is often in the area’s most desirable places to live. This is a collision of national policy versus local desires that lead many in the industry to wonder if the micro or macro economy will win. While the metro Atlanta area has inventory challenges it is even worse in places like Seattle or San Francisco. Imagine this… Amazon places their new headquarters in Atlanta. That puts literally tens of thousands of new well-off buyers in our market. Where are we going to put them?
Kirsten Ricci is a Roswell resident and a Berkshire Hathaway Agent who specializes in residential real estate in the north metro Atlanta area. She can be reached at 678-472-3832, firstname.lastname@example.org.