Housing Crash Hits Atlanta Hardest

From David Leonhardt at the NY Times Economix: Seattle’s Foreseeable Housing Bust. This is a follow-up to David Streitfeld article: Housing Crash Is Hitting Cities Thought to Be Stable

Leonhardt writes:

When we last listed the price-to-rent ratios in major metropolitan areas, Seattle’s was near the top of the list. Only in the Bay Area of Northern California and in Honolulu were house prices higher, relative to rents.

A sky-high price-to-rent ratio is perhaps the single best sign that an area is in a housing bubble. Real-estate agents, homeowners and even home buyers can tell a lot of stories to justify the bubble — stories about central cities or good school districts being immune to bubbles — but eventually people will realize that renting is a much better deal and more will do so.

There is no such thing as a market price that cannot fall.

I agree completely with that last sentence - no place is immune.

And price-to-rent is a great indicator, but some areas have high price-to-rent ratios because of the mix of housing units (rentals units are not perfect substitutes for buying). This is why it might be better to track price-to-rent over time for a particular city (as opposed to comparing cities), but a high price-to-rent ratio is definitely a warning flag for a bubble market.

On a more locally related note: this uber-cool interactive chart shows Atlanta as the hardest hit city in the Case-SHiller composite index  -- with 7.9% year over year price decline.  That's higher than the hardest areas of Phoenix, Las Vegas and Miami. 

Interestingly, a quick look at our local mls (FirstMLS) shows a more drastic shift for the Intown market.  In fact, the Average Sales Price for the 12 months ending January 31, 2011 was $303,588 a .8% increase from last month’s (December 2010) number but down 16% from last January’s number of $360,851. On January 31, 2009 the Average Sales Price was $409,158, almost 34% higher than today’s average.

The Number of Units Sold during last 12 months was 1,491, while in the 12 months ending January 31, 2010, 1,492 units sold. In 2008-09 1,889 sold. The one year change was down by only one unit and over two years the number of sales was down 21%.

Annual Sales Volume for the last 12 months of 2010-11 was $452,649,643 compared to $480,088,004 in ’09-‘10 and $657,406,948 in 2008-09. The one year change was a negative 6% and the two year change was negative 31%

Average Days on the Market for the small portion of the market selling was 82 days over the last 12 months. It was only 80 days in 2009-10. In 2008-09, the Average Number of Days on the Market was 77 days. Thus over one year average was up 3% and the two year change was an increase of 7%.

The first month of 2011’s data is in and 2011 sure looks a lot like 2010. Home prices in the Intown Atlanta market, on average, continue a double digit year over year decline. The Number of Days on the Market has drifted upward a bit and is still at a “reasonable” level. The number of transactions remained flat over the last two years and well below historic levels. Sales Volume declined slightly in the last 12 months and is only about 2/3’s of what it was a couple of years ago.

We will have a better handle on the year’s outlook for the Intown residential market in a few months once the spring selling season arrives. One question is what effect will the upward trend in mortgage interest rates have on the market? Another question is what effect the proposed phase-out of Fannie Mae and Freddie Mac may have on the marketplace and will the proposed stricter underwriting and equity requirements drive buyers into the market before they take effect. The changes may make it more difficult to buy a house and may mean that transaction levels may never return to their “historic” levels. We will know more about the scope of these changes and their effect in the coming months.