Light at the end of the tunnel

With so much negative news circulating about the Atlanta real estate housing market, most agents find it difficult to see the light at the end of the tunnel.

The reality is that, while the local real estate market is more challenging than it has been for some time, first quarter sales of existing homes in metro Atlanta were down only slightly from the area’s best first quarter ever in 2006 when more than 16,000 were sold.

The reason local sales of existing homes have been so resilient is that sellers are discounting home prices. The median sales price of existing homes in 2007 is running almost three percent below last year’s median sales price of $163,000 according to Smart Numbers, a local firm that provides real estate analysis and forecasting.

Sellers of existing homes are being forced to discount because housing inventories are at historically high levels. The current months supply of inventory in metro Atlanta stands at 9.5 percent – a 50 percent increase over this time last year.

According to Metro Brokers/GMAC Real Estate President and CEO Kevin Levent, agents must help sellers now more than ever to understand current market conditions as they decide how to price their homes.

“The months supply of inventory report that we provide and update every month on MetroNet is such a valuable tool on a listing appointment,” Levent said. “We break down the months supply by county so you can relate current conditions to a seller on an even more local level. It demonstrates to the seller that you really know your stuff and aren’t just telling them to lower their price expectations out of desperation.” While Smart Numbers doesn’t track inventories of resales versus new homes, many real estate observers believe a disproportionate amount of the inventory surge is due to new homes.

Local new home sales have been in a gradual nose dive since early 2006 and haven’t yet recovered. After dropping more than 13 percent from 2005 to 2006, new home sales were down 17 percent in the first quarter compared to last year’s first quarter.

One major reason for the slide in new home sales is that prices continue to go up, even though sales are down. New home prices are up nearly three percent this year and by an average of more than seven percent the last four years.

Lot prices are the main culprit. Lot prices rose more than 13 percent from 2003 to the first quarter of 2007. On top of the increase in lot prices, lot sizes are getting smaller – from .35 to .30 of acre on average.

Bankers and builders began to adjust for the slowing market in 2006, as permits dropped nearly 13 percent. Smart Numbers projects that permits will fall more than 20 percent this year before rebounding in 2008.

In fact, after projecting earlier this year that the local real estate market would experience a gradual recovery by the end of the second quarter, Steve Palm of Smart Numbers now predicts the recovery may not take hold until next year.

“There is light at the end of tunnel,” Palm said at a recent housing summit. “But we’re going to be in the tunnel for a little while longer.”

Metro Brokers/GMAC Real Estate, established in 1979, was recently named the largest real estate service provider in Georgia for the fourth consecutive year by Real Trends. Metro Brokers has 23 metro Atlanta and north Georgia offices and offers a wide range of real estate services including residential and commercial sales; pre- and post-license training; corporate relocation; new home sales and marketing; and insurance, mortgage and title/closing services.

The company is the largest GMAC Real Estate franchise in the world and has more than tripled in size over the last five years with more than 3,200 licensees, making the company the largest license holder in the state of Georgia. Metro Brokers is also the number one selling broker in metro Atlanta and north Georgia.

To contact Metro Brokers, call 404.843.2500 or visit metrobrokers.com.