Metrostudy: Atlanta housing market hit bottom in Q3November 6, 2009
Submitted by Leslie Ransom, REALTOR®, Founding Partner.
Article taken from the Atlanta Business Chronicle.
Metro Atlanta’s housing inventory began to deplete in the third quarter and housing starts rose, according to Metrostudy’s third-quarter housing report.
“Atlanta’s housing market has hit a bottom,” said Eugene James, director of Metrostudy’s Atlanta division. “Almost all housing indicators have reversed and are now heading in a positive direction. Finished inventory has been reduced to a level where builders have been forced to resume building new homes.”
This September, Atlanta’s finished inventory was reduced to about 11,000 units, which is a 37 percent decline from September 2008 and a 48 percent decline from September 2007, according to Metrostudy. Finished vacant housing inventory is one of the fundamental indicators Metrostudy uses to monitor the health of the market.
Closings have surpassed starts for three years now. Plus, the gap between new-home sales and starts has widened each quarter.
In the third quarter of 2009, annual closings totaled 14,980, while annual starts totaled 4,748 in metro Atlanta. Total net absorption was 7,060, with more homes sold than built and delivered during the 12 months ending in September 2009. The result is depletion of finished housing inventory, James said.
The reduction of inventory has encouraged Atlanta builders to switch gears during the third quarter and instead of slowing the pace of starts, they started more homes than in the previous quarter. James said the uptick in starts was a bright spot in the market. Atlanta builders started 1,152 homes in the third quarter of 2009, an increase of 17 percent compared to second-quarter starts.
“At 12.8 months, the new-home supply situation looks worse than it is,” James said. “We do not have an oversupply problem, we have a demand problem. The months-of-supply figure is inflated because of the unusually slow closings pace. As demand returns to the market, the months-of-supply figure will normalize.”
Demand has been hampered by the difficulty home buyers have qualifying for mortgages. Credit remains very tight, challenging both home buyers and builders. Continued job losses and high unemployment also hurt consumer confidence, James said. Demand for new homes will grow when the job market improves.
Despite poor demand, as evidenced by only 3,534 closings during the third quarter, the months of supply for finished housing declined from the second quarter. It was the first quarter-over-quarter decline in months of supply of finished homes in four years.
Metrostudy expects the months of supply will continue to decline in coming quarters.