2017 was another banner year for Atlanta’s housing market which saw its 5th consecutive year of price appreciation. Not only that, but property values have gone up almost 69% since the bottom of the Great Recession (March 2012) according to the Case-Shiller Index. Nope, that’s not a typo, which means that on average, a home worth $100,000 in March of 2012 is now worth roughly $169,000. With that much appreciation in play, and demand rising, it’s not surprising to see new development projects popping up all over the city again as developers try to keep pace with demand.
So what’s in store for Atlanta in 2018?
Okay, let’s dive right into what everyone wants to know – how much are homes going to appreciate in 2018 and what are going to be the hottest neighborhoods in Atlanta? Whenever you’re making predictions about the future you’re always going out on a limb, but I’ve outlined a few of the prominent points that led me to these conclusions below so be sure to take a look.
Here’s what the crystal ball has to say about Atlanta’s real estate market in 2018…
Price appreciation will continue, but at a more gradual pace
As noted earlier, real estate prices in Atlanta have been going up on a year-to-year basis since 2012 and I expect to see this trend continue, albeit at a more modest pace. While 2012 and 2013 saw incredible double-digit price increases, the acceleration has been slowly returning to a more stable pace. On average, we should expect prices to appreciate 3-5% throughout the Greater Atlanta Area during 2018 (we saw a 5.2% increase during 2017 – per the Case-Shiller Index).
Inventory will remain tight
One of the biggest reasons property values have risen so quickly over the last several years has to do with the supply of homes. When the Great Recession hit in 2009, developers stopped building new homes almost entirely. And while they’ve been slowly ramping up since then, they’re still only at 60% of their normal pace. Additionally, Atlanta’s population has also grown more than 10% since 2010 – according to SustainAtlanta. This has led to low inventory levels throughout Atlanta, particularly in high-growth counties such as Fulton, Gwinnett, and Forsyth, which grew 11%, 13%, and 20% respectively during this time.
New construction is becoming more expensive
Another challenge that builders and developers have faced in recent years is a very tight labor market. If President Trump follows through with his tougher immigration policies, the market for skilled workers will tighten even more so, causing an increase in construction costs and possibly slowing any advances on the supply side.
Mortgage rates are going up …but it’s also becoming easier to get a mortgage
Mortgage rates have remained fairly stable during 2017 and hover just over 4%. CoreLogic, a data provider for the real-estate industry, averaged six forecasts of mortgage rates, arriving at a consensus view that the 30-year fixed will average 4.7% in December 2018. That would cause an increase in monthly payments of roughly $41 per $100,000 borrowed.
That said, we’ve also seen some loosening of credit and mortgage restrictions during the past two years, as well as an increase in availability of both jumbo and low down payment loans. With rates going up, banks may also be more willing to work with buyers as they try to make up for the decline in their refinance business. While increasing rates could dampen price appreciation in 2018, it could be offset somewhat by the increased availability of mortgages.
More Millennials will enter the market this year
Having watched the damage inflicted by the financial crisis of 2009, Millennial’s have become notorious for shunning homeownership. This has helped drive demand for rental properties, and subsequently, the increase in rental rates in recent years. However, rental rates have finally reached (and even exceeded) the breakeven point with mortgages for a comparable homes. This has encouraged many Millennials to reconsider home ownership and we should see another uptick in demand from this segment in 2018.
Continued trend toward urban and community living
Once again, I expect the hottest markets to be found intown, especially in neighborhoods where the beltline is slated to be developed within the next 12 to 24 months. This will be particularly true for neighborhoods that have also developed their own distinctive identities and sense of community, such as Reynoldstown, Grant Park, and East Atlanta. While these areas have seen strong double-digit appreciation over the last two years, I think there’s still gas in the tank and they have the potential to outperform the rest of the market.
Summing it up…
With this in mind, I believe we can expect to see continued pressure on the supply side for the foreseeable future. And while an increase in mortgage rates will help bring price appreciation back to a more moderate pace, the impact will be offset somewhat by the increased demand from Millennials, as well as the possibility of increased construction costs for new developments. 2018 should once again be a great year for sellers, but with several years of steady growth ahead, it will also be a great time for buyers to enter the market as well.
Considering buying or selling a home? Here are a few resources and related articles:
How to Get the Most for Your Home – Part 1: Preparation
Atlanta Real Estate Predictions for 2018
Why Photography is so Important in Atlanta’s Real Estate Market
Dear Real Estate Agent, What Were You Thinking? How to NOT sell your home…
How to Get the Most for Your Home – Part 2: Positioning and Promoting your Home
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