Much to the chagrin of many home buyers, Atlanta is now the main dish on the investor buffet table. As other markets see distressed inventory shrink, the big investors – those with budgets in the millions and some in the billions, including hedge and retirement funds with both domestic and international roots have turned their attention to Atlanta. The result is clear to entry level Atlanta home buyers; buckle your chin strap and open your wallet because the buyer’s market is over.
Having cleaned out areas like Phoenix, mega investor groups are now focused on Atlanta, Tampa and other southern cities. What’s driving this interest? What else but potential profit. Economists at Goldman Sacs compare treasury notes at 2% with calculated yields averaging more than 6% nationwide on rental properties. In Phoenix, prices were up 24% from 11/11 to 11/12 versus 7.4% for the nation. That of course needs to be kept in context, but the influence of bulk purchases by investment groups is indisputable when it comes to the data. Inventory and time on market is down, while prices are up, and not just for distressed homes.
So what’s the bottom line for distressed properties in Atlanta? Or more broadly, homes under 200K? Simple, it is now a seller’s market and the idea that bargains are to be had should be dismissed. Considering a balanced market to have a 6+- month supply of homes, the greater Atlanta real estate market shows the following levels as of Dec:
- Under 100K – 1.7 months
- 100K-200K – 2.7 months
- 200K-300K – 4.5 months
The metro Atlanta market as a whole saw supply drop about 41% across all price points from Dec ’11 through Dec ’12. From 0-$500K it’s a seller’s market; 500K+ remains a buyer’s market but supply has been cut in about half as the pendulum swings. Data for the micro markets in the greater Atlanta real estate market vary, but trends are positive overall.
Even more startling are the prices being paid for homes over the last quarter of the year. At or over list price transactions are being seen in surprisingly high percentages. This is not exclusive to distressed homes:
- Under 100K – 31%+- of distressed sales and 8+-% of non-distressed sales were at or over list
- 100K-200K – 12%+- of distressed sales and 10+-% of non-distressed sales were at or over list
- 200K–300K – 4%+- of distressed sales and 9% of non-distressed sales were at or over list
- Of all 4th Qtr ’12 sales, 13.5%+- of distressed sales and 9%+- of non-distressed sales were at or over list
So the Atlanta home buyer is chasing fewer properties, facing more completion and paying higher prices. They’re also seeing the time to chase these properties dwindle; homes are selling quickly, and so those not fully prepared to buy are never really in the game. Consider median days on market for 4th Qtr ‘12
- Under 100K – 56 days
- 100K-200K – 75 days
- 200K-300K – 91 days
The data is clear, home buyers in Atlanta under 200K are working in a seller’s market. The influence of large investors is clear; expect more competition, higher prices and a much shorter window in which to make decisions. Multiple offers and calls for “highest and best” are routine, as investor activity has tripled in Atlanta over the last year. These investors have a huge appetite and the hoarding of Atlanta homes for sale under 150K will continue until they move on to the next city or the flavor of the week changes from real estate to something else. When that happens and these same homes are cut loose, we’ll likely see the cycle begin all over again.