Area housing market may see extra sizzle

Falling interest rates could send real estate prices still higher.

Atlanta home prices have been rising for seven years — and lower mortgage rates could fuel a new run-up.

A little-watched indicator — pending sales — shows more buyers diving into the market to take advantage of lower financing costs. The more bidders there are, the more money sellers typically can demand.

The median price of a home sold in metro Atlanta in July was $260,000, up 86% from the post-recession trough in 2012, according to the S&P CoreLogic Case-Shiller Index.

With affordability a growing issue, the market over the past year seemed to be running out of steam. Atlanta home prices rose 3.4% in the first six months of 2019, less than in recent years. Meanwhile, the number of closings, in which ownership is transferred from seller to buyer, was down 1% over the same period. That suggested the pool of potential buyers was shrinking.

But pending sales suggest buyer demand is picking up again. A pending sale is when the buyer

and seller have a tentative deal but have not yet completed the transaction. Such contracts have been rising for the past five months, including an 11.6% surge in July from a year earlier, according to Re/Max, a Realtor.

And the reason is clear, according to John Hunt, a principal at MarketNsight, an Atlanta-based housing research firm.

“This is purely a function of the decrease in interest rates,” Hunt said. “Interest rates matter, a lot.”

Lower mortgage rates let buyers cut their monthly payments when they get a house or — if they choose — get a more expensive house for the same monthly payment.

Mortgage rates started falling over the winter, a ripple effect that followed the decision of the Federal Reserve to cut short-term interest rates last December for the first time since 2009. The Fed cut rates again in July, part of a policy to head off an economic downturn by stimulating consumer and business spending.

In November of last year, the average 30-year, fixedrate mortgage was 4.94%. As of Sept. 5, the rate had dropped to 3.49%, according to the St. Louis Fed.

One prospective homebuyer is Christina Dennis, 37, of Stone Mountain.

The renter had been looking for a home during the spring but dropped out in May after missing out on several houses she liked.

Dennis leapt back into the fray last month when she saw how far mortgage rates had dropped. She has made an offer — $210,000 — on a four-bedroom house in Snellville and is negotiating with the owner.

“The lower interest rates make it more appealing,” said Dennis, adding she has locked in a loan at 3.75%.

Much of the action has been at the lower end of the market, where first-time buyers are most likely to be looking.

“Particularly in the under$300,000 price range, we are seeing multiple bidding,” said Bruce Ailion of Re/Max Town and Country and president of the Cobb Association of Realtors.

Atlanta remains one of the more affordable major metro areas, based on the share of income needed to own a home.

But even here, home prices have outpaced wage and salary gains. Wage gains in Atlanta have bounced between 3% and 4% recently, after rising even less in earlier years, according to the Atlanta Fed.

Among the nation’s 20 largest metro areas, Atlanta home prices have grown the fourth-fastest over the past year, Case-Shiller estimates.