Hey, everybody, let’s talk about our Local Georgia Real Estate Market of June of 2022 and what is going on. We’ve had a lot of news, a lot of movement here lately, and you need to understand what’s going on. Let’s get rid of all the anxiety and the fear that is created with not being clear on exactly where we’re at. Clarity is power. So let’s talk about what is affecting our local real estate market and what we’re actually seeing at the local level.
All right, so I’m going to put my appraiser’s cap on here real quick and get a little geeky with you and talk about the four factors that are affecting real estate and what is happening right here locally. Remember, real estate is local. So when you’re listening to the national news, and you’re starting to get a little bit scared or fearful, you need to understand and come back to what is actually happening in our local area.
The FIRST factor of the four is social, so what is happening on the social level right here in our local area. That would be things like trends in neighborhoods. How safe is it here in this particular area? What’s the employment like? What is going on socially? The great news is we are very healthy in Northwest Atlanta. We’re very desirable overall. People love the climate here and they love the economic base here. And from a social standpoint, there is tons of stuff to do in the Atlanta area. So we’re a very desirable area. So from a social level, we’re doing great. It’s a great place to live. We love our communities here; overall, it’s a reasonably safe place to be.
All right, the SECOND factor that affects values is government influence or the government’s role in what is going on in the local market area. Now I know that sounds pretty global, and you may be thinking, well, that’s more of a national thing. However, there is local government influence that affect the values as well. Those are things like police and fire departments. Does it have access to it? What are the local regulations that are occurring? One of the things that we see happening are the smaller municipalities creating laws and regulations around short-term rentals, which is kind of squeezing out the Airbnbs. They’re seeing an influence or an increase in that, and they just don’t like it for whatever reason. Rent restrictions would be another influence, a government influence that would affect values. So as we move forward, we really don’t have a lot of heavy government influence that are affecting the values. We all are pretty safe. Once again, we’re going to talk about safety. We’ve got police departments. Most fire departments have great access to particular neighborhoods, and we don’t have any crazy regulations that are really squeezing the market. So overall, once again, our regulations or our government influence is pretty minimal, pretty standard in our particular area and not too stifling or restrictive.
The THIRD reason, which is probably the biggest reason right now, are economic factors. That would be things like the employment rate. What are the wages of the people who are actually working in this area? And then there is the overall interest rate of what’s going on. So there’s a lot underneath the economic factors that affect home values, probably more going on in this little section than any of the other ones right now. So let’s unpack this a little bit. Let’s talk about rates, because every time you turn around, all you hear is interest rates are going up. So let’s take a step back and think about this. Historically, when we look at rates, the average rate is around 8%. That would be like an healthy interest rate when you look at it as a whole and historically. Obviously, we’ve been way underneath that for so many years that we are really having a hard time swallowing 8%. Currently we are right around 6%. I would anticipate, and we’re telling our clients, that if you can lock in a rate before the end of this year at about 6.5 or below, you’re going to be sitting pretty. I would be very happy if you could lock in at a rate anything below 6.5%. I know that’s a hard pill to swallow right now. We are so used to seeing the 2.8 to 3%, that this whole 6.5%, is driving you crazy. However, historically, that’s actually still really good. So we got to take a step back. It’s going to be a little bit painful. It’s kind of like being out of the gym for a year or two, and then all of a sudden you decide to go back in the gym. It’s just tough. Those first couple weeks are really tough. However, historically, it’s still a really good rate, but that’s the big one that is affecting things. We’ve seen the first-time home buyers are really taking it in the chin. The higher rate at 6.5% has really priced a lot of people out. There’s not a lot of homes at that lower price point that are out on the market, which a whole other issue. Anyways, that’s what’s going on with rates. The other issue that falls under economic factor is employment. We’re really going to be watching and monitoring the unemployment rate. We are starting to see some layoffs. We are also seeing companies holding off on hiring new employees and this is all happening primarily in the tech sectors. I’m hearing that a lot of the layoffs are over on the West Coast, maybe up on the East Coast. I haven’t heard a ton about them right here in the Northwest Atlanta area. So we’re really going to want to monitor the unemployment rate here locally. Right now, we’re doing okay. We’re hanging in there. It’s still really low. Anybody that’s trying to get anything done here lately has realized that we got a labor shortage. So I don’t know how quick that’s going to switch, but that is something that we’re definitely going to want to monitor. Kind of going back and talking about rates a little bit more, we haven’t really seen a lot of tightening with credit in getting people approved, which is a good thing. We haven’t seen a lot of things that affect that. But once again, that would be an economical condition or a restriction that we would actually see. Credit has been pretty much the same. The rates are going up, but as far as getting people approved and tightening restrictions and such, that’s been pretty stagnant. The other thing is is our tax base here is pretty good. We haven’t seen a lot of crazy things happening in that area. So we’re going to have to continue to keep watch of that as well.
All right, the FOURTH factor is the physical and environmental factors that actually affect real estate. That’s going to be the amount of inventory on the market. Are there physically enough adequate houses for our population? Physical is also any restrictions that you have on the land. Like, do you have a mountain range or a river that are impeding the growth? Atlanta is pretty set where we don’t have any natural boundaries around us so we can grow on all sides, which is kind of unique for a lot of larger metropolitan areas when you think about it on a national basis.
However, let’s talk about inventory because that has been another big topic that has been on the front page for quite some time. Yes, we are still way behind on where we are at with inventory. Much of that is because we have a lot of people migrating down into the Atlanta area. That’s another big factor that is affecting things. There are not enough homes to accommodate everybody that is currently here, let alone everybody that’s coming in from different parts of the world. The thing is you got to understand there’s no quick fix to that. The market can’t turn around and just all of a sudden dump 50,000 new homes on the market. It takes time. And over that same period of time, we have more and more demand that is actually building. So because we have such an imbalance of supply and demand, that is going to take some time to really flush out. So we’re going to be depleted or be behind the curve as far as the needed housing on the market for quite some time.
So a couple other things that we have seen in the market that really affects what’s going on, or you should pay attention to, is the institutional buyers. Now last year, the institutional buyers, those are the big corporate companies that buyers have been competing against for homes. They usually buy and either are flipping them, like the Opendoors of the world, or they’re buying and holding and turning ’em into rentals. We have seen last year, out of all the houses that hit the market, I believe last year, depending on what report you read, anywhere from 18 to 20% of all the new home listings were actually sold to an institutional buyer. That is a huge market share, let me tell you. And being a buyer in this market has been so frustrating trying to compete against those institutional buyers. So we’ve got some good news for the buyers out there. The institutional buyers, some of them are starting to scale back. Some of them aren’t being as aggressive with their offering prices as they have been in the past. They’re basically offering way less the listing price, kind of like wholesale pricing. Which gives buyers a leg up and a little bit more of an advantage moving forward. So that’s some good news for buyers. I personally think they’re having a hard time getting funding because they have really taken a hit on their stock markets lately. And basically, they don’t have that influx of cash that’s being pumped into their organizations like they had been in the past. I don’t have any real proof of that, but I have a feeling that’s kind of what’s going on. So anyways, that’s all good news.
Listen, we are doing good here in Northwest Atlanta. If you’re concerned about some kind of a crazy crash that’s going to happen, this is not 2007, 2008. Again, this is a totally different situation that we are in. We’re healthy. Because we have such an imbalance of supply and demand, we still have a lot of demand and not enough supply, which is always going to keep pricing elevated. Are we going to see the 20 to 21% value increases year over year? Probably not. That’s going to come back down to reality. Are we going to see a price decrease? We’re going to keep on watching it. Right now, we don’t see that. We don’t see that occurring for at least the next 12 months. And then beyond that, we’re going to keep an eye on the unemployment situation. We’re going to keep an eye on the rates, and we’re also going to keep an eye on the third factor. Another something else that we look at is the yield curves to find out what’s going on there. That’ll really give us another indication. So, overall, I know there’s a lot of fear out there. Locally, just be thankful you’re in a great part of the country that still has a lot of demand and a great area. And we’re pretty dang healthy right here. We are here for you.