Decatur Home Price Recovers, But Sales Grind To Near Halt
Decatur Metro | May 12, 2009Hey look, its everyone’s favorite home sales chart, updated through the first quarter!
While Decatur home sales aren’t what they used to be, the median home price in 30030 is still nearly on par with its year-ago average. Pretty good considering that Atlanta home prices are down 25% from last year.
Also, after a single quarter decline, the average price continues to show an upward trend over the last 5 years.
As always, for comparison here’s 30306, 30307, 30308, 30316 and DeKalb County. Everyone’s sales counts are at a stand-still, but it seems that Decatur is the only zip around with anything resembling upward momentum anymore. The trendier zips to the west seem to have topped out in ’06-’07.
Oh and for the sadists, here’s poor 30032.
I wish this was good news but doesn’t it just indicate that Decatur homesellers are not facing the facts? They hold out for higher prices but then can’t sell their homes. Hence only around 30 homes sold in Q1. Many may have overextended themselves when they bought so they are reluctant to take even a small loss on their home. Unfortunately, their eyes may have been bigger than their pocketbooks, so to speak.
Remember all those retired old-timer, long-timers in Decatur who would say real crochety-like “Why do the new folks got to spend all this money on big renovations? We raised a family of five in our house just like it is without making it into a McMansion!” Well, they may have been right. My guess is that soon the more affordable homes will sell disproportionately well and we’ll see that trend line move down. My advice to people who need to sell is that they take the low bids before they go even lower. I’ve got family in New York State that are regretting that they didn’t sell a year ago when they thought the low bids were coming from “bottom feeders”. Those bids look awfully good now that bids are half as much again.
I wish you would refer to 30032 by its real name: Candler-McAfee
Indeed! There is no doubt Decatur’s home values are completely decoupled from the rest of Atlanta. Certainly, Decatur’s values are as impervious as home values in Manhattan, San Francisco and Washington DC – all immune for the national economy.
I think CSD Snowflake is right. In my observations, Decatur has a huge number of ridiculously overpriced homes. And many sellers are too delusional about the true value to lower the price to where their houses will sell. This will happen eventually, and prices will decline. The uptick in the graph is very misleading because the number of sales in Q1 looks like it was about 1/4 the number sold in Q1 2008 — a staggering decline.
Anything priced over $417k is going to be a tough sell because the banks are requiring huge downpayments for those loans. During the bubble, people were buying those houses with 5% or less down. Now, they need $100k or more down to get the loan. Thus, the number of qualified buyers is way, way down. And note that sales are down despite incredibly low interest rates. So even with that huge incentive to buy, buyers are staying on the sidelines.
I agree that Decatur prices will hold up far better than some others, but we’re not at the bottom yet.
I know on Ponce Court, no houses have sold because none have been for sale. When we bought 3 and a half years ago, there were 5 or 6 other houses on the street for sale. Those all sold within weeks or a couple months as ours, and for the last 2+ years or so, no one’s tried to sell (though there is a former rental property up on Ponce right around the corner from us that’s been on the market for ages). This lack of sales made it difficult to get an accurate appraisal for our refi (but we are already a bit of an anomaly: a street of relatively modest bungalows surrounded by neighborhoods of larger, more extravagant homes).
A couple points…
Brad, we seem to go through this every time. I’m not saying that Decatur is immune from the Atlanta or national economy. But isn’t it possible that Decatur could conceivably buck the trend if it was undervalued prior to the bottom falling out of the market? When we bought our house here in early 2007, it seemed insane that you could buy a decent house in walking distance to the Square in Decatur for the same price that you could buy the crappiest possible house in Morningside, within walking distance of nothing.
Look at Decatur’s trend line and then every other surrounding zip. There is a difference.
Snowflake and DEM: The median home price is under $300k. That’s a pretty reasonable price for a home/condo in this zip. So even if the $600k homes sold for $450k it wouldn’t lower the median price if more sold at a lesser price.
To CSD Snowflake: I speak crochety!
Point taken DM. Your post talked about the average while the chart showed the median — that threw me off a little. But I do think the data are not terribly reliable given the huge decline in the number of sales. We’ll know more when more buyers enter the market.
One point about Morningside: true, you can’t walk to much of anything. But it is a lot closer to downtown, midtown and Buckhead, and proximity to the high paying jobs in those areas accounts for some of the price difference. As much as I love Decatur, getting from it to just about anywhere else in Atlanta in a car is a bit of a nightmare.
Lump is on to something. There are almost no houses for sale in Glendale Estates either. Nobody is listing their house in this market that doesn’t have to, and buyers are looking for houses bordering on foreclosure, if not in foreclosure. People are deferring optional moves, so houses are not selling.
I find it interesting that places like Candler Grove are sticking so closely to their original selling price.
I’m no economist, but there is no such thing as “overpriced” as long as someone is (eventually) willing to pay that price.
Generally speaking, participants in most markets are not delusional about buying and selling prices. They are rational actors acting in rational ways. We may not have insight into all those decision factors, but I think that sellers not taking lowball prices is a sign that they haven’t reached a state of financial distress. I think that’s a rare positive sign.
If the only people selling are people that have to sell or foreclosures, wouldn’t that contribute to a an even lower average price?
And who are these special people in Decatur that have the ability to hold out for a ridiculous price whereas everyone else in the metro area has to sell for cheap?
Why don’t we just all admit that Decatur has held up better than most areas and might just be swinging back to a historically normal pattern of slow increases in value? From what I hear out there, Q2 is going to see a pretty large increase in activity, so maybe that will be a better measure?
I think that nasty dip in Q4 was probably the distressed sales in the area, but the scope was limited in Decatur in general.
It’s fair to say that Decatur has a higher density of single-family homes with children in school than the Metro area taken as a whole. Good schools and a unique live/work environment cause that. Also, Decatur residents aren’t a random selection from around Atlanta–they are a self-selecting group with a high concentration of employees of recession-resistant institutions (Emory and ASC may be fighting budget issues, but there haven’t been sweeping layoffs). People in those circumstances–married, kids, stable job in a stable field–are less likely to overextend themselves and are more likely to be able to wait out a downturn. A pride and faith in this community contributes to the confidence of homeowners that things will be fine here in town, and they should just hold on.
I think that’s one of the main reasons the downturn has affected Decatur’s property values less. Less foreclosures/panic sales mean prices aren’t driven down as much.
Where are the overpriced homes in Decatur? When we moved here 7+ years ago, we thought it was an amazing value. I can’t think of many other cities as close to the city center, with major universities and institutions close by, with good schools and public transportation, that are more affordable than here. Anyone know of such a place?
Decatur has come a long way in the last several years too. It used to be that parking was never a problem, because all we had were parking lots downtown. I’m glad that’s no longer the case.
Yet existing property values have basically risen at the rate of inflation during that time. From that perspective, existing homes have been selling at about the same price as they were even before most of the real estate bubble.
Decatur’s property value rate of growth has been stable, unlike other places. There aren’t the huge run-ups in value that would support anything more than temporary dips. Homes are not expensive here unless you are using an inappropriate point of reference.
Realtors will say “face the facts”, because their entire contractual lifetime with a given property is only 3 months, unless/until the owner renews it. Realtors like to, and deserve to, get paid like everyone else. But if someone selling their home isn’t bound to the same short lifespan, then it makes no sense to cut the price, as much as it might benefit your realtor. There may be exceptions here and there, but there’s just no technical support for any kind of lasting price declines in Decatur.
Where are the overpriced homes? A few examples, since I was recently in the market and looked at several properties.
I live on Pensdale, and there’s new construction down the street that’s been for sale for a year at least, initially in the mid 700s and now at 699k. Another piece of new construction on the street has been for sale for at least as long, despite about $80k in price reductions. Now under 500k, it still can’t sell.
There is a renovation on Coventry near Scott that’s been for sale for well over a year, still asking 599k with apparently no takers. Another home a few doors down is still for sale in the low 600s. I looked at it at least 5 months ago, immediately told the realtor it was drastically overpriced, and it’s still sitting there. Just across Scott, on Chelsea, there was a renovated 5 bedroom that won a Decatur design award a few years back, yet could not be sold for 650k after many months on the market, so the owner took it off the market.
Another example is an absolutely stunning, relatively new house on Oakview Road in Oakhurst that has been on the market for about 4-5 months, maybe more, initiallty at 900k, now down to 740k. Still no takers, apparently.
Dem, In the short term, higher-end properties may not be selling because of scared people and bank tantrums… it’s harder to finance. But that doesn’t make a property overpriced, it just makes it harder to sell.
I would define something as technically overpriced if the asking price exceeds the the fair and combined cost of land, reasonable cost to build (which excludes renewal/renovation companies), and overhead of selling it. If these factors are taken into account, being high in price does not equal being overpriced.
Thankfully homeowners are not bound by mark-to-market unless they have no choice but to sell. Unlike banks, homeowners can change their plans rather than selling at a loss.
On the way down, home values usual follow this pattern:
1) sales volume slows
2) inventory increases
3) asking prices creep down or in some cases dive (Phoenix, Miami, vegas)
It looks like Q1-09 is more than 50% less than the lowest volume in the past 5 years. That appears to be a BIG relative reduction. I expect inventory is already up significantly. Anyone think #3 is coming soon?
But I expect that Decatur’s relatively limited supply – there aren’t too many undeveloped fields, and the relatively desirable aspects of Decatur, I don’t think we’ll see prices drop at low as the average for Atlanta-metro.
dedogur, I don’t think this is a short-term issue. What’s happening is a return to common sense in lending — i.e., that loaning hundreds of thousands of dollars to people who can’t make a downpayment and barely have the income to cover the payment is a really bad idea. The current situation is that getting a jumbo mortgage with anything less than 10% down is essentially impossible, and most lenders want 20% or even more. This is a return to normalcy, not a short term blip. And the result is that the number of qualified buyers is a fraction of what it was 3 years ago. That is going to depress prices. There’s really no getting around that.
Again, I am not saying Decatur is going to plummet like Las Vegas. The declines will be far more marginal. But I would not take the uptick in the above graph as the sign of a sustainable trend.
The people selling $600k+ homes have a few factors working against them. It’s all about the foreclosures.
1) As mentioned previously, jumbo loans are hard to get without 20% down. Most people who want to buy these houses rely on the equity in their current (likely $300-400k) house to come up with this.
2) these people who are looking to sell their $300-400k house are competing with a lot of inventory, including a lot of foreclosures.
3) People are standing on the sidelines waiting to see how low prices will go. Can’t really blame them.
When the foreclosure rates slow then prices will stabilize, but I think even after this happens prices will continue to fall until the market pricing catches up because homeowners are reluctant to drop prices.
Decatur might have fewer foreclosures than other areas, so this might be helping pricing. But Decatur is not immune to what happens in other neighborhoods close by- if Candler Park or Druid Hills prices are dropping then Decatur will too.
If my 401K only fell 15 to 25%, I’d be much happier. Real estate is a great investment and has retained its value better than most in this recession. Now is a good time to remodel and repair, but not to sell.
Anything priced above $465,000 needs a jumbo mortgage, which are around 7% and require 20-25% in cash downpayment. If you don’t have $85,000+ in cash, you’ve got to sell your existing house before you can purchase. Nobody wants to sell their current house when prices have fallen. There are several factors going on, but the most significant is tighter credit limits reducing demand.
Tighter credit is a huge issue right now. We all see those great mortgage rates in the paper, but the banks are doing very little lending to new homebuyers at those rates (re-fi’s are capturing the majority of their time and capital). I wish some amount of money-out-the-door requirement had been given w/ all the stimulus funds given to the big banks, as one key in our housing crisis is getting first time homebuyers in the market. They are the starting point for others being able to move up the housing ladder.
I’d also like to address the attacks on low downpayment mortgage loans. Low down payment programs for first time home buyers aren’t crazy– there are plenty of people I know that purchased with low downpayments that are successfully managing their finances and paying their bills. Yes, low down payment programs are relatively new to the mortgage game, and there is benefit to the idea of save until you can afford. However, “Oldtimers” on here that didn’t go to school during the days of crazy tuition and rising student loan debt need to consider that many young professionals saddled with student loans have trouble accruing the downpayment savings at the same time as paying down student loan debt. Just because someone didn’t have parents able or willing to pay for college doesn’t mean that they should have to wait 8-10 years to have access to homeownership. These young professionals have played a big part in Decatur’s community building in the past decade, along with the “oldtimers.” I say bring on the low downpayment programs, with responsible underwriting on the part of the banks to assess likelihood of repayment.
Just a quick comment. I would pretty much disregard the median home sales price (and that is pretty much what every reputable economist would say right now – http://www.calculatedriskblog.com). What a high median sales price in decatur says is that there are almost no foreclosures – which is essentially the only thing selling right now. I believe that ~50% of existing home (as in not new) sales are foreclosures. As someone stated previously, this is b/c in a foreclosure it has to sell, so the sales price is more reflective of the current market conditions than areas where people are willing to ‘wait it out’. As in most cities right now there is a huge inventory of people who would want to sell, but b/c it is hard for buyers to get financing and b/c the sellers refuse to recognize the drop in their home values, no one is willing to buy. At the same time, Decatur is definitely a LOT better off than other areas, but I’d be stunned if there wasn’t a 10- 15% drop in home values from peak to trough in decatur.
If homes are not overpriced relative to the fixed costs to create them, then you can’t expect any price declines to be long-term unless you think we’re in for years of deflation and a population exodus out of the US. Considering the trillions injected into the economy, I think the opposite will be the case.
In Decatur, there is not much inventory, and no room to increase that inventory of single family homes. There is also a surprisingly low amount of inventory for sale. The growth rate of home prices tracks the rate of inflation for the most part in Decatur. It didn’t make some huge leap off that trend line like other places did. There many be individual exceptions of people who need to sell in the short term, or been told the sky is falling by their highly-motivated realtor. But long-term, prices in Decatur have little (if any) room to fall, and a lot of room to grow.
Regarding credit, bank lending behavior and standards in an economic crisis are not the same as that outside of economic crisis. For instance, many lenders are requiring comps sold within a 3 month period for lending appraisals, whether refi or purchase. This, and many other practices limiting lending right now are based on short term fear, and are not long term changes.
Yikes. Sloppy writing on my part DEM. I made the change.
I agree with you regarding Morningside and its proximity to Midtown/Buckhead. But in my experience its harder to get downtown from Morningside than Decatur – thanks largely to DeKalb Ave. But I agree that a big part of the appeal of Va-Hi, Morningside is its location to the Peachtree Strip.
So again, to me it seems its a walk vs. drive dilemma. “How important is accessibility in your car?” and “How important is accessibility on foot?” Car has been the outright king for so long, that even a slight shift in public sentiment toward walking is beneficial to Decatur.
Regardless, I agree that the jury is still out and we’ll have to wait and see once homes start selling again…though hopefully not at the rate they were selling in 2006.
“One point about Morningside: true, you can’t walk to much of anything. ”
You CAN walk to a lot of places in M’side. Plus, it’s biking distance to CDC/Emory, apparently the largest employer in the state.
I think your’re essentially right, George. Obviously, in the real estate bubble, some buyers did “overpay” given that they thought that prices would increase for as long as the eye could see and money was available and cheap. But I would agree that sellers do not hold out for unreasonable prices – at some point if they have to sell, they have to sell for the price the market will bear. That is the case in the metro area – which explains the 25% decrease in prices. Therefore, I don’t see why the same wouldn’t be true for Decatur if the market here were really so bad.
An asset is overpriced if it sits on the market for many months and no one buys it. The only way to sell the asset is to lower the price to where the market clears and the asset sells. Many houses in Decatur fall into that category. Of course, calling offers “lowball” begs the question: are they really lowball offers or legit offers at which some buyers remain unwilling to sell because their mortages exceed the true market values?
DM, I was going to response to the proximity thing but you got there first. I know folks who live in Va-Hi and M’side and it may take them 5 minutes less to get to Midtown by car. They don’t have direct MARTA rail access, either
It seems improbable that Decatur was undervalued in 2007. Why would this be the case? It was a swell place then and it was a swell place in 1997 when I went to school nearby. And judging by the traffic and the crowds at Taqueria del Sol, Decatur hasn’t been a secret for a while.
The disparity between Morningside and Decatur is still there too. Morningside’s accessibility to the high-paying jobs in Midtown and Buckhead as well as the big lots, nice houses and perceived safety will likely guarantee a value gap to communities without these attributes. It is difficult to believe that Decatur’s home values are driven by Decatur’s in-town accessibility to anyplace other than Emory/CDC.
Although I rue the lack of walkability of essentially all Atlanta-area neighborhoods (as compared to NY, SF, Charleston, Prague, London….), walkability doesn’t seem to be huge value-driver for homes in Atlanta. And I would venture to say that the amount of people who walk their job in any Atlanta neighborhood is unfortunately zero comparatively.
Hence, let’s review this chart in few more months and with some more data to see if Decatur is a little closer to tracking overall Atlanta value trends. If Decatur does hold value better than Atlanta-metro, it’s not because it is walkable or is relatively cheaper.
“…walkability doesn’t seem to be huge value-driver for homes in Atlanta…. If Decatur does hold value better than Atlanta-metro, it’s not because it is walkable…”
Hi, Brad. A question: Don’t you think you might be confusing a relative dearth of walkability with an absence of demand? If Atlanta as a whole is underserved from a walkability standpoint — especially among family-friendly areas with good schools — I would argue that what Decatur is doing is nothing more than good niche product differentiation that, if national demographic trends continue to reveal themselves in the ATL, could absolutely be a factor in held value.
Don’t you think quality of life attributes affect pricing?
Couldn’t disagree with you more, Brad. Decatur is one of the few places in the region that is walkable and authentic with acess to transit. We know the demand for this type of living arrangement is growing and the supply, particularly here in Atlanta, is slim. IMO, this is the number one reason our prices have and will continue to sustain. Do we all walk to work? No, but we walk to school and the park and restaurants, etc., which you can do in VERY few places elsewhere. And we know people are willing to pay more for this type of walkable urbanity as apposed to drivable suburbanity.
The fact that you can access DT and Midtown employment without getting on the interstate is huge and brings the location debate to those neighborhoods that have us beat by about 10 minutes to a near draw. Especially when you compare us to places like Roswell and Marietta. Compared to those places our difference to Morningside is negligible . I wouldn’t underestimate the proximity to Emory – it’s the region’s largest private employer – or CDC with over 8000 employees. Can’t find many companies with those number DT or Midtown.
Also disagreeing with Brad. Downtown and midtown are very accessible from Decatur. Buckhead is trickier, but who wants to go to Buckhead? As far as walkability, as people from pedestrian-friendly northeastern cities continue to flock to Atlanta, walkability becomes more and more attractive in the real estate market.
I am one of those special people. We put our house on the market, 4 days later got two offers. 90% asking price. I think I’ll let them fight it out!
I’m in 30032 and it’s not Candler-McAfee. I think Belvedere is in 30032 as well.
I can confirm that my domain is in fact part of 30032.
I disagree. A $200K house sitting on the market for months and months may be an issue, but It’s not at all unexpected for a $650K house to sit on the market for a long time. You’re dealing with a much smaller pool of buyers, and the financing issues are obviously more complicated. That doesn’t mean the house is over-valued.
Morningside is rather large, and depending on where you live, you do have nice walking opions. For example, it takes about 15-20 minutes to walk to the east entrance of Piedmont Park and the Botanical Garden from where we live. The mini-plaza with Alon, etc. is about 10 minutes by foot; the Virginia/Highland corner is ~15 min. Ansley Mall is about 15-20 minutes (although walking on Monroe is not too pleasant). Trader Joe’s is also within walking distance.
Driving to Midtown is unbelievably easy, if you know the residential grid south of Piedmont Park well and can navigate through the Ansley Park labyrinth. Crawford Long Hospital is about 10 minutes away. So are High Museum and Atlantic Station.
Determining “quality of life attributes” is kind of slippery. And in Atlanta, the housing market values walkability far less than access to job centers – especially if the job centers are close to better schools. This is best shown by the direct correlation between real estate values and proximity to job centers that have superior public schools. As an example: Sarah Smith Elementary – great schools, surrounded by expensive real estate and easy access to Buckhead or CP – and walking nearby stinks.
If walking was a highly valued attribute, one would expect single family home values in East Atlanta, Candler Park, Grant Park, and the other walkable neighborhoods to compare well with values in the hot-mess car neighborhoods like Buckhead and Brookhaven. They don’t. The housing market values other “quality of life attributes.”
I’m not arguing that walkability is the most important “quality of life attribute” for a majority of residents, just that if it clicks up the scale a few notches among the general population that is nothing but positive for Decatur in a otherwise bleak market.
Brad
I’d like to see your analysis on a price per square foot basis – which is really apples to apples. I don’t think you’d see quite the disparity that you might expect. And then compare walkable places (whether they be in Decatur, etc.) versus suburban places like Alpharetta and East Cobb, etc – which are also close to some of the largest office markets in the metro. I do believe that you would find walkable places much more valuable (again, on a price per square foot basis).
I think you’re missing my point, Brad. Schools is a given. That’s 101 stuff. I’m talking about, once the school issue is covered, what makes the difference? What attributes serve as competitive?
If I’ve been reading your posts correctly, you’re in the large-scale real estate development game in some capacity. If so, it’s incumbent on you to read the numbers and go where the predictable profit is. That’s just sound business. No argument from me.
But I tend to lean towards the fringe players, who look for under-served markest that, even if they’re not large enough to be on the big-player radar, still constitute significant opportunity. A lot of people who value good schools also value other things that complement that “classic Americana” vibe — walkable commercial, investments in parks and recreation, community cultural activities, and human scale. Decatur excels in all of these things — and better than East Atlanta, Candler Park and Grant Park.
Buckhead caters to a different niche (which, at the risk of being flamed, is much more deeply rooted in appearances and pretensions). That matters to some people, so it’s a purchase influencer as well. My point, and a point others are making here re: cost per square foot, is that once the key elements are covered, some people will pay a premium for a particular quality of life.
Decatur’s efforts to cater to such people have been wise, imo.
If walking was a highly valued attribute, one would expect single family home values in East Atlanta, Candler Park, Grant Park, and the other walkable neighborhoods to compare well with values in the hot-mess car neighborhoods like Buckhead and Brookhaven. They don’t.
But they do, Brad. The houses and lots are much larger in Buckhead and Brookhaven. So it is no surprise that the housing values would be higher in those areas. But on a per foot basis, I’d bet you that the houses on our side of town are actually worth more, per foot.
A good example is this. Our family has a friend who has a large, 4,000 + square foot house in Sandy Springs. Very easy access to 285 and the Perimeter and Cumberland office market and only about 10 minutes north of Buckhead. Their house is worth only about $450,000 – about the same as my 1800 square foot bungalow in Decatur on a lot probably 1/4th of the size.
Guess what Brad? That makes my property worth more.
But even if all of those homes end up selling for 20% less than their current asking price, it will still raise the median selling price of houses in Decatur.
The house on Oakview, by the way dem, if it’s the one I am thinking of, is actually a remodel of an old ranch from the late 50s, and from what I have seen of it on the inside it’s not really that great. From what I have heard through the grapevine, the developer originally got in the high 900s for it just under two years ago. It was purchased by someone who was transferred from Michigan, I believe, and who was recently transferred out again. It’s sort of a fire sale at this point!
I think most everyone who is posting is right in some way or the other. We are in a great position with most houses a good value in a strong, centrally located community. However, some of the new builds and some of the remodels that developers did from around 2007-2009 are probably priced at the max the market can take for a long while and somewhat overpriced in a down economy.
Agreed. It seems that a lot of the homes that sit on the market here would do so in any market. Some are in bad shape, others are over-built for the market. (there are only so many places you can install granite counter tops. Unless…do you think it could serve as a wall-covering??)
That said, I think it’s interesting that when Q4’08 data came out, it seemed like no one else shared my positive outlook for Decatur. Now the reaction is definitely mixed, leaning towards cautiously optimistic.
The DM comment mood has definitely shifted.
Great point George. Not sure about #3, but the saving grace for all of us may not be that ‘we’re walkable’, have ‘great schools’ or a ‘good sense of community.’ All of those are helpful (and true, imo), but the real news is that we just don’t have that much supply. Eventually, the above mentioned attributes will help increase demand, while supply remains relatively fixed, thus supporting & eventutally raising home prices.
Or – playing devil’s advocate here – there could be perceived massive gang warfare on McDonough, the spread of closed retail & empty storefronts could reach the other side of the courthouse square, East ATL crime could reassert itself in Oakhurst and the whole beautiful experiment we call Decatur could collapse around us as the gazillion stroller occupants & their parents flee for safer, more boring pastures. No, I don’t expect that to happen, but yes, I do worry that one overblown crime report could stop the continued Decatur renassiance right in it’s tracks, as folks decide that they aren’t willing to risk living in this part of town.
Yeah credit markets and foreclosures are both contributors to the overall market. But another thing to consider is that the whole market is truly inflated and the correction will continue until home prices get back to a reasonable level. Case-Schiller indices still point to houses being too expensive relative to incomes. A good rule of thumb is that a mortgage shouldn’t be >3X gross salary. But maybe this applies more to truly inflated areas like Morningside and Va-Hi than Decatur.
“Just because someone didn’t have parents able or willing to pay for college doesn’t mean that they should have to wait 8-10 years to have access to homeownership. ”
Huh? I guess I’m a REALLY “old timer” because I paid my way through college AND waited over 10 years to buy a house. Call me crazy, but I enjoyed renting intown during my young professional, single days.
Wasn’t part of our current real estate problem that everyone at all levels on the economic scale felt like they needed to jump into the housing market or get left behind. Isn’t that carnard busted yet?
Agree that there’s no reason young adults should feel entitled to owning a home. First of all, if one isn’t lucky enough to inherit money from Mummy and Daddy, one needs to earn the financial stability to own a home. And two, because home ownership isn’t all that darn much fun. It’s a lot of responsibility, financial pressure, and just plain hard work. One should do it because one really wants to and is ready for that responsibility, not just to own a home like another accessory or toy. Renting can be appropriate and a heck of a lot easier. When we last renovated our home, we rented in one of those nice complexes with a pool, washer/dryer off the kitchenette, cable and broadband, and a helpful office/concierge. It was nicer than our home and I hated to leave! No yardwork, no emergency repairs, no property taxes, and reasonable monthly payments!
I once heard excellent advice–owning a home is an excellent investment IF one wants to be in the home for a long time. Over the long run, they aren’t making any more land on this planet so land values will probably always go up unless the world population declines (not likely). But over the short run, your home could go up or down in value by thousands of dollars and one has to be able to handle it. You can’t count on getting your investment out of it on short notice.
I wasn’t advocating for everyone, regardless of ability to manage finances, to jump into homeownership. Or that 22 year olds just out of college hurry into a condo or house they may not want or need just to join some bandwagon. My point was that the downpayment assistance programs serve a valuable niche of homebuyers, particularly young professionals. Perhaps because I worked for a while prior to graduate school, then was in graduate school for another while, I am glad that downpayment assistance programs were available to those with student loan debt who have carefully considered homeownership and the financial responsibility that goes along with it. I’m glad that paying one’s own way through graduate school didn’t automatically preclude homeownership and investment in the long term future. Being glad an opportunity exists is a far cry from feeling entitled to owning a home- a financial product offered to the public is not an entitlement. There are still some downpayment assistance products on the market, and my comments relate the idea of thinking prior to automatically vilifying such programs or the people that use them responsibly.
Meh. True enough. Over the past ten years I believe that housing grew at a faster rate than population. This is contrasted with places like the U.K. which had much stricter building requirements, and thus it would make more sense if their housing prices stayed somewhat elevated. In atlanta especially there was MASSIVE overbuilding. If you look at the Case-Shiller housing index, that is why atlanta had almost no growth in home prices relative to other cities over the past 10 years. Yet, at the same time, ATL home prices have dropped ~15% in the past year. Excess of inventory, limited population growth, a long recession and sustained unemployment of 8-10% for 3-4ish years, and I think that there will definitely be a drop in home prices in Decatur. Now, it might not be nearly as bad as other areas, and may be better than Atlanta on a whole due to the unique Decatur situation, but a drop – definitely. That isn’t to say that home prices won’t bottom out sometime this summer or fall (more likely) in Decatur and then start to rise. Analogous to the stock market – everyone is excited over the recent 20-30% rally in the last month, yet the S&P 500 is still down ~40% from the peak. Better – yes. Still crappy – absolutely.
Not to be super down on things, I just think that things are going to be more difficult than expected – more of a Japan 90′s recession with a long period of very low growth and higher than normal unemployment. It’s not going to be a depression, but it also isn’t going to a quick bounce back.
Most relevant:
http://www.calculatedriskblog.com/2009/03/housing-two-bottoms.html
http://www.calculatedriskblog.com/2009/03/more-on-housing-bottoms.html
http://www.nytimes.com/interactive/2008/12/04/business/economy/HOUSING_PRICES_GRAPHIC.html
Less relevant:
http://www.calculatedriskblog.com/2009/05/fact-checking-bernanke-on-real-estate.html
D’accord! Just two of the prime examples: The $1M house on Pinetree Street, and the $1.2M house on Sycamore Street (and this one needs a TON of work on the inside). These people need to put down the crack pipe and get a hit of reality.
this.
its called shadow inventory. there are a lot more houses out there than one thinks.