The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed’s Regional Economic Information Network and Public Affairs Department.
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Southeastern Housing Update: Sales Up, Inventories Down, Prices Rising
The Atlanta Fed's Real Estate Advisory Council met again in early August, and we just wrapped up our monthly poll of southeastern housing contacts. Both sources of information indicated that new and existing home sales continue to improve, inventory continues to decline, and home prices are experiencing continued upward pressure.
More than two-thirds of southeastern brokers reported that home sales in July increased on a year-over-year basis (see the chart below). Several brokers noted that investors have become less active and many indicated that the recovery remains uneven. Reports from southeastern builders continued to improve. Similarly, more than two-thirds of builders reported that sales in July increased on a year-over-year basis. Gains were stronger than in recent months.
Brokers and builders noted that prospective buyers continue to have a difficult time qualifying for mortgage financing, though this impediment was not as pronounced as in earlier reports. Reports indicate that loosening credit has likely contributed to the sustained increase in demand.
This improvement is not taking place evenly though, because several builders indicated that the typical buyer today is someone that has previously owned a home and that first time homebuyers continue to lack strong enough credit scores or sufficiently large down payments.
Reports from southeastern builders and brokers indicated declining home inventories on both an annual and monthly basis (see the chart below). Several brokers reported that there were few homes to select from in "desirable neighborhoods." Likewise a few builders noted that finished lots were scarce, particularly in prime locations, and a regional builder said that new home prices would have to rise at least 15 percent to justify development of new lots. This view could mean that the supply of new homes will remain low for some time, as price appreciation has been modest at best in most submarkets.
Low home inventories and steady demand seem to be putting upward pressure on home prices in many southeastern neighborhoods (see the chart below). More than half of brokers and home builders reported that home prices rose modestly in July compared with a year ago. Some builders said that they were telling potential buyers that prices would be rising soon in hopes of encouraging them to commit, while some builders said they had increased prices, but most indicated that they were no longer offering discounts.
Overall, the outlook among Southeast builders and brokers remained positive. The majority of brokers anticipate home sales over the next several months will be slightly ahead of the year-ago levels. The outlook among builders was a bit more upbeat. Most anticipate new home sales over the next several months will be flat to slightly up compared with a year ago while nearly two-thirds anticipate construction activity will exceed the year-earlier level.
Note: July poll results are based on responses from 65 residential brokers and 28 homebuilders and were collected August 6–15, 2012. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity while negative values indicate decreased activity.
By Whitney Mancuso, a senior analyst in the Atlanta Fed's research department
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