A Look at October’s Market
With the end of 2022 in sight, let’s take a look at the latest insights in today’s
housing market. Across the country, trends in home sales have been highly responsive to rising mortgage rates as a result of the Federal Reserve raising benchmark interest rates in recent months. After briefly declining to 6.95% the week of November 3rd, the average interest rate for a 30-year fixed rate mortgage returned 7.08% the week of November 10th, on par with the last week of October and the highest rate since 2002[1]. These rising rates have increased the cost of home ownership for many potential buyers and discouraged some would-be sellers with low rates on their current homes—a phenomenon that is coinciding with typical seasonal slowing heading into the winter months—which is contributing to lower transaction volumes and higher inventory levels market wide.
Inventory
Last month in the Greater Atlanta Area[2], we saw inventory leveling off with a very slight increase in homes for sale (+0.5%) across all home types compared to September. Compared to the historically tight inventory levels the same time last year, the number of homes for sale in October was up by 43%.[3] Inventory reached 2.4 months of supply. This means at the current pace of sales it would take about 2.4 months for all listed homes to sell, if no new inventory was added. About 6 months of inventory reflects a market that is balanced between buyers and sellers. Even with this growing inventory, we are still below pre-pandemic supply levels. There were 29% fewer homes for sale last month than in October 2019 when we had 3.3 months of supply. The current level of supply continues to favor Atlanta sellers.
Although total inventory has been rising, new listings have been declining since June, when the average rate for a 30-year fixed rate mortgage first exceeded 5.25%.1 This suggests homeowners—many of whom secured low interest rates over the past two years—are becoming more reluctant to list their homes and there is increased stagnation in listed homes. New listings represented just 48% of the total homes for sale in October, the lowest ratio since the first full month of the pandemic in April 2020.
[1] Freddie Mac. Primary Mortgage Market Survey U.S. Weekly Averages as of 11/10/22.
[2] 11-County Area: Cherokee, Clayton, Cobb, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Rockdale, and Paulding Counties
[3] FMLS Market Stats, Greater Atlanta Area, October 2019 to October 2022
Earlier this year, homes were selling at a record-breaking pace of less than a week, a pace unheard of before 2021. In comparison, a median of 15 days on the market in October is more than double the summer lows. However, they are still selling much faster than the historic rate. This October, homes sold 40% faster than they did in October 2019, a typical October when homes were on the market for about 25 days.3
Home Prices
This low level of inventory has helped to keep home prices in the Atlanta area relatively stable considering the rapid pace of mortgage rate increases. The average sale price was $437,813 in October, down slightly from September (-0.7%) and down 8% from the peak in June. Median prices followed a similar trend. In many ways, this is a return to the normal seasonality of the Atlanta real estate market, as illustrated in Figure 3. Sale prices historically peak in June, with the exception of an unusual season in 2020. In 2018 and 2019, sale prices declined by 7% between June and October, showing the decline from this year’s peak is slightly accelerated. Year over year, home prices in October were still up by 8%.
Changes in average sale price have varied by home type. Single-family homes and townhomes have seen more moderate but consistent declines in prices since their summer peaks. Condominiums saw a steeper decline in July, shortly after mortgage rates reached over 5.25%. They have recently begun to increase again, a trend not typical for this time of year. This could be indicative of an emerging trend back to condos because of their relative affordability and proximity to job centers as more employees are called back into the office.
Transaction Volumes
Coming off the busy summer sales season and heading into the colder months, we typically see a decline in the number of homes sold this time of year. Following this seasonal trend, the number of closed and pending sales declined this October compared to the summer peak. Unlike sale prices, the decline in transaction volumes has been more pronounced than what we would expect based on seasonality in previous years. Closings were down 17% in October compared to September, down 31% compared to October 2021, and down 18% compared to the average for more typical Octobers from 2017 to 2019. Pending sales have also been on the decline. They were down 14% from September, down 41% compared to October 2021, and down 27% compared to Octobers from 2017 to 2019.
Condominiums
Unlike the rest of the market, inventory levels for condos have remained relatively stable since July, seeing only a small uptick in inventory levels. There is currently 1.8 months of inventory. Average sale prices declined sharply over the summer from a peak of $366,904 in May, but began trending upward again in October to a current average of $323,681, up 3% from September. However, pending sales have fallen since August. This may be in part due to lack of desirable inventory. Although overall condominium inventory levels have been steady since June, the number of new condominium listings has declined by 54% from a peak in March.
Townhomes
Townhomes have seen an increase in inventory and months of supply, currently at 2.1 months. Pending sales have fallen since their peak in late summer, along with prices, which now average $382,427. Many newer townhome developments are offering buyer incentives to help cover closing costs or buy down interest rates, which can help alleviate some of the affordability issues caused by higher interest rates.
Single-family Homes
Prices have continued to gradually decline from their peak in June 2022, averaging $452,166 in October. Months of supply is currently sitting at 2.5 months, which is up from a low of 1.1 months in early 2022. Across the nation, single-family homes have seen the biggest change due to their inherent higher prices and slow building pace for new homes.
To learn more about the market, reach out to one of our experts for tips on entering the housing market strong at www.evatlanta.com.
Recent Posts
