Lake and Associates /// 2019 Real Estate Forecast

2019 Metro Atlanta Residential Real Estate Forecast

Lake and Associates ® REALTORS

404-240-2708 /// Jeff Yeomans 404-953-0418 /// Sarah Alter 404-261-2700 /// Office Jeff.Yeomans@HarryNorman.com Sarah.Alter@HarryNorman.com

LOOKING BACK AT 2018

2018 will go down in the record books as a good year for metro Atlanta residential real estate. Sales units were up slightly over 2017, a year with strong yearover-year growth. Within our company, luxury sales were strong in 2018 which resulted in two recordbreaking quarters of sales in our company’s history.

Average sales price grew at a rate close to 7% versus prior year. This, too, was building on strong average sales price growth in 2017. The gap between average price for all homes currently listed versus average sales price remained flat at approximately $202,000, reflecting the need for more inventory in the lower price ranges to meet buyer demand.

Lack of inventory continues to impact residential real estate sales growth in metro Atlanta. Potential sellers are less likely to move if they cannot find their next home and potential buyers are less likely to enter the market if they are unable to locate a home that aligns with their budget and other criteria. An interesting point to note is that the seller’s market (less than 3 months of inventory) moved to a neutral market (3 to 6 months of inventory) late in the year and this trend is expected to continue into 2019.

This is a positive trend as there should be a greater alignment between sellers and buyers expectations.

Source: Trendgraphix, Inc. (Includes Cherokee, Clayton, Cobb, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Paulding, and Rockdale Counties – Nov. ’17 – Oct. ’18)

What’s Hot in ?

Atlanta Live, Work, Play Villages

Top Sales for

2018 2515 Rivers Road $5,800,000 2217 Sea Island Drive $4,400,000 590 Lost River Bend, Lot 8 $4,208,488 1035 Nawench Drive $4,000,000

The Beltline & The Gulch Electric Scooters

2805 Normandy Drive $3,970,000 4674 Whitestone Way $3,800,000 449 Blackland Road $3,500,000 2973 Habersham Road $3,500,000

Home Technology Shared Workspace

4890 Serene Shores Drive $3,450,000 1210 West Garmon Road $3,425,000

Expressway Toll Lanes

OUTLOOK FOR RESIDENTIAL REAL ESTATE IN 2019

2019 AT A GLANCE

Employment Metro Atlanta remains the economic engine for the state of Georgia. Approximately 70% of all job growth occurs in this region. The influx of start-ups, technology innovation centers, and significant inbound moves by existing national corporations will result in job growth of approximately 48,000 new jobs in 2019. Unemployment is expected to remain flat at around 4.1% for the metro Atlanta region throughout 2019.

Purchasing Power Metro Atlanta will remain among the most affordable major cities in the U.S. Given the upward trend in average home prices and interest rates, real wage growth will be needed to keep the affordability index in check. Our forecast is that more home buyers will consider alternative loan products, such as adjustable rate mortgages, to keep their monthly payments within budget.

Employment p Average Sales Price p Inventory p Condo Conversions p Proximity to Work/Activities Demand p Interest Rates p Affordability q

Interest Rates The typical home mortgage is the 30-year fixed rate loan. The interest rates for these remain at historic lows, but there is an upward trend. CoreLogic forecasts that the 30-year rate will be around 5.2% by the end of 2019, while other organizations predict that it will be closer to 5.5%. We believe that it will be closer to 5.2% based on the related factors impacting mortgage rates.

Inventory The number of active listings is on an upward trend. We expect this to continue into 2019 with inventory levels reaching closer to six months by the end of the year. With three to six months of inventory, we will remain in a neutral, or balanced, market for the entire year. This will place some downward pressure on the rate of average price increases, which will result in a higher affordability ratio.

We are also watching for the potential start of high-rise apartment to condominium conversions. These have been non-existent for many years, but there is high demand in the under $500,000 price range especially first time home buyers who wish to live closer in the various city cores. This could be a realistic occurrence because 6,300 multi-family units were delivered in 2018 and another 18,382 units are under construction.

Trends Focus on improving transportation will continue into 2019.

The multi-county agreement to coordinate public and rapid transit systems under the ATL umbrella will begin to show some much-needed progress in reducing the number of cars on our highways and surface streets. For housing, consumers are seeking high levels of integrated technology, purposeful functionality, and sustainable building materials and construction methods. Green is no longer a fad, it is the new normal. Neighborhood village design will continue to grow in popularity as more consumers are looking for ways to connect with their community without driving.

Much has been written about the various “disruptors� to the metro Atlanta residential real estate market. Generally, this involves some form of new technology or process. Our position is that while all consumers appreciate a smooth home selling or buying process, the human element remains critical. Having deep local market expertise is more valuable in the terms of real dollars to the consumer than the latest app. The great news is that Harry Norman, REALTORSŽ has both the latest technology and largest selection of highly-trained sales professionals with local market expertise for all parts of the metro Atlanta region. There is no need to replace relationships with technology when you can have both.

WHAT DRIVES RESIDENTIAL REAL ESTATE IN ATLANTA?

Life Events Residential real estate movement tends to follow life events. First jobs, first homes, marriages (and divorces), household growth, and eventually “rightsizing”. We are experiencing some restraint of first-time homebuyers due to the rise in home prices, the lack of entry-level purchased housing options, and the weight of student loan debt. Today’s buyers are seeking homes closer to their work and where they want to play. This often means there are limited options for the first-time homebuyer closer in the city. However, we believe that many of the newer high-rise apartment buildings will be ideal candidates for condominium conversions starting in 2019. If priced to attract first-time homebuyers (approximately 45% of units sold), this will start the move-up chain reaction and all price sectors will benefit.

Jobs The metro Atlanta area accounted for approximately 70% of the 90,000+ jobs created in Georgia in 2018. Many of these 60,000+ jobs were filled by employees moving into the region, thereby increasing housing demand. While not all of these positions resulted in a home purchase, new housing permits in the region increased 10.8% versus 2017.

According to the Georgia State Economic Forecasting Center, job growth in Georgia will slow in 2019. However, they project that approximately 48,000 new jobs should be created in metro Atlanta. This trend will continue into 2020 and the unemployment rate is expected to remain steady at around 4.1%.

Metro Atlanta has been and will continue to be the beneficiary of numerous jobs created by the relocation of major corporate divisions or headquarters, such as thyssenkrupp, Norfolk Southern, and NCR, to our area. In addition, Atlanta is now considered one of the top five up-and-coming tech meccas in the nation and our region is considered one of the largest producers of feature films in the world.

Affordability Atlanta remains one of the most affordable major cities in the United States. Affordability is a measure of whether a typical household earns enough income to qualify for a mortgage loan on a typical home. As home prices and interest rates rise, home affordability declines. In 2018, average home prices in metro Atlanta grew approximately 7% to around $311,000. Interest rates for a 30-year fixed mortgage rate grew from approximately

3.8% to approximately 4.7% during 2018. CoreLogic is forecasting average home prices will increase 5.1% and 30-year fixed rate mortgages will increase to 5.2% in 2019. Both of these factors will impact housing affordability. Prices are expected to increase in 2019, but at a more modest pace than the last two years. Our market will still be better positioned than other major markets as they will also be impacted by these trends.

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