2023 Metro Atlanta Residential Real Estate Forecast

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Metro Atlanta Residential 2023
REAL ESTATE FORECAST
2 | HARRY NORMAN, REALTORS® Atlanta is the #1 Market to Watch On the Horizon: Markets to Watch 2023 and Beyond National Association of REALTORS ®

CLIMBING POPULATION

Atlanta ranks as the 4th fastest growing city in the USA.

YOUNGER POPULATION SHAPES US

The median age currently in Atlanta is 33.2 years, compared to national median of 38 years of age.

BUSIEST AIRPORT IN THE WORLD

Atlanta is the busiest airport in the world with 150 domestic and 70 international destinations.

TECH LEADERS

Atlanta is the 4th best city in the USA for technology jobs.

WE LAKE LIFE

Lake Lanier attracts 11.8 million visitors annually. More than the Louvre Museum or Shanghai’s Disneyland.

RELATIVE AFFORDABILITY

Georgia is the 5th Most affordable state in the USA.

BEST STATE FOR BUSINESS

Georgia ranked #1 for doing business for an unprecedented 9th consecutive year.

BIG COMPANIES CHOOSE US

Georgia is home to 19 fortune 500 companies and 34 of the fortune 1,000.

THE MOST CREATIVE CITY IN USA.

Atlanta is ranked the #1 city for creativity due to the city’s vibrant street-art scene, deep musical heritage and booming creative economy.

WE’RE NUTS FOR NUTS!

Georgia is the largest peanut producer in USA.

MUSIC MATTERS

Home to over 300 recording studios and with 492 concert venues.

2023 METRO ATLANTA RESIDENTIAL REAL ESTATE FORECAST | 3

LOOKING BACK AT 2022, A YEAR OF CHANGE

2022 started strong in the housing market with homes selling as soon as they hit the market. Home prices continued to grow for much of the year, by June home prices had appreciated 16.9% nationally. However, as interest rates started rising the housing market began to respond. The change wasn’t immediate, but after consecutive rate rises, the increased cost of home ownership took some heat out of the market as we saw homes slowly begin to take longer to sell. Multiple offer scenarios became less common through the second half of the year and price growth slowed as the housing market demonstrated signs of returning to pre-pandemic normality. Even though it became a little harder to sell a house, in the final quarter of 2022, the average time to sell a home in Atlanta was only 33 days. While longer than prior months, this sales window was still 30% shorter than the same quarter in pre-pandemic 2019.

HOME PRICES

Across 2022 most markets experienced notable home value increases, with the national average home price rising 8.6% from the previous year, as the national median price for single-family homes reached $398,500. Individual markets varied, some seeing double digit annual increases, including Atlanta which experienced an annual average sale price increase of 12%, and the median price for single-family homes averaged $396,000 for the year.

In Atlanta home prices spiked across the second quarter of 2022, with active listings reaching a median asking price of $460,000 in June. At the close of the year (Dec 2022) the market cool down saw the median listed price in Atlanta of $410,000, and in the same month the median sold price was $368,000.

Looking forward, with much dependent on inflation and future interest rate movements, 2023 national pricing predictions offer limited certainty. Across a range of housing market forecasts there is a mix of price movement forecasts ranging from price declines of -4% to increases of 5%.

MORTGAGE INTEREST RATES

2022 started with a bang, the 1.31% jump in rates over the first quarter was the fastest 3-month increase since 1994. The trend continued throughout 2022 and with it brought an early chill to the housing market. The total increase in interest rates in 2022 ended at a shocking 3.2%, the largest annual increase in 50 years.

Entering 2023, we do see reasons for optimism. Last year we forecast that inflation would be the data point that would rule the path of mortgage rates and that continues to be the most important theme into 2023. It also appears that inflation may have peaked in June 2022 (at 9.1%) and has been trending down monthly as a result of aggressive rate hikes from the Federal Reserve and the easing of supply chain issues. As of January 2023, inflation still sits at an elevated level of 6.45% and we expect continued action from the Federal Reserve. While the Federal Reserve rates hikes are important, they do not directly correlate to the 30-year fixed rate mortgage. Mortgage rates are more directly controlled by the direction of inflation, and we believe that inflation expectations will continue to trend downwards, the basis for our forecast that mortgage rates will drop from 6.375% today to 5.5% or lower. Prominent market forecasts point to this direction:

Reduced interest rates are vital to the housing market and overall economy in 2023 as we need to improve both affordability and available inventory. If mortgage rates can dip to 5.5% or lower, we would see a 10% increase in buyer purchasing power and, perhaps more importantly, more homeowners would be willing to sell without the fear of losing that 3.0% interest rate they have on their home today.

The above information is believed to be accurate but is not warranted.
Source
Fannie Mae 6.3 5.6 Freddie Mac 6.4 N/A Mortgage Bankers Association 5.2 4.4
2023 2024
Source 2023 Corelogic 4.1 Zelman & Associates -4 Fannie Mae -1.5 NAR 0 Freddie Mac -0.2 Realtor.com 5.4 1. Atlanta refers to all FMLS. 2. Corelogic Nov 2022 - Nov 2023

HOME INVENTORY

Challenges of limited inventory rolled over from 2021 into 2022. At the start of 2022 homes were receiving multiple offers, contingencies were being waived, and often the sold price was above asking. Because the market had been moving at a rapid pace for an extended period, even as interest rates started to rise, sales activity maintained. For three of the first four months of 2022, more homes sold than hit the market, resulting in extremely limited inventory. In the first half of the year, inventory levels were less than 1-month supply.

In the second half of 2022, consecutive rate rises and the potential of a 7% mortgage rate started to have an impact, and with less buyers in the market inventory levels gradually increased. At the end of 2022, average inventory levels had reached 3.5 months for sold and pended properties. While this is a substantial shift from 1-month at the start of the year, it is in-line with historical levels; across all of 2018 and 2019 (pre-pandemic) inventory averaged 3-months’ supply.

The chart below illustrates the inverse relationship of price and inventory across 2022.

Housing inventory is expected to remain tight in 2023, with housing starts below historical averages and fewer homeowners willing to sell, due to the increased cost of new mortgages. The rate of new construction of single-family homes is expected to be low if sales move slower and builders focus on moving existing inventory. These housing supply challenges will help to maintain home prices particularly in the Atlanta market which continues to experience net migration growth.

NATIONAL AND LOCAL ECONOMY

There remains varying opinion about whether the country will experience a recession in 2023. Many indicate that even if we do enter a recession, it will be relatively mild compared to anything experienced previously.

One of the reasons the market is such a challenge to predict is the strength of employment; during 2022, the economy added 4.8 million jobs. Early signs in 2023 show a continuation of a strong labor market with the January 2023 unemployment rate reaching a 53-year-low of 3.4%. Georgia’s labor market is even stronger than the national average; in the last six months of 2022, Georgia’s unemployment rate sat between 2.8% - 3%.

Georgia is expected to continue to outperform the rest of the nation in major economic indicators through 2023. According

to Selig Center for Economic Growth, Georgia’s GDP will increase while the U.S. GDP experiences moderate declines, unemployment levels will remain below national averages and personal income growth in the state will exceed inflation.

“In 2023, the pattern of Georgia outperforming the U.S. will continue, thanks to the buildout of many projects in Georgia’s economic development pipeline; competitive economic incentives that help refill that pipeline; more leverage than most states from higher new vehicle sales; strong performance of Georgia’s ports; solid prospects for military bases; and demographic trends that underpin economic growth.” (THE 2023 GEORGIA ECONOMIC OUTLOOK, Selig Center for Economic Growth)

2023 METRO ATLANTA RESIDENTIAL REAL ESTATE FORECAST | 5
MONTHS OF INVENTORY JAN FEB MAR APR MEDIAN SOLD PRICE MONTHS OF INVENTORY (CLOSED SALES) MAY JUN JUL AUG SEP OCT NOV DEC MEDIAN SOLD PRICE 000’S MEDIAN SOLD PRICE VS MONTHS OF INVENTORY 3.5 3 2.5 2 1.5 1 0.5 0 420 410 400 390 380 370 360 350 340 330 320

HOUSING AFFORDABILITY

As home prices have consistently increased in Atlanta and surrounds in recent years, housing affordability has been a regular topic of discussion. In 2022 increasing home prices compounded with high mortgage rates impacted affordability at a national level. At the end of 2019, the national average cost of home ownership represented 29.9% of income, by the end of 2022, this had increased to 44%, an increase of 14.1 percentage points in 3 years. Over the same period, the share of income required to own a home in Atlanta increased from 23.6% to 41.8%, an 18.2 percentage point increase.

In recent years Atlanta has experienced rapid growth, attracting a large contingent of people relocating from other major cities. With a home ownership cost at 41.8% of income, Atlanta remains affordable relative to many cities and offers more value for money. In New York it will cost you 66.1% of average income, San Francisco 88.8%, Los Angeles 91.4%, Austin 53.1%, and Denver 53.6%.

WHO IS BUYING WHAT, AND WHY?

The largest contingent of active participants in the housing market continues to be Millennials. Older Millennials with a median age of 36, and Gen Xers with a median age of 49, combine to make up 47% of buyers. Younger Millennials are most likely to be first-time home buyers. Older Millennials and Gen Xers have the highest household incomes of home buyers and purchased the most expensive homes.

The most common type of home purchased is the detached single-family home. While younger generations may rent in apartment buildings, when it comes to purchase, preference remains strongly in favor of detached single-family homes. The quality of the neighborhood is the top reason for choice of location, but the younger the buyer, the more influenced they are by the convenience of the home to their job.

The main reasons that buyers are making a purchase is the desire to own, the need for a larger home or a change in life situation: marriage, birth, divorce, change in job. Even in times of heightened mortgage rates, these needs exist and people will make the decision to buy and sell homes.

THE LUXURY MARKET

The higher-end market has a larger share of cash buyers that are less impacted by movements in mortgage rates. This resulted in the Atlanta Luxury Housing market remaining remarkedly consistent in 2022 compared to 2021. The number of homes sold over $1M increased 6% in 2021, while the median sales price increased 1% to $1.334M.

More luxury homes entered the market in 2022, with new listings over $1M increasing by 20% compared to 2021. This can be attributed to both more sellers entering the market, as well as a reflection of price appreciation of recent years moving more homes into the higher price bracket.

Similar to the broader market, mid-year was a peak in both sales numbers and price. At this point prices were 4% higher than one year prior. The second half of the year saw less sales and inventory levels gradually increased each month reaching 7 months’ supply in December 2022, up from only 3 months in December 2021.

While not experiencing the fluctuations of the broader market, the luxury market is demonstrating sustainable strength. Compared to pre-pandemic 2019, the number of homes sold in 2021 was more than double, while price has appreciated 3%.

6 | HARRY NORMAN, REALTORS®

In 2023 a number of factors are expected to prevent the housing market from making a rapid return to the level of the previous two years. With interest rates remaining high and inflation putting upward pressure on the cost of living for an extended period, more people will feel financially squeezed. As consumer spending reflects this, companies will continue to adjust staffing levels and this broader economic uncertainty is likely to create hesitancy in the housing market.

The Atlanta housing market is anticipated to be relatively flat for the large part of 2023. Inventory levels will increase, but are expected to remain tight, which will impact the overall number of sales. This limited supply is expected to fall short of demand, the result of which will be a maintenance in price levels, which while not expected to grow at the same levels as last year, will hold or show moderate growth up to about 5%.

The level of market change will vary across different submarkets, however, Atlanta and the Greater Georgia, are placed much better than other housing markets across the nation. It continues to have robust economic activity and a job market that continues to grow as many major companies relocate here from the more expensive West Coast markets.

The NAR (National Association of REALTORS®) identifies 10 key indicators influential to how a housing market will fair:

1. Better Housing Affordability than the national level

2. More renters who can afford to buy the median priced home than the national level

3. Stronger job growth than the national level

4. Faster growth of information industry jobs than the national level

5. Higher share of the information industry in the local GDP

6. Migration gains

7. Share of workers teleworking

8. Faster growing population than the national average

9. Faster growth of active inventory than the national level

10. Smaller housing shortage than the national level

Atlanta is the only metro market in the U.S. to meet all 10 indicators. This places Atlanta at the top of the list as the housing market with the most potential for growth in 2023. “The demand for housing continues to outpace supply. The economic conditions in place in the top 10 U.S. markets, all of which are located in the South, provide the support for home prices to climb.”

THE BOTTOM LINE

2023 METRO ATLANTA RESIDENTIAL REAL ESTATE FORECAST | 7
ATLANTA MARKET
FORECAST
Atlanta is the #1 Market to Watch in 2023, we wouldn’t want to be anywhere else.

WHY CHOOSE HARRY NORMAN, REALTORS®

How can we help you in 2023? AEROTROPOLIS 404-250-6060 ATLANTA NORTH 770-622-3081 ATLANTA PERIMETER 770-394-2131 BIG CANOE® 770-893-2400 BLAIRSVILLE 706-745-3000 BLUE RIDGE 706-913-8300 BUCKHEAD 404-233-4142 BUCKHEAD NORTHWEST 404-261-2700 EAST COBB 770-977-9500 THE COLLECTION AT FORSYTH 770-497-2000 HISTORIC MARIETTA 770-422-6005 INTOWN 404-897-5558 LUXURY LAKE & MOUNTAIN 706-212-0228 NORTH FULTON 678-461-8700 PEACHTREE CITY 770-632-8526 SAVANNAH 912-233-6609 WOODSTOCK 404-495-8331 LONDON +44 20 7467 5330 Source: 1) NAR 2022-home-buyers-and-sellers-generational-trends. 2) NAR on-the-horizon-markets-to-watch-in-2023-and-beyond. 3) Reuters.com. 4) Forbes.com. 5) Realtor.com. 6) WSJ.com. 7) Zelman & Associates. 8) Federal Reserve Bank of Atlanta. 9) Metro Atlanta Chamber. 10) Selig Center for Economic Growth: The 2023 Georgia Economic Outlook. 11) Fannie Mae. 12) Freddie Mac. 13) FMLS.com. 14) Trendgraphix. 15) Luxury Portfolio International. 16) DestGuides.com. 17) Atlanta Agent Magazine. The information within is believed to be accurate but is not warranted. ATLANTA’S FIRST IN LUXURY For more great insights and market updates scan the QR Code to visit the HN Insights Hub $3.2B in Sales Volume 5,549+ in Closed Units $567,549 Average Sold Price
As home to the very best real estate sales associates, our dedication to providing exceptional client service through the home buying and selling process is unmatched, as shown in 2022.

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