Homes For Sale in Atlanta - The Inventory Problem

Some are claiming "the bottom" here in Atlanta. John Adams, a very popular real estate investor with a talk radio show has been saying it for months, you can read other "experts" in the AJC who say that February was the bottom, but, I do not believe that to be the case and I believe that what we have is nothing more than a homes for sale in Atlanta problem - make that a too many homes for sale in Atlanta problem. In other words, there is still simply too much inventory for the current sales rates to stabilize the market now or for the near future.

The FMLS shows 43,799 homes for sale (active only) and the last month of complete sales data is April where there were 3,477 sold homes. Simple division gives you an absorption rate, or, months of inventory of 12.59 months. I have no idea how the AJC gets 8 months of inventory reported recently. Many people will argue that you need to also look at pending and contingent sales. If you do that, we are at 14.9 months of inventory and that means that what we have is an inventory problem. We simply have too much inventory for the sales rate.

The truth is we will see a significant change in the numbers, but, that won’t actually show up until late July after June sales are closed and counted. I would not be surprised if we see a temporary inventory level of under 10 months - maybe, but, by then we will be moving back out of the selling season so it may actually mean that 2010 will be better than I think it will, but, it’s not possible to predict with the current economic conditions, unknown inventory levels for next spring, etc. I guess it also should be said that it won't have to do all that great to "do better" than I think it actually will anyway. Besides, other factors that remain unknown and quite capable of influencing the market are factors like “herd mentality” and how the news media continues to portray what is happening. Nobody knows for sure, but, unless homes stop coming on to the market, there is no way out of this any more quickly than 2011. I just don't see how.

The bottom line is this - with inventory levels where they are, traditional market forces are the only “knowns” in the equation and that means a further general price decline as supply and demand dictates will happen. There will be more foreclosures coming on the market and they are now part of the price equation in most sub-markets so they do affect values. Now, if you are still reading, you probably thing I have painted a pretty grim picture of the Atlanta market, but, if you are searching for homes for sale in Atlanta right now, you should know that there is more to this story. I'm talking generalities right here and there are sub sections of the Atlanta market that are showing the early signs of stabilizing. Most are on the north side in areas that are more desirable like Sandy Springs, Roswell, Alpharetta and the other northern suburbs of Suwanee and Cumming.

Anyway, I have just heard too many people recently talk about this market like the bottom is behind us. There is nothing to indicate that this is the case and if I were to breakdown submarkets, you would see it more clearly. I'll try to post some of those breakdowns in more appropriate posts, but, this one was just to get on my soapbox for a while. I just can tow the line about how great of a time it is to buy right now - at least not without some realities thrown in as well. That doesn't mean I think you should wait to buy becasue there is affordability risk in waiting as well, but, that too is for another post that have to do with interest rates, monthly payments at current rates vs. possible future rates and the difference if prices changes. We need to be smart about the market. Not follow the herd mentality.

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