Two recent Wall Street Journal articles focused on inflation impacts here in the Atlanta metro area and in the overall housing market. The first article noted that the Atlanta area recorded the highest level of 2021 inflation for areas with more than 2.5 million people. Atlanta’s inflation rate was 9.8% for the twelve months ended December 31, 2021, as compared to the 7% national rate.
It goes on to say that the covid pandemic has fueled population shifts to smaller metro areas, especially in the Sunbelt. Ultimately the population shifts include people who are retiring and remote workers seeking lower living costs and warmer weather. I find it fascinating to see the high rates of population growth in Atlanta, Houston, and Dallas, while the San Francisco, New York and Washington, DC metro areas experienced significant population declines.
The influx of residents to Atlanta caused increases in housing costs, transportation, and dining / entertainment costs. Also of note, housing costs account for almost one-third of the consumer-price index, and thus became the largest single driver of Atlanta’s inflation.
A recent Redfin study showed that Atlanta home prices increased 23% in the twelve months ended in December. That’s almost 8% higher than the 15.2% national average. The study said that while Atlanta experienced the highest home price gains, Atlanta housing prices are still more affordable than many other metro areas like San Francisco; meaning, Atlanta is still attracting home buyers from the higher cost markets in the Northeast and on the West Coast.
The second WSJ article focused on rising mortgage interest rates. Interest rates hit their highest level in 3 years, which compounds the home affordability challenge when coupled with rapidly rising home prices. In some cases, the affordability challenges are pushing some homebuyers to postpone their purchases.
Let me give you a real-world example. A client purchased a home last spring for $275,000 with a 3.125% interest rate. Today’s interest rate would be closer to 4%, and using the 23% appreciation rate, the home’s value would be close to $340,000. If my client bought the same house at today’s price and interest rate, the payment could be roughly $500 per month more than last year. Some home buyers are finding that they do not qualify to buy a home today that they could have purchased a year ago.
What’s the moral of these articles? Atlanta’s housing affordability, while still great compared to other American cities, is getting worse. If you want to buy a home here, I recommend you do it sooner rather than later if you can. I don’t expect the situation to improve any time soon. Remember, you do not need a 20% down payment to buy a home. You’ll need to make a very competitive offer to win here. Give me a call and we can discuss ways Dunwoody Mortgage Services can help you win the contract.
