Pending Sales Down 4 Percent from 2021 and still up 5 percent from 2019
Keeping with its trend of being ahead of the curve and setting accurate benchmarks to use nationally, MarketNsight released early August numbers for Atlanta. The first three weeks of August revealed a definite bottom for housing sales, which is, of course, tied to interest rates.
With 30-Year Fixed Rates at or below the interest rate “sensitivity threshold,” defined as 5.25% by the MarketNsight team in July, there has been an upward trend in pending sales compared to 2021 and 2019. For the year to date through the third week of August, pending sales are down only 4% from 2021 and still up 5% over 2019.
“It continues to look like we are settling into a market that is very much like the last ’normal’ year we can all remember – 2019,” MarketNsight Principal and Chief Analyst John Hunt said.
MarketNsight uses the term sensitivity threshold to refer to the interest rate where initial homebuyer demand (represented by pending sales) drops into negative territory. This threshold was reached in October of 2018 when rates rose above 4.83% and caused demand to enter negative territory. It looks like the sensitivity threshold for 2022 is anything above 5.23%. The significant difference between 2018 and today is that inventory is half what it was in 2018.
Across the Nation
The National Association of REALTORS released July’s national numbers last week showing pending housing sales down 20% year-to-year. Atlanta pending sales in July were down a very similar 21% year to year. You can see why MarketNsight uses Atlanta as a barometer for the rest of the nation.
Most importantly, NAR Chief Economist Dr. Lawrence Yun had this to say: “In terms of the current housing cycle, we may be at or close to the bottom in contract signings. This month’s very modest decline reflects the recent retreat in mortgage rates.” Source: NAR newsroom
Hunt states, “I believe that NAR’s August data, when released at the end of September, will reflect the same upward trend we see in Atlanta for the first three weeks of August.”
Still, the problem of extremely low inventory will continue to plague the market. Dr. Yun said, “Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
As a barometer for the nation, Atlanta is experiencing a dearth of inventory in prices below $300,000, drastically limiting sales. Amazingly, price points for $500,000 to over $1 million saw pending sales increase in July over a very good 2021.
“If we had inventory at and below $300,000, we would be up big over last year and 2019. You must have SOMETHING to sell!” said Hunt.
Supply and Demand of Housing Sales
And despite some analysts’ ridiculous predictions of a massive increase of supply in a high-interest rate environment, we still have very little to sell.
For the trailing 12 months ending August 21, inventory is up 54% from the same period last year (when it was at a historic low) but is still 41% less than October 2019. Closings are down 7% from August 2021 but still 7% higher than October 2019.
The months of supply inched up to 1.8 from 1.7. It has peaked, and inventory/MOS will trend down from here through the fall and winter under normal seasonal housing conditions.
The MarketNsight Forecast
To reach an equilibrium of six months of supply, Atlanta needs an additional 72,000 units of housing inventory over the next 12 months.
“Good luck with that,” says Hunt. “We may put 13,000 to 15,000 buildable lots on the ground in Atlanta over the next 12 months.”
While other national forecasters and economists predict the housing market will collapse because it is overbuilt, MarketNSight predicts 2022 will be another year where our ability to supply falls short of demand, ending the year with 2.1 months of supply and an annual inventory deficit of 56,000 units.
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