Good news for Atlanta (and therefore the state) in latest Case-Shiller data

December 26, 2012 14:13 pm

by Bill Dawers · 9 comments

I find myself a bit more upbeat about the prospects for Georgia’s economy in 2013 than some of the forecasts released so far. My main reason for that cautious optimism is the solid rebound in housing.

Over the last year here in Savannah, we’ve seen more home sales, significantly lower inventories, more building permits, and — according to Zillow’s latest home price index for various metro areas — stabilizing prices.

According to that same Zillow index, metro Atlanta home prices are still down 1.4 percent year-over-year, but up 1.6 recent for the most recent quarter compared to the previous one. (Atlanta prices cratered early in 2012.)

Today’s Case-Shiller data for October (a composite of August, September, and October) show the Atlanta metro area experiencing some predictable seasonal weakness in prices, but a solid year-over-year increase of 4.9 percent.

Seasonally adjusted, Atlanta’s October Case-Shiller index value was 95.11, a level first achieved in 1999. So, while it looks like the steep dive in Atlanta metro home prices is well behind us, it’s hard to argue that homes are still overvalued or that another bubble is inflating.

With reasonable and increasing prices, more buyers will come off the sidelines in 2012. Demand for new construction will increase (although probably slowly). The number of underwater homeowners will diminish. Banks will continue cleaning up their books. Construction employment should increase in 2013.

We’ve still got a long way before the housing bust is clearly in the rearview mirror. But things are moving in the right direction, and it would likely take several major economic shocks to reverse course.

saltycracker December 26, 2012 at 9:33 pm

In related news: subsidies boost home prices more than expected
Aka: subsidize borrowers at the expense of the savers

Bill Dawers December 27, 2012 at 10:13 am

Savers have been hit hard by the low interest rates for sure (me included). But I wouldn’t equate the low interest rates with “subsidies”. The homebuyer tax credit was a temporary subsidy that created irrational enthusiasm for housing long before the bottom came; the mortgage interest tax deduction could obviously be called a subsidy too.

Prices would certainly be lower if interest rates were higher, but interest rates have remained unusually low for years now without a clear bottom in housing. (In fact it appears that all three key numbers for housing have bottomed: prices, sales, and new construction.)

Increasing interest rates in the future are just one reason NOT to expect a dramatic increase in prices.

saltycracker December 27, 2012 at 3:13 pm

Call it what you want subsidy, support, the Fed managing the money…..The Federal Reserve is sitting on a record almost $3 trillion in bonds and is buying $40/45 billion a month in mortgage backed securities from the banks pumping them full of bucks while loaning them money from 0 to 0.25%. Mortgages are at historical low interest rates, 30 yr. treasuries are way under historical averages.

The too big to fails are larger than before the great recession and we, with the Feds, can only hope they don’t find a self-serving reason to start releasing all that money into the economy.
Guess it depends on how much evaporates when they deal with non-performing assets.

mpierce December 27, 2012 at 3:26 pm

Subsidy – 1. Economic benefit (such as a tax allowance or duty rebate) or financial aid (such as a cash grant or soft loan) provided by a government to (1) support a desirable activity (such as exports), (2) keep prices of staples low, (3) maintain the income of the producers of critical or strategic products, (4) maintain employment levels, or (5) induce investment to reduce unemployment.

Bernanke Says Fed Will Do What It Can to Support Housing

And why wouldn’t that artificially low rates be considered a subsidy?

mpierce December 27, 2012 at 3:27 pm
saltycracker December 27, 2012 at 5:01 pm

Considering weekly anecdotal stories of folks advantaging themselves as banks hang on to non-performing, low cost to carry, assets:
It would be interesting to see a report on the banks spending to keep folks not paying their mortgage in their homes to minimize deterioration from being vacant or to not loot them when they move out. Or maybe to also avoid unwanted occupiers.

The Last Democrat in Georgia December 26, 2012 at 11:11 pm

Mr. Dawers, your optimism towards the future is greatly appreciated.

saltycracker December 27, 2012 at 9:52 am

With any subsidy there are winners. If you have a secure job, can avoid over leveraging, plan to hold a property 10 or more years – now is the time. For example the rates and prices of properties with major location/recreation/second home amenities in counties with reasonable taxes are at generational lows. Buy that lake/mountain/beach/golf home now.

Subsidies and excesses in desirable places don’t last and the good choices will be taken.

Harry December 27, 2012 at 9:27 pm

If/when hyperstagflation kicks in we’re all losers except maybe elitists, monopolists, and statists. We will work harder for artificial money – everybody will be elevated to the highest marginal bracket and pay the federal 39.6% of taxable income. And they’ll STILL be running a deficit and we’ll all be owned by DC and NY.

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