Red Robin Group Market Report – August 2011

Primary Market Area (Grant Park, Ormewood Park & East Atlanta)

Summary
After a tumultuous end to 2010 that most of us in the neighborhood would like to put behind us, 2011 has gotten off to an interesting start. There is a lot of good information here, so let’s jump right into it.

To recap, in 2010, buyer activity and prices dropped dramatically after the end of the tax credit on April 30, 2010. I believe we all knew there would be a slowdown, but most underestimated how much impact it would have, particularly in our market area. When buyer activity slowed dramatically late last spring, there was significant price shift downward as demand fell. Because there was a high level of investor activity (particularly in East Atlanta) and investors have “margins” that can be cut, it was very difficult for homeowners to compete. The fall out was a significant price adjustment downward, which was seen most heavily in East Atlanta. And, many homeowners simply dropped out of the market.

Fast forward to Spring 2011. We have seen a lot of buyer activity, likely in the wake of buyers finally getting the message that prices are low and interest rates are at historical lows. Homes are definitely selling in the neighborhood! That being said, the buyers that are out there are looking for bargains. They don’t seem to have a sense of urgency and wait for homes that are “value priced” to hit the market. It’s more important than ever for sellers to be in that “Top 25% of showing condition and Bottom 25% of price” – this is the seller gospel that I often preach and now, more than ever, it’s true.

So, now that we’re just about to enter the Fall market, we have a very interesting dynamic going on. Many homeowners have dropped out of the market, taking their homes off the market to “hunker down” until the market improves or possibly to become “reluctant landlords”. And, after getting hammered on prices last year, many investors have left the neighborhood or, at the very least, are being much more cautious. All this seems to have led to a surprisingly low inventory at the moment.

So, where does this leave us going into the Fall and the outlook for Spring? I don’t have a crystal ball, but my sense is that if you are a seller and you have a house that you can get on the market QUICKLY that is priced right and in good condition, then, this is a great time to do it – you don’t have a whole lot of competition. I don’t see the prices rebounding dramatically in the near future, but perhaps this low inventory will create a small uptick in the prices in the short term. I sense that we’ll see more of the same in the Spring 2012 – although, I’ll qualify that to say that the market is unpredictable at best and nothing would surprise me.

A Look At The Numbers
Below is a look at some key statistics for the neighborhood for YTD 2011. This information is really a “snapshot in time” taken on August 22.

If we look at the current inventory levels, they are actually surprisingly low. The MSI (Month’s Supply Inventory) is an indicator of inventory levels – it measures how many months it would take to sell the existing inventory at the current rate homes are selling. To put this number into perspective, an MSI of 6 is considered a “balanced market”. Anything greater than 6 is a buyer’s market (excess inventory) and below 6 is a seller’s market (shortage of inventory). Interestingly, we see that both Ormewood Park and East Atlanta are experiencing low inventory levels going into the fall market. Grant Park remains high, perhaps because homeowners in that neighborhood have been less reluctant to lower their prices comparative to Ormewood.

To this point, if we look at the Median Price indicator, the median sale price is down sharply in Grant Park, while up a bit in Ormewood Park. And, down just slightly in East Atlanta. The true picture, though, is when we compare the Median List Price to the Median Sale Price (LP/SP ratio). The Median List Price for listings in Grant Park is $249,250, compared to a Median Sale Price of $178,750. This is a huge gap and would indicate that sellers are pricing their homes generally high for the market (LP/SP ratio of 72%). In contrast, the LP/SP ratio in Ormewood Park is 91% and East Atlanta is 99%.

To put these numbers in perspective and draw conclusions, we have to keep one very important thing in mind. The overall volume of sales (particularly in Ormewood) is relatively low. So, these numbers can be very susceptible to dramatic swings with just a few sales that are high or low. That being said, I think we can draw some general conclusions about market dynamics in our local neighborhoods. 
       1) Grant Park home prices do seem to have dropped a bit and this is likely due to buyers being willing to trade off for Ormewood Park. In the past, Grant Park homes enjoyed a significant price premium, but that gap seems to be closing. This would help explain a somewhat higher inventory in Grant Park at the moment. 
       2) A general trend seems to be that prices are lower than last year and the volume of sales are lower, as well. The one exception is Ormewood, where the Median Sale Price did tick up a bit. Again, this could be due to the relatively small number of sales in the neighborhood coupled with a few higher than normal priced homes. 
       3) Another general note: this data seems to be somewhat contrary to my summary above, which indicated that 2011 is a more “active” market. But, I’ll maintain that the sales in 2010 were packed in the first months of the year (during the Tax Credit) and were much slower the last half of the year. This year, we have been more consistent throughout the year. It will be interesting to see how the last 4 months of 2011 play out and look at the two years compared in their entirety.

So, hold on tight. I think we’re still in for a wild ride in the foreseeable future. If you’re a homeowner and would like to sell your home, one of the best things you can do is go ahead and get a consultation now. If it’s not the right time to sell your home, we can put you on a periodic review to keep you updated with changes in the neighborhood market. You’ll be the first to know if the conditions improve and you can sell your home. If you are in a position to sell your home, now is a GREAT time because there are lots of buyers and the inventory levels are fairly low.

If you’re a buyer, the only thing I can say is “What are you waiting for?” Prices are at record lows all over the city and interest rates are at historic lows. I honestly believe that now is the best time to buy a home that most of us will see in our lifetime.  

posted: Sep 12, 2011 | No Responses

Posted by:  Wakamo & Associates

Melissa Wakamo and her dynamic team of agents and support staff provide buyer and seller clients with exceptional service and proven results. Since the start of her real estate career in 2004, Melissa has proven to be a true advocate for her clients and has consistently performed in the top 1% of agents

“When I started my real estate career, I wanted to work in my local community and get to know my neighbors. Now, I realize how important that local expertise is to our clients. At Red Robin REALTORS®, all of our agents are specialists in working with buyers and sellers in Atlanta’s intown neighborhoods.”

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