State of the Market (Through the eyes of an appraiser)
I consider the time period of June, 2020 through August, 2022 as the strongest we have ever experienced in North Atlanta and the Northern suburbs. Demand was driven by historically low interest rates, economic stimulus, an influx of buyers from other states, the ability to work remotely and low unemployment. Inventory decreased over this period resulting in intense competition during the spring and summer months of 2021 and 2022. Many homes sold over list and bidding wars became common. Sales of new and resale luxury homes priced over $2,000,000 soared with significant increases in land values in Fulton, Cherokee, Cobb, Forsyth and Dawson Counties. Non-listed sales became more common as desperate buyers competed with historically low inventory. At the same time building products were becoming more expensive due to strong demand, higher fuel prices, shuttered mills (due to Covid), and shipping and trucking backlogs. Inflation increased significantly and the cost to build a new home drove the resale market even higher. Appraising properties in this environment became extremely difficult due to the lack of consistency in the market and sales prices that were not based on the sale of similar properties. Appraisal estimates below contract price were not uncommon.
The significant increase in interest rates tempered the market somewhat in the fall of 2022. Those homes most impacted by the rise in interest rates included single family, townhomes and condominiums valued under $750,000+-. New construction starts remain solid with a limited slowdown in price ranges less susceptible to rising interest rates. Currently inventory remains low as many mortgage holders are unwilling to give up their 3% rate for current rates in the mid 6’s. Days on market for active listings has increased but remain favorable and under 2 months in most instances. Lending activity has slowed significantly as the shock of significantly higher rates has softened buying enthusiasm and slow refinance activity. Pre-listing appraisals are back in fashion as homeowners and realtors want a second opinion due to significant changes in market conditions.
With all of this said, my outlook for the spring market is good. Our spring market starts early, usually in February, just as the Daffodils signal longer days. The stabilization in interest rates, which are still historically very low, and more affordability should entice homebuyers into the market. Realistic sellers should not expect the windfall profits from last summer but many homeowners still enjoy significant equity. Fears of a significant recession appear to have subsided and employment remains good. People will continue to migrate into our area from other states. Fed interest rate hikes should slow down. I expect appraisal volumes will be lower this year due to the slowdown in the refinance market and fewer sales in comparison to prior years but I’m hopeful for lower rates sometime later this year. Low inventory will keep prices stable and I would not be surprised to see appreciation in certain markets. Pre-listing appraisals remain important as realtors and owners understand the importance of accurate pricing in a more normal market environment. I expect Atlanta and the Northern suburbs to excel in comparison to other large markets in the country.