As the New Year gains momentum, we look back at 2016 in the light of cutting-edge property stats on the Atlanta metro. Provided by a leading US realty group, they strongly reinforce YDL’s current choice of investment location.
Supply-driven seller’s market
Once the supply of listings at a given location is less than six months, it is considered a seller’s market. The current figure is only 2.9 months, 18.2% lower than the same month in 2015. This shows that the Atlanta metro is more of a seller’s market than it was a year ago. The figure for resales is even better, at 2.5 (YDL focuses predominantly on resale properties rather than new construction).
Consequently, the median sales price has risen, sellers are getting more of their asking price, and properties are spending less time on the market. In detail, according to the Q4 2016 Atlanta Metro Market Report that Keller Williams beams to its satellite offices:
The median sales price of a residential property has risen by 6.1% during 2016, showing the steady growth that Atlanta has experienced over the past three years. This is a more stable market than the 35.9%, 22.9% and 15.5% recorded at the end of 2013 and early in 2014.;
The median sales/listing price (S/L) percentage is 96.3%. According to Keller Williams, S/L price ratios provide an indication of buyer price resistance and seller willingness to negotiate, with higher ratios indicating a stronger position for the seller; and
Median days on market (DOM) is only 41, down by 22.6% when compared to 2015 – similarly providing evidence of a strong market.
It is interesting to compare the current seller’s market to the peak of the buyer’s market in 2009. By doing so, we see that:
Supply in months has moved from 16.1 to 2.9;
Percentage distressed sales has reduced from a whopping 40.8% to only 4.1%;
The S/L percentage – which was only 80.3% in 2009 – had shot up to the current 96.3%; and
Median DOM has jumped from a lengthy 145 to a blink-and-you’ve-lost-it 41 days.
It all equates to more buyer competition, fewer bargains and quicker sales.
However, the above only tells part of the story, as these are averages for the whole of metro Atlanta. YDL has fine-tuned its strategy by honing in on the following facts and figures:
- Despite the supply of listings being 2.9 months, sales above $750 000 are currently experiencing buyer’s market conditions in certain areas.
- YDL is, therefore, moving away from acquiring properties that will – after rehab – sell for more than $750 000, except if the stats in a particular area support a higher sales price.
- In fact, our current strategy is to target properties – in carefully selected areas – which will sell for less than $500 000, as these are experiencing even stronger seller’s market conditions.
- As a result, we’re focusing on finding properties where we don’t have to change the existing footprint by doing additions.
- This has the benefit of quicker flips, as planning approvals and permits don’t slow us down. (We will, however, do additions if the right deals present themselves.)
- But: these properties are very difficult to find, as we’re competing with other investors and ordinary home buyers for the best deals. YDL’s five years in the Atlanta market and contacts on the ground are therefore proving key ingredients in our success.
The good news is that interest rates remain historically low, so this is a good time to enter the market for the right property. Rising rates in the future may, however, reduce affordability for homeowners.
A Trump truism
And lastly, although new US president Donald Trump has already stirred things up in a number of industries, several pundits are of the view that his history as a long-time real estate mogul might serve the property market well. According to Nathan Miller, head of real estate software company Rentec Direct, ‘Trump is a real estate guy and his mentors, policies and cabinet are going to lean in the direction of real estate investments. Real estate is a market Trump knows well, so whether it’s a conscious decision or not, his moves in the White House will improve the real estate market.’ Time will tell.