Another week, another report about problems in the Atlanta real estate market. This one courtesy of Zillow and the “must read” headline is that half of Atlanta mortgages are underwater. As always, it’s a good idea to take a few minutes and get past the headline. While not entirely healthy, things are getting better.
From the AJC and Zillow’s chief economist Stan Humphries:
More than half of homeowners with a mortgage in metro Atlanta owe more than the house is worth, a new report says. Their negative equity will slow a real estate recovery as some homeowners who would like to sell and move are “trapped in their homes,” because they cannot afford to sell at a loss, said Zillow’s chief economist Stan Humphries. It also makes foreclosure more likely if the mortgagee loses a job or hits other economic shocks, he said.
Zillow, the online real estate data and search firm, analyzed 35 million mortgages, including 778,870 in 22 metro Atlanta counties, to conclude 55 percent of mortgages here were in the negative range. That far exceeds the national average of 31 percent. Humphries pointed out that despite the high numbers; only 8 percent of metro Atlantans were delinquent on paying.
Employed homeowners who plan to stay in their homes long-term are not bothered as much by the “paper losses,” he said which makes the situation less dire. “People should not think that 55 percent of homes are going to end up in foreclosure,” Humphries said. Homeowners who are feeling the effects are those who want to sell or must sell due to incidents such as job relocation or financial strains.
So here are the key things to consider behind the catchy headline:
- Zillow considered 22 counties and called it Atlanta. 22 counties? Is the “Atlanta” market really that large?
- In some cases it might be obvious that more is owned than the home is worth, but not always. And what is Zillow using to establish “value”? Tax assessments? “Zestimates”? Come on now…the value of a home is what someone is willing to pay for it.
- What about the hundreds of variables surrounding value? Condition, appeal, size, external factors, local trends…blah blah blah. How are they accounted for?
- The map shows the breakout down to the county level, but consider the composition of each county. Fulton is large and dense, Gilmer is smaller and rural. Variables like density, area, price point….all come into play.
- As Humphries noted, it’s not a recognized loss until you have to sell. Any investment fluctuates but nothing is established until the commodity transfers.
No one is calling the Atlanta real estate market out of the woods, but we’re seeing definite areas of prolonged stability and even slight increases. We’re talking micro markets, often down to the high school level, that offer locational convenience and economic stability. New construction is active in many areas; we view this as an exceptionally reliable indicator of an area’s health – after all, does anyone know a bank that would lend money to a builder on any project that they didn’t fully expect to succeed? Some areas and price points (under 200K) are moving from buyer’s markets to seller’s markets.
Negative equity is out there and it’s not going away anytime soon. It has and will continue to impact the market, but all real estate is local and digging deeper whenever “Atlanta Real Estate…..” is the headline is always a good idea. It’s not all beer and skittles, but it’s not bad everywhere.