Atlanta house prices are up sharply over the past year, and institutional investors are buying or building dwellings, according to the Atlanta Fed’s Beige Book, released Wednesday.
According to SaportaReport, On Tuesday, the S&P CoreLogic Case-Shiller Indices report put the price hikes into perspective. The year-over-year rate of increase in metro Atlanta housing prices was 21.2 percent. The national rate of increase was 19.5 percent, the index showed.
The Atlanta Fed’s Beige Book report provides a key insight in observing the rising participation of investment firms in the housing market. These companies influence prices through their ability to pay cash to sellers. The report analyzes the Southeastern district, in which metro Atlanta is a significant component. “Homebuilders noted elevated interest from institutional investors seeking to buy or build new homes for single-family rental units,” the report reads.
The Atlanta Fed’s Beige Book touches on the complexity of the housing situation in this comment:
“Although still strong, housing demand moderated further from the record highs experienced over the past year. Nonetheless, the recent uptick in mortgage interest rates led to an improvement in residential sales, spurred by homebuyers’ expectations that interest rates will rise further… On a year-over-year basis, home prices increased sharply in markets like Atlanta, Nashville, and central and south Florida. Affordability contracted further throughout the District. Housing starts were up from year-earlier levels in most markets.”
The S&P CoreLogic Case-Shiller noted that the pace of price increases has declined slightly. The Nov. 30 report also observed that prices in the report’s 20-city benchmark increased in September, and prices in all 20 cities are at an all-time high.
“More data will be required to understand whether this demand surge represents simply an acceleration of purchases that would have occurred over the next several years, or reflects a secular change in locational preferences. September’s report is consistent with either explanation,” analysts observed.
The Atlanta Fed’s report likely incorporates comments gathered after Zillow announced it is getting out the house-flipping business and selling thousands of dwellings. Zillow delivered that news on Nov. 2. The Atlanta Fed gathered information from contacts through Nov. 19.
Zillow had miscalculated volatility in the housing market, it advised shareholders in a letter. The company intends to close its Zillow Offers operation, sell dwellings and lay off a quarter of its workforce. The business was more complicated than expected, though.
“We have been unable to accurately forecast future home prices,” the letter reads. “We have determined this large scale would require too much equity capital, create too much volatility in our earnings and balance sheet, and ultimately result in far lower return on equity than we imagined.”
For some investors, housing remains a haven for cash in part because of the potential for higher returns than other investments. Scattered site investments have traditionally been the purview of mom-and-pop operations. The market changed with the influx of renters following the 2007 Great Recession.
Some renters had lost their homes during the foreclosure crisis and were unable to qualify for loans. Their children’s generation has been slow to form households for reasons attributed, in part, to their parents’ situations, and also to college debt and other factors.