Friday Five: Impact of foreclosures on the metro-Atlanta housing market

By: Brad Horner

Forgive me for blogging about NRT Development Advisors’ 1Q10 report for the second time this week, but we have had a lot of discussion in the office regarding what the data says about consumer buying trends and how to reexamine clients’ sales and marketing strategies based upon the report’s findings.

One thing that stands out in the report is the significance of foreclosures in the local real estate market.  These bank-owned homes offer great opportunities for buyers to purchase new construction or resale homes at a significant discount.  But they also influence the pricing of owner-occupied homes, as a result.

Below are the report’s top five findings about the impact of foreclosed homes in the metro-Atlanta market during 1Q10:

1. Foreclosure activity represented 29.7% of the 1,339 new construction single-family sales and 38.6% of the 10,862 resale single-family transactions during 1Q10.  Of the resale single-family homes sold below $100K, 53.6% were foreclosures.
2. Multi-family resale prices continue to fall and have reached the lowest first quarter average price on record. This decline is likely attributable to an over-supply of multi-family housing and foreclosures, which have an average sales price of $79,094.
3. The resale of multi-family and single-family resulted in an 8.3% increase in absorption over 1Q09, while new construction sales declined 17%. This large disparity is most likely due to more aggressive pricing and the number of foreclosures and short sales in the resale market.
4. Overall, foreclosure sales in 1Q10 were down when compared to 1Q09 volume, with multi-family new construction foreclosure volume being down by 43%. While the decline in foreclosure volume is a positive sign, it is most likely only temporary as foreclosure notices in the 13-county region climbed to 12,568 in March 2010, the highest figure since September 2009 when there were 12,318 foreclosure notices.
5. The FDIC and Fannie Mae are developing disposition strategies, and many experts also believe a substantial amount of delinquent and pre-foreclosure homes are being held back by banks, which could mean foreclosure volume will gain momentum throughout 2010. According to a recent Housing Wire article, analysis of data from Lender Processing Services revealed Georgia has one of the largest discrepancies between delinquent loans and foreclosure inventory (10.5%), possibly resulting a double-dip in housing as delinquent loans move through the pipeline.

Requests for the full report should be sent to Judy Price at Judy.Price@NRTDevelopmentAdvisors.com.  Previous reports can be downloaded here.