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After surviving a bumpy ride, real estate agents in metro Atlanta have seen a quick swing from a buyer’s market to a seller’s market, with little to no lag in between.

In the last two years, buyers have taken advantage of low interest rates and picked up their purchasing power. As a result, the already low inventory picked over by previous investors is being eaten up. In May 2011, First Multiple Listing Service Inc. (FMLS) had 61,717 metro Atlanta listings, but in May 2013 that number dropped to 24,551, a 60 percent reduction.

“We are selling houses at a much more rapid rate than we are replenishing inventory,” said Michael Rogers, president of Dorsey Alston, Realtors. “Unfortunately studies show that 64 percent of metro Atlanta homeowners have less than 20 percent equity in their home and cannot sell their home at a price that covers their mortgage balance and closing costs. The good news for sellers is that the lack of inventory is driving home prices up fairly dramatically in some pockets.”

According to recently published S&P/Case-Shiller Home Price Indices, metro Atlanta saw a 19.1 percent year-over-year jump in home prices for March and 1.3 percent growth from February to March. While this shows a positive trend, there is still a ways to go to reach pre-recession levels. Roger Tutterow, economist with Mercer University, said the recent 19 percent gain puts the metro Atlanta housing market back to where it was in late 2010 or early 2011.

“Part of the reason that Atlanta is up so much year-over-year is we are now benchmarking ourselves against the bottom of the market for price which would have been March or April last year,” Tutterow said. “There is also the issue of the arithmetic – when you drop by a third that means you have to go up 50 percent to just to get back even.”

Charlotte Sears, president of Coldwell Banker Residential Brokerage, said part of the reason inventory is so low is the investors that entered the Atlanta market and bought up homes at rock-bottom prices. When the market accelerated in early 2013 and the demand for housing increased, the lack of inventory started to bring prices up. In May, the average sales price rose 30 percent over May 2012, according the FMLS. Now another wave of investors – buying and flipping houses – are at play, Sears said.

“You have both types of investors still in Atlanta, which makes the inventory more constrained,” Sears said. “Right now we have about a four-month supply of homes available.”

David Boehmig, president of Atlanta Fine Homes Sotheby’s International Realty, notes that in looking at all price points, the number of homes sales in the most recent quarter is actually down about 6 percent compared with the same quarter last year. However, homes in the $250,000 and up price point have seen a 39 percent increase in sales.

“Lower-priced inventory has really dried up a little bit while the rest of the market has taken off,” Boehmig said.

Amidst this rapidly changing environment, real estate agents are busy and multiple offers on property isn’t unusual, Sears said. Although intown areas like Buckhead, Virginia-Highland and Morningside, and outside the Perimeter areas like Alpharetta, remain strong, there is movement occurring all over metro Atlanta.

“Sometimes in the marketplace you’ll see one area move and others sit, but there is movement everywhere, which really encourages us as far as the health of the market,” Sears said.

There is also a pent-up demand for new construction. As banks slowly loosen their tight hold on loans for new construction, builders who acquired lots at deep discounts during the recession are starting to build.

“We talked to a number of large new home construction companies and they tell us that when they open their sales office, especially on the weekend, there is a line waiting to get in and see the models. This demand allows the builders to increase prices,” Sears said.

While the environment is improving, Mike Turner, vice president for The Home Service Store Inc. and 2013 Greater Atlanta Homebuilders Association president, said there are still some headwinds for builders, especially small builders. He said there is a lack of lot availability in the areas where sales are coming back, such as Forsyth County, North Fulton and Cobb, among others.

“The smaller builders are having the biggest issues at this time and it all revolves around fund availability,” Turner said. “The larger builders are getting their money from Wall Street or private equity funds, while the smaller builders are dependent on traditional banking or community banking and that is still a big problem, but it will be resolved.”

Turner is “guardedly optimistic” about 2013 and expects either the economic cycle or Congress to work out the remaining obstacles standing in builders’ way. Meanwhile, as prices increase in the existing home market, newly built homes will be more able to compete on price, Tutterow said.

“One of the problems before was that with existing home prices down about one-third nationwide and in Atlanta, that meant that any new home projects had to be offered at lower than typical price. Over the past year, record low lot prices made that possible,” Tutterow said. “As existing home prices come up, it will make the economics of new home construction more favorable.”

The condominium market is also seeing increased interest, but low inventory. In May 2011 there were 11,600 condominiums listed in FMLS and in May 2013 that number was down to 3,844, a 73 percent reduction, Rogers said.

“Dorsey Alston has been the exclusive listing agent of The Ritz-Carlton Residences in Buckhead, and we recently received another contract reducing our inventory down to the final two units,” Rogers said. “The reduction of condominiums in metro Atlanta over the past two years has been really dramatic and is a very positive sign for the remaining new units as well as resales and the health of the condo market as a whole.”

Currently, new first generation condominiums are limited to high-end products such as The Ritz-Carlton Residences, Residences at The Mandarin Oriental, The Residences at the St. Regis Atlanta and the W Residences Downtown, leaving the entry-level or mid-range condominium buyer with few new options, said David Tufts, president and principal of The Marketing Directors Inc. As a result, developers are already looking to fill demand.

“We did a study and our prediction starting in 2007, was that 2013 was going to be the year of the resale, a year of change,” Tufts said. “We predicted that townhome infill construction would happen first and that is happening now. There are townhome communities taking shape and moving ahead everywhere.”

Robin Loudermilk, former Aaron’s Inc. CEO and now real estate developer, is planning a new condo building on the Midtown Mile. Partnering on the eight-story building at 867 Peachtree St. with developer Dwight Bell, Loudermilk’s $20 million mixed-use project was originally going to be apartments, but recent condo sales and price appreciation led the developers to change their minds. As demand increases, Tufts expects more apartment developments to be repositioned for the condominium market starting this year.

“The switch has been flipped on and what we are doing now is talking to developers who are looking at conversion opportunities because people in the industry see the lack of product in the marketplace,” Tufts said.

As a new generation of homebuyers come of age and baby boomers look to downsize and retire, Tufts expects the condominium market to surge. Intown markets with access to the Atlanta Beltline, Piedmont Park and developments like Ponce City Market will do particularly well. Despite all the condominium market has going for it, Tutterow warns real estate developers not to exceed demand.

“While I’m not worried about the multifamily market in 2013, we have to be careful with new construction in that sector that we don’t overshoot what the likely demand will be,” he said.

Looking ahead, Tutterow expects the homes sales in the second half of 2013 to remain strong with increased demand in the markets that have historically done well – those with better school systems and good access to transportation. While home prices will continue rising into 2013, Tutterow doesn’t foresee price appreciation to be as aggressive in 2014.

“If a homeowner thought of selling his or her home at any point since 2008 but felt intimidated by market conditions, then he or she should understand that the pendulum has swung on the supply and demand curve and the equilibrium price has increased,” Rogers said. “We are in an interesting market where conditions are strong for both buyers and sellers.”

Sears agreed, adding it’s also an opportune time for move-up buyers – those upgrading from smaller to larger homes – or for landlords who want to unload a rental property. She also encourages first-time homebuyers to take advantage of the market and its still low prices.

“The prices are still lower now than they were in 2007, which was the height of the market,” Sears said. “It is still a decent buy out there even though the prices have accelerated.”

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