Why Are Prices so High?

We are seeing unprecedented levels of pricing in Atlanta over the last 3 months – caused by supply and demand.
Why is the supply of homes so low?
  • New construction has been put on hold. Mortgage lenders would not issues loans to home builders. Additionally city permit offices, inspectors, and more were closed and prevented builders to work. Construction has not been able to catch up since the recession as well.
  • A steady market of homes for house flippers come from foreclosure auctions. With foreclosure moratoriums still in place, there are very limited homes for flippers to buy and flip.
  • Reduction in out-of-state job transfers/relocation. A large portion of homes go on the market with career changes and advancements. However, working from home is normalized, eliminating the need for people to move for work.
  • Home remodeling. Homeowners spent money making their current home work for them with additions, renovations or by adding swimming pools, home offices, and more. The inter-community move to a better fitting home has been reduced.
  • Virtual schooling meant no need to move as the better fitting school districts (whether academics or athletics) were also virtual and having no significant improvements to justify a move.
Why is demand so high?
  • Life changes: People still are getting married, having kids, and relocating and need a bigger or better fitting place to stay.
  • Borrowing money for mortgages is at 2.5%-3% (which has never been cheaper).
  • Mortgages are the best thing to protect yourself against inflation. The federal government and the Fed are expanding the money supply at a rate not seen in this country for years and years. Historically, this approach has always been followed by a decline in the value of the currency and increase in the price of hard assets. Long-term fixed rate debt will get cheaper and cheaper (relatively speaking) as your dollar’s purchasing power goes down and that means you can pay for your house with cheaper and cheaper dollars down the road via a 30-year mortgage.
  • Competition from REITs, Wall Street hedge fund firms and foreign investors. They are investing in single-family homes and bidding against primary home buyers with less resources.

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