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Economy idling with foot near the gas

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The housing market started the year with its foot firmly on the gas, fueled by strong economic data, a booming stock market and a new president intent on passing initiatives aimed to increase jobs and boost corporate revenues. The breaks were applied after the healthcare bill failed to pass Congress. As it stands now, many are idling forward, waiting for the right moment to jump back on the gas.

Mortgage interest rates were sent on a roller coaster ride this year. Rates are tied indirectly to the stock market. When the stock market goes up, mortgage interest rates typically go up. When stocks go down, mortgage interest rates tend to go down. They started the year in the middle of a steep rise as investors continued to position themselves for opportunity by buying stocks they thought would thrive under the new president.

They ultimately peaked in March as the 30-year fixed average was at 4.4 percent, according to Mortgage News Daily. At that time, the healthcare bill failed to pass Congress and investors recoiled, concerned about the president’s ability to pass his initiatives. Rates followed and dropped, hitting their lowest point on June 2 at 3.98 percent.

The drop was fueled by more than just politics. The June jobs report, released every month by the Bureau of Labor Statistics, showed a surprisingly low unemployment rate of 4.3 percent. While it is instinctive to think that low unemployment is good for the economy, low unemployment can stall growth as employers have trouble finding the skilled labor necessary to expand their products and services.

Our metro leaders are working hard to grow upon Atlanta’s reputation as a great live-work-play city. And they need to, because other metro areas are doing the same. And as the competition for skilled workers becomes that much more intense, businesses will locate themselves in cities that are attractive to today’s workforce.

The question right now is: where is everyone going to live? Numbers released by Smart Real Estate Data show that home inventories under the $400,000-mark are at historic lows, while inventories at the above $400,000-mark are rising fast.

Houses priced around $300,000 and below are seeing inventory levels of about two months! That means if no new listings came out, in two months there would be nothing to sell. A healthy market is six months of inventory.

The sub-$400,000 market is a fierce seller’s market where buyers have to act fast and impress the seller. The listing agent’s main job these days is to price the house as high as it could appraise for, then pick the buyer who will give them what they want, and who will close with little fuss.

This competition has driven home values up. In some parts of town, values have risen 5 percent to 10 percent in just the last year. If you are in the market for a $400,000-home, and you wait a year, you could be paying $20,000 to $40,000 more.

Normally the problem of low inventory would be fixed by the construction of new homes. But here in Atlanta, there is a slight problem: labor. As mentioned before, unemployment is historically very low. Homebuilders are having trouble finding skilled labor to do the work. This is driving up costs of new homes because builders have to pay more to lure subcontractors away from other projects.

But let us all keep in mind that these are good problems to have. They are symptoms of a successful local economy. That said, the low-inventory problem does not look like it will be solved anytime too soon, so values will likely continue to go up.


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