Price index rises yet again

By John Adams

For the AJC

The widely watched S&P/Case-Schiller index recently showed that home prices in the nation’s largest cities continued to rise for the fifth straight month. Although the seasonally adjusted rate of increase was modest, it was a welcome relief from the seemingly endless price drops of 2008 and the first half of 2009.

From an Atlanta perspective, this report shows the fourth consecutive month of improvement, even though the most recent monthly prices refused to budge from the previous reporting period. That’s because economists adjust the data for the season, and that adjustment shows the Atlanta area actually experienced a modest increase in home values during the period.

By almost any measure, one can say that the real estate market is greatly improved from six months ago. Increases in home values help the local real estate scene in a number of ways:

● Those homeowners who are trying to sell their homes are more likely to meet with success, and when they do, they are more likely to get an offer near their asking price.

● The inventory of new homes, though still an area of concern, is less now than it has been in recent months. This helps both new home sales (as there is less competition) and resales (as buyers shop and compare there, also).

● Current owners who are “upside-down” in their mortgage loans move closer to a “break-even” position as home values rise. This has the effect of encouraging owners to avoid default and maintain hope of future equity in their investments.

And there is another area that benefits when values rise:

● Bank-owned home sales spark greater interest as investors see a possible return to real estate profits in this bloated subset of the Atlanta market. These cash investors largely sat on the sidelines in the first half of the year. But now any reasonably priced post-foreclosure property is likely to draw multiple full-price offers. In a maddening response, banks routinely reject all offers, then allow bidders 24 hours to make their “final and best” cash offer.

The future of the Atlanta market looks promising but, as is the case with the larger economy, still uncertain. Perhaps our best hope for a full recovery lies in the reduction of the huge wave of foreclosures that has swamped many Atlanta neighborhoods.

Clearly, even modest increases in values will help that issue, but a return to stronger employment numbers is the key. People with jobs buy houses, while those without jobs may lose their homes to foreclosure.

As we get ready to go into a new year, let’s hope for a strong jobs market.

John Adams is an author, broadcaster and investor. He answers real estate questions on radio station WGKA (920 AM) every Saturday at noon. For more real estate information or to make a comment, visit www.money99.com.