Every week, we ask an Atlanta real estate professional for their thoughts on the top trends in Atlanta real estate.
This week we talk with Mikel Muffley, Founder of Muffley & Associates Real Estate, Atlanta’s No. 1 Intown Large Team. An industry leader, Mikel is a 25-year real estate sales veteran who’s ranked in the top 1 percent Metro Atlanta ABR since 2004. A new construction expert, Mikel pioneered Muffley & Associates’ popular Custom Dream Home program – a new construction alternative for homebuyers and an avenue for sellers to trade up to a new custom home.
Atlanta Agent (AA): A recent study of housing affordability found that among large metro areas, Atlanta’s housing stock requires the lowest median salary for single-family homes; how important is Atlanta’s affordability, for its marketplace?
Mikel Murphy (MM): The thing with Atlanta is, a lot of the data gets skewed here. So if someone looks at the average sales price of a home, it’s below $200,000, but if you take the top 15 or 20 neighborhoods in Atlanta, the average sale price is $400,000 to $500,000; it just depends on what neighborhood you’re in. The numbers are quite deceiving.
Still, if I took a home in a Morningside, a Buckhead and a Brook Haven, and I took my clients to Chicago, New York and LA, we are easily 50 to 60 percent less expensive for the same size house. Prices, though, have been trending up, but for a particular reason. Right now, both nationally and locally, we have a huge lack of inventory. That has driven prices up, as a supply and demand curve, and a lot of what you’ve seen in the last 12 to 18 months is purely because of lack of inventory.
AA: We recently looked at how the selling price of newly built single-family homes has increased in recent years. Have you observed a similar trend in Atlanta new construction? If not, what other trends are you seeing in the new home market?
MM: Sizes are coming down; people are getting smarter. They want smaller houses. So the person who may have bought 6,000 square feet six years ago is telling me, “I never needed the space, but money was cheap back then.” And it was – with interest-only loans, the payments were very low.
Nowadays, at any given time, I’ve got 20 custom homes out of the ground, and our average square footage is between 2,800 and 3,500 square feet. That used to easily have been 3,500 to 5,500. People don’t want to sacrifice bells and whistles, but they don’t need all that space that they never used. I sold people houses that they never even finished furnishing. It’s all about clients not wanting to pay for something that they’re not going to use.
Again, the biggest change in the process is, six years ago, they didn’t have to put money down. There were interest-only loans, or they only needed to put 5 percent down. Now, it’s a minimum of 20 percent down, so it is changing their mindset down of, “Wow, I now have to put down all this money, how do I keep this in my budget?” Well, guess what, if you want to live in Virginia-Highland on a prime lot, we’re going to have to shrink the square footage.
In doing so, I’ve had the city’s best architects offer homes with better designs and more open floor plans, so I can make 3,000 or 2,800 square feet live like 4,000 square feet. We quickly make the client realize that they never needed 4,000 square feet. For instance, we get rid of formal dining rooms that never get used. Or big landings at the tops of stairways. Or kid’s rooms that were the size of master suites.
AA: Finally, is there anything in the broader Atlanta housing market that you’re keeping tabs on, as the 2014 market takes shape?
MM: I’ve been in this business for 20 years, but prior to that I was an options and futures trader, so I watch the underlying things. People don’t realize that the bond market and the stock market truly drive a lot of what happens in the housing market. The bond market, for instance, is going to tell us where interest rates go. I also watch the Fed, and whether their policies will cause rates to increase. Now, I don’t think rates are going to go up, because we also have to look at unemployment, which remains high.
Everybody just wants to watch the real estate market and think, “Hey, everything is great! People are just going to buy houses.” But again, there are these underlying things that are actually forming the market. All we’ve done over the last four years is clean up inventory. So for the last two years, you have all these Realtors that have gotten back in the market, and they think everything is great, when really, they’ve simply hit a supply and demand curve, where everybody bailed on their houses – and who doesn’t want a house that’s 50 cents on the dollar?
But now that we’ve cleared all that up, the market’s gotten a bit tougher. Realtors no longer have tons of listings to pile on. Buyers are flying around, and they can’t find them houses. That’s why we’re building so many houses right now, because I can built a custom home for someone at the same price that they can buy a re-sale.
Ideally, what we’d like to see for the next 24 months is for the market to hold its own and stay steady. We can’t go up in price anymore. It’s gone up too far and too fast. At the end of the day, people forget that the house is only worth what someone is willing to pay for it. Not what I think or what an appraiser thinks, or what another Realtor or builder thinks.