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A threat to recovery? The major trend challenging Atlanta’s housing market

by Peter Thomas Ricci

atlanta-skyline-night

This year has been a very positive one for Metro Atlanta’s real estate market: there have been 38,585 home sales thus far, a 7 percent increase over 2015; median sales price is up 8.52 percent to $242,000; and negative equity inventory has fallen more than 43 percent.

Those have all been welcome developments for the local market, but they have all occurred amidst an overarching trend that could spell trouble for the market’s future – home prices continue to rise far faster than wages, and as a result, fewer and fewer residents can afford to buy homes.

That unfortunate reality came courtesy of ATTOM Data Solutions’ Q3 2016 Home Affordability Index. Below, we have created three charts from ATTOM’s findings to better explain the problem:

1. Year-over-year changes

As our first chart demonstrates, in all but two of Metro Atlanta’s 10 most populous counties, home prices have risen faster than wages in the last year, with Cherokee County – where prices are up 20 times that of wages – being the most extreme case:

County Q3 Median Sales Price YOY Change – Median Price YOY Change – Avg Weekly Wage
Cherokee $214,000 12% 0.6%
Cobb $225,000 8% -0.8%
Coweta $182,000 6% 0.4%
Dekalb $170,000 -3% 1.8%
Fayette $264,500 6% -1%
Forsyth $285,000 8% -2.7%
Fulton $269,000 8% 3.7%
Gwinnett $203,000 10% -0.7%
Henry $149,900 4% -2%
Paulding $147,000 3% 4.1%

2. Post-bubble changes

Beyond the last year, the price/wage trend is even more alarming. Our chart below compares how much prices have risen in Metro Atlanta’s counties since hitting their respective bottom to how wages have risen in that same time span – in markets like Fayette, prices have outpaced wages by 14 times.

County Pct Change in Median Sales Price since Bottoming Pct Change in Annual Wage since Bottoming
Cherokee 65% 7%
Cobb 89% 6%
Dekalb 124% 5%
Fayette 237% 17%
Forsyth 65% 6%
Fulton 124% 11%
Gwinnett 108% 5%
Henry 74% 5%
Paulding 86% 8%

3. Historical changes

In perhaps the most alarming trend of all, in all but one of Metro Atlanta’s counties, homes are now more expensive than their historical averages. As our chart below shows, only in Paulding is the percent of average wages needed to buy less than the historic percent:

County Pct of Avg Wages to Buy Historic Pct of Wages to Buy
Cherokee 41.7% 40.8%
Cobb 30.6% 29.7%
Coweta 35.9% 35.6%
Dekalb 24.1% 22.7%
Fayette 49.6% 45.0%
Forsyth 44.7% 44.5%
Fulton 28.5% 24.8%
Gwinnett 30.0% 28.5%
Henry 31.6% 31.1%
Paulding 32.4% 33.6%

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