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Introducing The Cal-Culator: Atlanta Residential Real Estate Index

Welcome to the Cal-Culator! Each month we’ll post our Cal-Culator number after considering a variety of factors that include information about home buying, mortgages and building activity in metro Atlanta, as well as the national economy.

This month our Cal-Culator number is 5.1. For comparison’s sake, in July 2007 when Atlanta home prices were at their peak, the Cal-Culator would have been a 9. About 18 months ago in March 2012, the Cal-Culator would have been a 1.5. That’s the month that BusinessInsider.com among others wrote that Atlanta has the worst housing market in the country.

Thankfully, many factors have improved considerably, with trends pointing in a positive direction and the Atlanta housing market continuing to gain momentum.

To determine the Cal-Culator number we take a look at the following:

• The national average of mortgage rates

• Mortgage rates trends

• Mortgage volume

• Mortgage volume trends

• Single-family housing starts

• The inventory of available homes in Atlanta

• The S&P/Case-Shiller Home Price Indices

• The overall health of the economy in Atlanta, and in the U.S.

• Consumer confidence

The national average for mortgage rates is on the rise, with the average for a 30-year at 4.58 percent last week. Rates have risen a full point since May.

For the trends in mortgage rates, we look at the Bankrate.com Rate Trend Index. Each week experts in the mortgage industry and Bankrate analysts predict where mortgage rates are headed. For the week of August 22, 50 percent of the panel predicted they would go up in the following week; 17 percent predicted they would go down; 33 percent predicted they would remain unchanged.

Each month economists at the Mortgage Bankers Association (MBA) release commentary on the current economic climate and insights on how trends affect mortgage markets. The most recent commentary shows predictions of a volume of $606 billion in the second half of the year, up from the $527 billion it forecast at the beginning of 2013, but down from $976 billion during the first half.

Another factor we consider for the Cal-Culator is the volume of mortgage loan applications. For that information, we use the Market Composite Index from the MBA’s Weekly Mortgage Applications Survey. On a seasonally adjusted basis, the mortgage loan application volume decreased 4.6 percent from one week earlier, as reported on August 21.

To determine single-family housing starts and inventory we gather data from Metrostudy, a provider of primary and secondary market information to housing and related industries. Atlanta showed an encouraging turnaround in the second quarter of 2013, with construction doubling in some counties over the same period in 2012. Metrostudy economist Eugene James said, “The second-quarter of ’13 starts are up 77 percent from a year ago. That’s a big number.

Inventory remains low, with properties for sale through MLS at a 3.6-month supply. The median sales price for new homes rose in the second quarter, to $271,500 from $259,900 a year earlier.

The S&P Case-Shiller Home Price Indices is the leading measure of U.S. home prices and Atlanta is one of the markets it specifically addresses. Home prices continue to strengthen and Atlanta showed a monthly gain in May (the latest figures available) of 3.4 percent, the first time it has gone over 3 percent.

The overall health of the economy is important for the Cal-Culator and for that information we look at figures from the Conference Board Leading Economic Index (LEI) for the U.S. Last week the LEI showed an increase of 0.6 percent to 96. (2004 = 100) “The improvement in the LEI, and pick up in the six-month growth rate, suggest better economic and job growth in the second half of 2013,” said Ken Goldstein, Economist at The Conference Board.

For information about Atlanta, we use the On Numbers Economic Index from The Business Journals, publisher of The Atlanta Business Chronicle. This index measures the relative vitality of 102 major metropolitan areas with populations of more than 500,000, and Atlanta came in 65 out of 102. “Recent employment numbers suggest metro Atlanta’s job growth is sustaining momentum,” wrote Douglas Sams, Commercial Real Estate Editor for the Atlanta Business Chronicle. In June metro Atlanta added 10,000 jobs.

For information on consumer confidence, a critical component in the recovery of the housing market, we turn to the Conference Board Consumer Confidence Index® that releases a monthly Consumer Confidence Survey® based on information gathered by Nielsen. The Conference Board reports that confidence fell slightly in June but is still well above levels a year ago. “Overall, indications are that the economy is strengthening and may even gain some momentum in the months ahead,” said Lynn Franco, Director of Economic Indicators at The Conference Board.

We hope you find The Cal-Culator helpful as an indication of the health of the Atlanta residential real estate market. Let’s hope the news continues to trend in a positive way.


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