Atlanta real estate is still struggling to find bottom

AJC reporter Michelle Shaw has a piece in today’s paper which relays the latest grim news about Atlanta’s real estate market. The headline sums it up well, “Metro home prices, sales plunge”.

The article says that single family home sales for October were down 10.6% from last year and that in the first six months of the year foreclosures were 23% of sales in the Atlanta metro area. Ms. Shaw does a good job of painting a realistic picture so you should read the whole thing: http://bit.ly/eBp8FT

Some of the people interviewed even hint that real estate is in a cycle of deflation. Deflation means that buyers are holding off on purchases because they expect prices to fall and then because the buyers are holding out, the sellers are forced to lower prices. Deflation sounds good for buyers but it can be a stubborn, self fulfilling prophecy with devastating long term consequences. At first the lower prices would be good for buyers. But eventually the constant decrease in prices would be devastating to homeowners, banks and businesses. Eventually the new home buyers would find themselves suffering from lower wages that were brought on by the same deflation they had earlier welcomed.

A fear of that deflationary cycle explains why the federal reserve has decided to pump money into the economy even though food, gas and other necessities are already going up in price. Printing more money is going to make inflation worse but the fed seems more concerned about real estate deflation than they are about overall inflation.

Real Estate will rebound. It’s just a matter of time. But the market still has to hit bottom before we can have a real recovery and unfortunately there just isn’t any evidence that we have hit bottom yet.

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