Am I paying too much?

I have been asked the question many times over the last couple of years – “Am I paying more than this house is worth?”

According to First Multiple Listing Service (FMLS), across the Greater Atlanta area, the median sales price in January of 2020 was $262,000.  In June of 2022, it reached $432,055.  Then the Fed’s increase in interest rates seemed to make an impact on the market.  By January of this year, the median price had dropped to $375,000 with a slight uptick in February to $385,000.

But none of this is due to just one cause, such as interest rates.  Over the last few years we have seen a pandemic, shut-downs of schools and businesses with a rise in remote working, supply chain disruptions, and the reverberating effects of foreign wars and domestic politics.  Possibly most significant is the lingering aftershock of the crisis of 2008, which stopped home construction cold for several years.  Inventory has not caught up to demand, and most projections show that it will not for several more years.

In the greater Atlanta area, we have a different challenge in housing than other cities whose population is stable or declining.  People are flocking to metro Atlanta, putting pressure on the demand side of the equation.  Also, while most of the rest of the country experienced a similar increase in home prices in recent years and might experience a decline as we slowly return to a more balanced market, Atlanta-area homes have for decades been significantly more affordable than homes in similarly-sized metropolitan areas.  Our price inflation may be a long-overdue correction, as opposed to a bubble that is bound to burst.

So what is the answer to that question – “Am I paying too much?”

First, no one can predict the future.  Don’t trust anyone who says they can guarantee you will turn a profit when you re-sell at a later date.  Our country has experienced plenty of economic downturns as well as upswings, and timing is everything.  But we can take some reassurance in the fact that over the long run of history, real estate values have gone up.  Home ownership is a solid investment.  In fact, it is the primary way most American families accumulate wealth.

Home ownership is a good bet in uncertain times.  As a real estate agent, I am relieved that we seem to have left behind the bidding wars of 2021 and 2022.  But as long as demand exceeds supply, the price it takes to get a house under contract may exceed the property’s present value.

Maybe it is better to ask – “What is this home worth?”

When you consider price as the cost of admission to building equity in something you own and can enjoy every day, home prices today are still a good deal.