MarketNsight provides a timely snapshot of the Southeast and Atlanta housing markets, revealing that pending sales have climbed steadily since late February, rising an average of 9% through the end of March as rates have declined.
Supply and Demand
Months of Supply increased sharply to 3.8 in March from 3.4 in February. March total inventory was up 53% year-over-year. The majority of the increase in total inventory was from existing homes, as current homeowners re-enter the market as the “lock-in” effect starts to fade. This will result in more competition for new homes. That said, Atlanta needs an additional 30,000 units of inventory annually just to return to equilibrium.
What About Price?
For the year-to-date 2025, prices are up 3% (after being up 6% for the year in 2024). March 2025 prices are up 32% over March 2021, up 56% over March 2020 and up 65% over March 2019.
How Do We Build Homes in the $350,000s?
Today’s “starter” home price is considered anything in the mid $300,000s. Can home builders hit that price today? There have been several national articles proclaiming that builders are selling smaller homes as a way to mitigate price. MarketNsight has detailed, accurate square footage data for its 49 markets.
Are We Actually Building Smaller Homes?
Some markets are building smaller homes, but not Atlanta. In the Atlanta metro area, new home prices have increased 42% over the last 5 years, while price per square foot has increased 33%. Instead of dropping, average square footage increased 7% over the same period in Atlanta.
The average new home price in Atlanta was $493,954 in 2024. In order to sell a $350,000 home at the current PPSF of $223.47, the home needs to be 1,566 square feet. That means average square footage would need to drop 30%. A 1,566-square-foot product could take many forms.
“This could be a townhome, a duplex, a quad, or a mansion apartment…. you know, missing middle,” comments John Hunt, Principal and Chief Analyst with MarketNsight.
What About Lot Prices in Atlanta?
Lot prices in Atlanta have more than doubled in the last 6 years: from an average of $52,770 in 2018 to an average of $108,138 in 2024. The lot residual has increased from 16% in 2018 to 22% in 2024. This dramatic increase in lot price is due to many factors, but most of the increase can be blamed on multiple layers of onerous regulation.
What Lot Price Would Yield a Home in the Mid $300,000s?
At a 22% lot residual, lot prices would need to be $77,000, meaning they would need to drop almost 30% from the current $108,138. There is very little chance of that actually happening. MarketNsight concludes that building smaller homes is the only way to mitigate price in this environment.
MarketNsight 2024 Report Card and 2025 Permit Forecast
In February of 2024, MarketNsight was on record predicting that Atlanta permits would be up 6% in 2024. The actual increase in permits for 2024 was 10%.
Hunt comments, “We do not mind being wrong, especially when we are wrong in the right direction! For 2025, we forecast another 10% increase in permits for Atlanta.”
Weathering Current Storms
These are uncertain times, to be sure. But so was 2020, when the market experienced a once-in-a-hundred-year pandemic. And so was 2022, when the Federal Reserve raised rates at the fastest pace in history to 23-year highs. If, as some are predicting, job growth begins to soften, that will probably lead to lower mortgage rates. MarketNsight agrees with Lawrence Yun, the Chief Economist for NAR, who has pointed out the following: “The influence of lower rates generally outweighs job losses in most economic recessions. A solid majority of Americans are not impacted from recession and they respond to mortgage rates.”
