I have received a good number of inquiries into the large decline in home prices for Atlanta. According to the latest S&P/Case-Shiller Home Price Indices report, home values in Atlanta fell 5% from September to October and 11.7% from October 2010 to October 2011.
Taking a closer look at Fiserv’s real estate transaction data for Atlanta, I determined that there was a significant increase in the sales volume of bank-owned properties in August, September and October in the Atlanta metro area. (Note: I looked at individual transaction counts, not repeat sale pair counts; however, I expect that the number of pairs with bank-owned sales as the 2nd transaction increased proportionally with the increase in individual bank-owned sales transactions.)
Changes in the volume of bank-owned sales can cause changes in average prices that will be reflected in the S&P/Case-Shiller Home Price Indexes. And, if bank-owned sales are concentrated within one price segment (e.g., low-priced homes), shifts in bank-owned sales volumes can cause the S&P/Case-Shiller indexes to shift relative to the aggregate indexes. During the housing bubble collapse, in many metro area markets, the proportions of bank-owned sales vs. all sales have fluctuated substantially over time (but not consistently across different metro areas). Bank-owned sales volumes also tend to drop less in winter months (than regular sales volumes), so their proportion of total sales often increases from October through March, leading to larger seasonal swings in the S&P/Case-Shiller Home Price Indices in markets with large numbers of foreclosed properties.
Atlanta non-REO sales volumes also increased in August and September, but on a smaller percentage basis than REO sales. Consequently, the proportion of REO sales increased. Changes in the REO proportion of sales have been causing fluctuations in average prices in many markets, especially those with large foreclosure inventories.
I remain uncertain as to why REO and non-REO sales volumes spiked in August and September. This is not the typical seasonal pattern in Atlanta – in previous years, sales volumes tended to peak in July. It is certainly not out of the realm of possibilities that potential homebuyers (including investors) are jumping into the market to try to catch prices near a bottom.