Thread: Augusta, GA Housing Market (Evans)

**********THIS IS A MUST READ IF YOU WOULD LIKE TO GAIN A BETTER UNDERSTANDING OF THE AUGUSTA, GA REAL ESTATE MARKET**********

Augusta Housing Market Trends (Where are we going?)

Regression: What does it really mean?

In probability and statistics, regression to the mean describes the tendency for things to return to normal, whatever it is that normal might be. In the case of housing, a regression to the mean would imply a return to long established price trends based on historical levels of appreciation.
Regression to the mean is something that many homeowners and homebuyers are likely to learn about in the years ahead since most things behave this way. Despite the best efforts of homebuilders and originators of mortgage credit, housing is not likely to be an exception.
Back to the long-term trend, not to the normal rate of change
Regression to the mean does not imply a return to a normal rate of change, but rather, a return to the long-term trend - what would be expected as an end result years from now given historical averages.
So, for example, if the average annual appreciation for real estate in a particular area is one to two percent, and a few years of ten or twenty percent appreciation occur, a regression to the mean implies a return to the long-term trend that was in place before the rapid price increases.

What does this mean for the Augusta Housing Market?

It is well documented that the Augusta Housing Market has experienced roughly a 40% appreciation over the last five years.

Prior to that growth period, annual price appreciation was somewhat flat and depending on the market conditions, the average appreciation was about 1-2% a year.

Using the year 2002 as our base year (the starting point of the rapid appreciation) you would add 1-2% home appreciation for five years to determine the historic norm for that property.

Before the Augusta, GA Market can return to state of normalcy, 2007/08 prices would need to fall between 25-32% to return the Augusta, GA Housing Market to its historic price norm.

The question is how long will it take before it returns to the norm?

As we have seen in earlier examples, and there a plenty of more, existing homeowners are starting to move prices towards the historic mean. Homebuilders are trying very hard to resist the downward pressure, but over time they will succumb to the market forces.

Buyers do your homework!

If you want to see a good example of this theory in practice, it can be found in several area Augusta neighborhoods.

Recently, a homeowner purchased a presale home (contracted at the height of the Augusta 2007 price appreciation) for around $345K, a similar home in the same neighborhood (just 2 years old) with similar amenities, in great condition, but 150 sq ft smaller sold for around $260K.

Why the big difference?

Although the smaller square footage would account for some of the price discrepancy, the first house was purchased at the very top of the price appreciation furthest from the historic mean, while the second home was purchased a two years before the top of the market and then was discounted nearly 20% so it could return to its historic price mean.

Understanding this principle could save you tens of thousands of dollars (depending on the price of your home)!

In the Augusta, GA Housing Market:

- New homes are priced 25-35% above the historic mean

- Existing homes tend to be 20-25% above the historic mean (although there are some homeowners that have priced their home above these percentages)

$30K off a house in the newer part of the Evans area is common, but you will need to go lower if you plan not to lose any money.

Good Luck!

Is the Augusta, GA real estate market declining?

Overwhelming evidence suggests, yes, without a doubt!

- Record High Inventory (12 months)
- Increased DOMs (110+ days)
- Numerous Incentives ($5K - $15K)
- Reduced Prices (10%)
- Decreased Sales
- Few Qualified Buyers

Will the Augusta, GA real estate market continue to decline?

Again, overwhelming evidence suggests, yes, without a doubt!

[COLOR=#333333][FONT=Verdana]- All national government and business experts confirm this
- Even the NAR confirms the decline will continue
- Regional estimates suggest a decline
- MarketPredictor.Com calls for a 5% for the Augusta Market in 08
- All analyst

Augusta, GA Housing Market (Trends/Condition/Current Status)

(The Real Story)

The real question is: What is going on in the Augusta Housing Market?

After researching newspaper articles, blogs, home sales records, and discussions with buyers, sellers, and people in the real estate and mortgage fields, the evidence points to the following conclusion:

Everything is cyclical; what goes up must go down!

From political leaders to sports team to the stock market and the Augusta Real Estate Market is no different.

[FONT=Verdana]To fully understand today

A recent CNN Money has a great article on the housing crisis.

The article claims that the crisis is becoming critical.

The FEDS predict that the current housing crisis could be longer and the recovery more anemic than experienced during previous downturns.

[FONT=Verdana]These guys have good insight in the country

Where are we Today?

Facts:

Augusta, GA home prices appreciated 40% from 2002 to 2007 (30% above the historic price norm).

Based on my crude calculations, home selling prices have declined 8-12% (this does not include seller incentive, no one reports on this information).

This means that Augusta home have a selling price (not listed price) 18-22% above their historic price norm.

Augusta, GA home inventory is the highest it has been since they started keeping records (over 12 months of inventory on-hand).

Home sales in this area have declined (depending on the area) 15-30%.

This market is midway through the More Prices Cuts Phase of a typical declining housing market and there is no evidence to support that this market is anywhere near a price bottom.

Currently, renting is clearly more cost effective and involves less financial risk than purchasing a home in this market.

Projections:

Home prices will continue to decline for 2-3 years (and based on previous declines the prices may fall below the historic price norm), followed by a long period of neutral growth.

Mortgage rates will stay in the 5.5-6.5% range for the near term.

Local inventory and days are the market will continue to increase.

A number of local builders will go out of business (there goes your house warranty).

Many sellers that purchased during the appreciation period, we attempt to lease their property (this is already happening).

Buyers will be able to buy new homes for less than existing homes (we are starting to see evidence of this trend).

[I][FONT=Verdana]Unless your time horizon allows you to live in a home 8-10 years or you can purchase a house near the market

Homes are biggest bargain since 2004

Falling prices opened up home buying for many more Americans.


Two and half years into the housing crisis and big price declines of 20-35%, home buying is starting to pick-up in CA.

For comparison, Augusta, GA is only 8 months into its decline with a 10% price decline (not including seller incentives).

With another 10% decline, we could see a spike in home buying in the area. I believe we will continue to see some small ups and downs (with respect to monthly sales), but the overall sales trend will be below last year and the price trend will continue to move toward the historic price mean for this area.

Keep doing your homework!

Does anyone else have any thoughts concerning this subject?

No. BRs Feb-Apr '08 Nov '07-Jan '08 Feb-Apr '07 Feb-Apr '03


2 bedrooms 6 9 10 3

3 bedrooms 26 25 48 65

4 bedrooms 18 34 50 67

all 56 76 116 154


That's the sales number at Evans. The price will come down when sales are slow. April is supposed to be a good season. The number for Jan to March 2008 is 71, and Feb to April is 56, so we have 15 less sales in April than in Jan!!

With the sales number declining fast, we will see the prices will drop fast, more than 10%. Especially with the house foreclosure in Florida, people who retires can buy now in Florida rather than in Augusta. My co-worker is now thinking about his retirement home in FL, not Augusta anymore.

Samqx,

Thanks for your input.

I did notice that Augusta, GA did not do well in the recent most affordable housing market index.

I agree, the sales numbers do not look good, but the local market still suffers from many sellers in denial.

A number of sellers are trying to rent their homes.

It will take 4-5 months before all the local sellers in denial understand that a big price decrease is necessary if they wish to sell their homes.

If the home owners did not purchase their home before 2003, they may take a loss. Owners that purchased homes during 2005, 06, early 07 will most likely take a serious loss!

Good Luck!

What are the numbers telling us?
A high-end Evans neighborhood sold for 98% of the listing price.

Is this a hot market or what?

[FONT=Verdana]Let

Market Transactions
More Market Transactions
[COLOR=black][FONT=Verdana]Market Conditions in Augusta, GA

Recently an Augusta (Evans Gated Community) Home sold for 95% of its asking price.

That sounds good; this must be a strong market.

Maybe not, let us look at the history of this property and the details of this transaction.

- The house had been on the market for nearly 7 months.

- Based on the home