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Low inventory has housing values inching upward

Real estate professionals in Rockdale and Newton counties are finding that home prices are beginning to climb due to limited inventory on the market, creating bidding wars among potential buyers. At the same time, many banks are selling foreclosed properties in bulk to investors who are renting them out with plans to sell them in a few years. Special Photo

Real estate professionals in Rockdale and Newton counties are finding that home prices are beginning to climb due to limited inventory on the market, creating bidding wars among potential buyers. At the same time, many banks are selling foreclosed properties in bulk to investors who are renting them out with plans to sell them in a few years. Special Photo

COVINGTON — A limited number of homes on the real estate market is contributing to a bidding war that has resulted in a slight increase in home prices in Rockdale and Newton counties.

That’s the opinion of local real estate professionals who agree with a recent report that home prices in metro Atlanta are on the rise.

“We are seeing that home values are up over the last year in Rockdale, Newton and Walton counties,” said Scott Alexander, an associate broker with The Marshall Ginn Team, RE/MAX Agents Realty in Covington.

Recently, the Standard & Poor’s/Case-Shiller Home Price Indices reported that home prices in metro Atlanta were up 19.1 percent over March 2012. This was higher than the national 10.2 percent increase in home prices. Phoenix, Ariz., showed the biggest gain among cities with a 22.5 percent increase, followed by San Francisco with 22.2 percent and Las Vegas with 20.6 percent.

Locally, real estate professionals are likewise seeing a growth trend, although not as steep as the nearly 20 percent seen around metro Atlanta.

“We’re not seeing quite that good in any one area, but we have seen some places with prices 10 to 12 percent over where they were a year ago,” Alexander said.

The main reason, he said, is basic economics: supply and demand.

“We have low inventory right now and there are plenty of buyers because interest rates are still good, so we are seeing more bidding wars on property, especially on bank-owned property,” he said.

He said in some instances, three or four people are bidding on one property, which is driving up the price.

“People are seeing the housing market as busier and the competition is definitely a good thing,” Alexander said. “But we are by no means a seller’s market yet.”

The primary reason for that is the appraisals on these same properties are still low.

“Sellers are getting higher prices on their contracts, but the appraisals from the banks are so low that they can’t sell,” said Tonya Bullard with Pinnacle Realtors Inc.

Bullard, who has been in the real estate business since 1998, said the good news is that the houses that are on the market are selling. On the other hand, there isn’t a lot of inventory to be bought.

According to Alexander, in 2005 to 2007, more than 2,600 homes were on the market in Newton County. Currently, there are about 415 homes available for sale. He estimated that 1,000 to 1,100 listings would be needed for a more balanced market in the county.

Rockdale County has 338 active listings compared to its high of 1,784 in 2007. Alexander said having 700 or more homes on the market would bring better balance to the Rockdale County housing market.

One theory behind the low inventory numbers is that many banks are holding on to the properties they own and very slowly moving them into the market in an effort to keep prices higher.

“I don’t know for sure, but I think it’s smart if banks release their properties a little at a time because you don’t want to flood the market with too many properties,” Bullard said. “If they released them all, the market would be like it was a year ago — at rock bottom.”

Alexander agreed.

“Shadow inventory,” as he called it, is properties that have foreclosed and are sitting in limbo before being put on the open market. Many of these homes, Alexander said, never wind up on the open market because they are sold on the courthouse steps at auction, usually to large investors.

“There’s no way of knowing what the banks are doing, but one thing we do know is that there are a lot of investors buying properties right now and banks are selling their properties in bulk, at 10 or 20 at a time,” he said, adding that many of these investors are buying the homes, often sight unseen, with plans to rent them out for about five years and then sell them.

While older homes are moving more easily right now, the rate of new construction has not yet caught up.

According to figures from the Newton County Department of Development Services, 10 new residential building permits were issued in 2012, down from 25 new permits in 2011 and 1,984 in 2002. As of June 24, 10 new residential permits have been issued in Newton County in 2013.

A similar picture can be seen in Rockdale. Based on figures from the Planning and Development Department, 27 new single-family building permits were issued in 2012, with 13 of those by May 2012. As of May 2013, 14 new single-family building permits have been issued in Rockdale County.

“There’s been a little bit of building in Rockdale County, but not much,” Alexander said. “We’ve been hovering at about 400 homes for sale in Newton County for about five months. It’s all supply and demand.”