2022 didn’t end with a bang, but it also wasn’t a whimper, either. Home prices rose in the fourth quarter compared to this time last year, albeit at a slower pace. Cobb County’s housing market has been on a tear since the pandemic started, but the numbers are now reflecting a market that’s balancing out amid reduced demand and rising interest rates.
It’s also normal for housing demand to drop at the end of the year. Back-to-back holidays, kids going back to school, and the weather all play a role in many potential buyers choosing to stay put through Q4.
Another key influence in the real estate market this year was interest rates. The Fed consistently raised rates in 2022 in an effort to curb inflation. There’s preliminary data surfacing that the hikes might be having their desired effect, but there’s no doubt that rising interest rates have spooked buyers enough to cause a decline in the number of homes sold in Cobb County.
Let’s take a look at Cobb County’s housing market’s fourth quarter performance and what clues it may give us for the future.
The Median Sold Price
The median home price in Cobb County held fairly steady at a respectable $414,000. The Q3 median home sale price was $435,000, so Q4 was slightly depressed in comparison. But keep in mind that this cool down is to be expected, especially given how sharply home prices rose in the first half of the year.
The year-over-year chart, on the other hand, tells a rosier story for sellers. The median sold price in Q4 of 2021 was $400,000 – meaning prices have risen modestly by 3.5% since last year. This pales in comparison to the multi-digit increases that were realized during the height of the pandemic, however, it does show that sellers are still in a strong position to fetch decently high prices for their homes.
Even more encouraging is the continuing trend of rising home prices in Cobb County over the last few years. The median sales price just four years ago in Q4 of 2018 was $275,000.
Number of Homes Sold
The number of Cobb County homes sold in Q4 was 1,578. Conversely, the number of homes sold in Q3 was 2,436. This 858 unit difference translates to a 35% decrease in the number of homes sold in a roughly six month span of time.
Several factors are likely contributing to this retreat. Skyrocketing home prices were driven largely by buyers flush with cash during the pandemic buying spree. Now, liquid savings seem to be drying up and buyers are relying more on loans to finance their home purchases. Furthermore, the sheer number of people who bought homes since the start of 2020 may very well have reduced the buyer pool. In other words, demand is cooling because many people who wanted to purchase homes have already done so.
Number of Days on Market
As we predicted in our Q3 report, homes did in fact stay on the market for an extended period of time in Q4. The median number of days on the market for Cobb County homes in the fourth quarter was 17. This is an upward shift of 88% since Q3, in which homes spent only nine days on the market. Homes spending more time on the market is a function of reduced demand and comparatively higher interest rates. Sellers should most likely be prepared for this trend to continue throughout 2023, even if inventory remains low.
While that’s a fairly sizable quarter-to-quarter jump, it’s still not quite as drastic as the year-over-year increase for Q4. Homes spend just one week on the market in the fourth quarter of 2021. The median time homes spend on the market is increasing, yet the Q4 results for 2022 are still considerably below the 2019 high of 23 days.
In Cobb County, 30-year fixed mortgages are at 6.22%, and 15-year fixed mortgages are slightly lower at 5.49% at the time of this writing. These rates are fairly high when compared to the sub-3% loans many buyers were able to snag just a few years ago, but they’re not nearly as painful as the rates buyers endured several decades ago. In another bright spot, the fourth quarter mortgage rates for Cobb County were also marginally lower than they were in the third quarter.
The Fed didn’t hesitate to hike up interest rates throughout 2022. By the end of December, the effective federal funds rate was hovering between 4.25% and 4.50%, with two increases in the fourth quarter alone. It’s still an open question as to how often and how much the Federal Reserve will raise rates in 2023, but both buyers and sellers can expect continued discomfort if additional increases come to fruition.
2023 Market Outlook
The uncertainty around the economy continues to influence the real estate market. Although a recession is still entirely possible, economists and market analysts are increasingly eyeing a “soft landing” – which is the term for a situation where the economy contracts, but doesn’t decline to the point of triggering a recession. Needless to say, both a recession or additional rate hike would each contribute to further declines in prices and homes spending longer on the market.
Speaking of rates, buyers have shown wariness of signing on the dotted line with ever-climbing interest rates ballooning their mortgage payments. With some experts and analysts projecting continued – but smaller – rate hikes in 2023, it’s fair to assume housing demand could take an even deeper dive.
Even if fewer people are moving around, areas such as Cobb County are proving to be highly desired places to plant roots. Millennials are flocking to the Southeast in droves to take advantage of the job opportunities, warmer weather, and sprawling suburbs.
All things considered, buyers can look forward to the prospect of an economy that escapes disaster, and sellers should appreciate the influx of buyers looking to make Cobb County home.