Category: Market Observations
Posted: 8/20/2012
Major Buying Opportunity!
By John Dixon

The local Chamber of Commerce may not have been thrilled when the S&P/Case-Shiller Index pointed out that Atlanta was the only city in its 20-city composite with a double-digit negative annual return on home prices, but real estate investors should welcome the news.

 That’s because, as I’ve pointed out an number of times in this blog, the real fortunes are made by buying when properties are undervalued. And right now, home prices in Atlanta are lagging those in other cities covered by the respected index. The latest numbers show that Atlanta posted a negative return of -14.5% versus May 2011. And that came in a month in which 17 of the 20 cities posted increases in annual returns.

The ideal environment for any investment is one in which assets are underpriced relative to their true value. Sooner or later, other buyers will identify the values and start buying, resulting in significant profits for the investors who got in early. Investors especially like it when they identify a pocket of value once the overall market has begun to turn.

Atlanta is in precisely that position right now. Take a look at the chart, which shows the rate of change vs. 12 months earlier for Atlanta and the composite. Note that both Atlanta and the 20 cities are already in a well established upward trend, beginning around January. Prices in both are clearly improving, but Atlanta just started "deeper in the hole."

As an investor, that to me screams "value!"

 
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