Much like in Phoenix, the Atlanta housing market was hit hard by the foreclosure crisis. And like Phoenix, it saw huge interest from investors looking to buy distressed properties and turn them around as rentals.
Home sales in July were 2.5 percent lower than June, and 4.9 percent lower than July 2013, according to the Atlanta Board of Realtors.
"Overall, market conditions continue to remain favorable for a sustained and healthy real estate market in greater Atlanta. Median sales price and total home sales continue to hover at recent highs and inventory continues to rise," said ABR President Todd Emerson.
Home prices were 10 percent higher in June, the latest data available, than they were a year ago. This includes sales of distressed properties. As the number of homes for sale continues to rise, Atlanta should see more sales.
The month's supply of available inventory is now at 4.4 months, which is still tight, but closer to what is considered a balanced market. Potential home sellers in Atlanta are still plagued with an inordinately high rate of negative equity. Nearly 29 percent of Atlanta borrowers owe more on their mortgages than their homes are currently worth, according to Zillow.
"Although we still have a considerable amount of negative equity owners, the number of Atlantans that are upside down in their properties has drastically declined from 44 percent in 2013 to 28.9 percent in today's market," said Adesola Badon, a real estate agent with Berkshire Hathaway. "In my opinion the market is still doing well. I estimate that we will continue doing well as long as lending is stable, jobs are available, and new build inventory continues to release into the marketplace."
The Atlanta market continues to see one of the nation's highest shares of foreclosure auctions. More than 3 percent of Atlanta home sales in July were at foreclosure auctions, according to a new report from RealtyTrac. Investors in distressed properties began moving to the Atlanta market in 2013, after buying up thousands of properties in Phoenix and Las Vegas. The increase in investors activity has helped to push Atlanta home prices higher, much like they did in the West.
—By CNBC's Diana Olick.