Clearer Skies on Horizon

Housing market: With its robust growth rate, Atlanta is set

to bounce back sooner, stronger than many areas.

By Seth Weissman, Dan Forsman

For the Journal-Constitution

Published on: 04/14/08

The reports of the demise of Atlanta's housing market have been greatly exaggerated.

The much publicized housing bubble was never more than a small bump here in Atlanta.

In parts of Florida, California and Nevada, housing prices doubled and tripled between

2001 and 2006. During the same period, home prices in Atlanta increased a slightly

higher than normal 4 percent to 5 percent per year. Price increases in other parts of the

country were unsustainable, and what went up eventually came down. Not surprisingly,

where prices went up the most, they also came down the most. For all the bad press about

housing, home prices in the Atlanta region fell less than 5 percent over the last year.

While fear and uncertainty have caused the number of overall home sales to fall sharply

in Atlanta and around the country, home prices here have not fallen anywhere near as

much. This is because while housing is a commodity, it is also a place where people live.

The majority of home moves are discretionary. If the market is unfavorable, discretionary

buyers and sellers sit on the sidelines. This can cause a decline in the number of homes

sold without having much of an effect on prices.

Home prices in the Atlanta region are somewhat immune to a large price drop because

we benefit from a wonderful safety net. Our metro region adds about 150,000 people per

year. Between 2000 and 2006, our region added 856,266 people, a growth rate that was

the highest in the nation. Almost 2 million additional people are expected to move here

over the next 12 years. With so many new families moving to Atlanta, the demand for

housing will remain strong.

While there are more than 100,000 homes on the market today, it will not take long to

absorb them based on our current rate of growth. This is particularly the case since

homebuilders started cutting back on new construction three years ago and permits for

new homes have now fallen dramatically.

Home buyers are confused about getting a mortgage and the large number of

homeowners at risk of being foreclosed. Despite all the hoopla about a credit crunch, it is

surprisingly easy to get a mortgage if you have decent credit. While the same cannot be

said for buyers with bad credit, this represents less than 10 percent of the market.

The degree to which foreclosures will stress our local market will depend on what actions

our federal government takes to solve the problem. However, foreclosures are highly

concentrated in certain neighborhoods rather than being evenly distributed throughout the

metro region. As a result, housing markets in desirable neighborhoods with low

foreclosure rates are already showing signs of strengthening.

Less desirable neighborhoods hard hit by foreclosures may limp along for years in a

recurring tale of rich neighborhoods getting richer and poor ones getting poorer.

Smart housing decisions tend to boil down to a focus on location. While there are many

factors that make a neighborhood desirable, the more important ones include quality

homes, good schools, low tax rates, low crime rates and good access to work centers and

shopping. Driven by traffic congestion, an aging population and changes in consumer

preferences, what is considered a good location is also changing. There is a reason that all

those condominiums and mixed-use developments are being built —- they are filling a

demand from aging baby boomers and young professionals. While developers may have

gotten a bit ahead of themselves in this area, the smart money is on the demand for this

type of housing to grow exponentially over the next decade.

Housing prices in Atlanta, not having fallen much, should not have far to go to

predictably rebound. In a few years, due to the health of our local economy, housing

prices should be higher than at the peak of the previous cycle.

Sellers whose homes are worth less than they were a year ago and who psychologically

feel poor should not have to wait too long to feel better about their circumstances. Of

course, rather than waiting to sell until prices recover, savvy sellers have figured out that

if they can get an equally good deal in purchasing another home, they are still ahead of

the game.

A $200,000 home in Atlanta in 2001 was likely worth $260,000 in 2006. With a 5

percent drop in housing prices, that house today would be worth $247,000. While a

$47,000 increase may not seem like much, as a rate of return on the typical buyer's cash

investment, it is very healthy. Housing is and will continue to be a tremendous builder of

wealth for buyers who can ride out the periodic cycles in the market.

A strong buyer's market and low interest rates are allowing buyers to get great deals on

housing. As the spring market gains momentum, the best deals are being snapped up. The

advice of "buy low, sell high" has never been more apt. Buyers should act accordingly.

Seth Weissman is senior counsel to the Georgia Association of Realtors.

Dan Forsman is president and CEO of Prudential Georgia Realty.