Boom, Bubble, Bust—Rebound

By Laura Newsome

After more than two years of foreclosures, short sales, bargain-basement pricing and an epidemic of deserted, unkempt neighborhoods, the housing market has hit rock bottom and all signs point to a modest rebound in 2010. Evidence that the real estate tide is turning can be gleaned from recent figures that show housing starts have risen 1.5 percent since July, just as unemployment claims have fallen and drastic price cuts on goods and services have stabilized in recent months.

Compared to 45 percent of homes for sale in January 2009, nine months later just 39 percent of the homes on the market were slashing their price tags to attract hesitant buyers. This modest increase in home sale prices indicates a larger-scale recovery led by qualified homebuyers who have reentered the market and scooped up much of the housing glut that littered the market during the height of the “Great Recession.”

Although Atlanta never fell victim to the severe housing bubble that drove markets like Las Vegas, Phoenix and Miami to record real estate prices, Altosresearch.com recently ranked Atlanta sixth on its list of markets that have shown the most improvement in home values. While 44 percent of homes in Atlanta exhibited price reductions in January of 2009, nine months later, just 35 percent of homes were listed on the market with price reductions—an improvement of nine percentage points.

Even more promising for the Peach City, Moody’s Economy.com forecasts that five years from now, home prices in Atlanta will have risen by 35 percent—the highest projected appreciation rate of any city on the list. Such sunny numbers put Atlanta in a class with other fast-improving cities like San Diego, Boston, Las Vegas and San Francisco as metros that have turned the recessionary corner and begun climbing again—though none of these other major cities are predicted to enjoy the promising real estate appreciation awaiting Atlanta.

The slow but determined improvement in the housing market is largely due to the loosening of bank credit, an increase in buyer confidence, a greater balance between housing supply and demand, abundant real estate bargains made possible by the rapid decline in home sale prices and an influx of qualified young and first-time homebuyers who have taken advantage of the first-time homebuyer’s tax credit—now extended until April 30, 2010—which promises an $8,000 tax credit to buyers purchasing their first home.

The turnaround forecasted for the Atlanta area can be gleaned largely from the real numbers seen on the ground. During the height of the recession, in June 2008, homes sales in Atlanta were down by 25 percent. Just a year later, home sales were up by 1 percent—a respectable increase that has realtors, homebuilders and homeowners celebrating the positive trend and a promising path toward a ripe and prosperous future in the Peach City.

The Future of Housing
For an in-depth look at Atlanta’s real estate market in 2010, we turned to the expertise of Steve Bullard, president of Coldwell Banker Bullard Realty. Here are his predictions for the year ahead.

KNOW: How would you describe the state of the housing market over the past year?
Bullard: It’s been a very slow market—a recessionary real estate market. Things are starting to improve and we saw some real signs of movement in September 2009. Interest rates are in the high fives and sixes, so there’s never been a better time to buy a house or a car.

KNOW: Do you see some signs of improvement in Atlanta’s housing market?
Bullard: I think the market will continue to be slow into spring, but the resale and new home markets will really start to improve in 2011-2012. Right now we’re seeing a lot of investors come into the market and the tax credit available for first-time homebuyers has been extended into the spring. Not many move-up buyers are competing in the market, but there are a tremendous number of investors out there. Foreclosures have definitely decreased and that is a very good sign.

KNOW: Are there any notable trends in the housing industry right now?
Bullard: There is a positive trend in the number of new real estate agents that entered the GAMLS database. We’ve seen large decreases over the last year, but now there are fewer decreases—fewer agents are getting out, so that is a sign that business is improving and the bottom has come and gone.

KNOW: Are there any bargain areas in metro Atlanta’s housing market?
Bullard: I might be prejudiced, but the south metro area offers the best values, along with a great lifestyle, easy traffic, quaint neighborhoods and a high quality of life.

KNOW: What does the market hold for 2010 and beyond?
Bullard: I see gradual increases in home values—2 to 3 percent increases as the inventory increases. It’s a great time to buy now—interest rates are superb and expected to go up along with treasury bills. Money is so inexpensive right now so there is great low pricing. I’m very optimistic about the future of Atlanta and the future of the housing market.

It’s a Buyer’s Market
According to Tina Tyler, relocation manager for Coldwell Banker Residential Brokerage, the current market conditions can benefit a “buyer with his or her financial house in order—one who can qualify for loans in the existing real estate market,” as well as “first-time home buyers who have a nice incentive with the first-time homebuyer tax credit.”

With a weak market and sellers still looking to unload their toxic assets, real estate companies are coming up with inventive new ways to bring qualified buyers into the fold. Marking a revolution in business technology, companies like Coldwell Banker are offering new consumer-focused programs like LeadRouter, a program that ensures every potential buyer receives a prompt, professional response by linking online inquiries with sales associates’ cell phones within a matter of seconds, and Coldwell Banker Connect, which allows potential buyers to receive property details and photos instantly via text message.

The power of a buyer’s market is undeniable. In a down economy, sellers are more willing to negotiate sales prices, repair costs and throw in little extras like plasma TVs, top-notch appliances, outdoor landscaping features and more. Remember, once-in-a-lifetime deals are out there—they just take some research and a little legwork. “There are pockets of so-called ‘bargain areas’ out there,” Tyler assures, “It really just depends on what the client is looking for and what kind of compromises a buyer is willing to make to find that bargain home that works for them.”

The Bright Side
Though unemployment remains high and sources of credit scarce, there are an increasing number of signs that the housing market—the ailing economic pillar that began the “Great Recession”—is beginning to get back on track. Housing prices have hit bottom and are beginning to rise, while unemployment and foreclosure rates are ebbing and builders are reemerging to lay the foundation of a new, healthier housing market. Read on for some encouraging statistics that point to a promising economic future—both in Atlanta and across the nation.

• In December, a quarterly report filed by Freddie Mac showed that home prices rose for the second quarter in all but two regions of the United States. While the average increase nationwide was .9 percent, prices in Atlanta rose .6 percent—bringing the total increase to 2.6 percent for the year. Best of all, sales volume was up 15 percent between the first and third quarters of 2009.
• Though unemployment still hovers around 10 percent, employers in metro Atlanta plan to ring in the new year by hiring at a “reserved” pace during the first quarter of 2010. According to a new Manpower Employment Outlook Survey, 7 percent of Atlanta companies plan to hire more employees, while another 79 percent expect to retain their current staffing levels. Just 9 percent of companies expect to reduce their payrolls—a marked improvement from the previous quarter, when 12 percent of companies planned on reducing staff levels.
• According to Metrostudy’s third-quarter housing report, Atlanta’s finished homes inventory was reduced to approximately 11,000 units in September—a 37 percent decline from September 2008 and a 48 percent decline from September 2007. With more homes sold than built, developers and builders constructed 1,152 new homes in the third quarter of 2009—an increase of 17 percent from the second quarter of 2009 and the first quarterly decline in the supply of finished homes in four years.
• Georgia’s foreclosure rate is on the mend; the state had 9,664 foreclosure filings in November—3.4 percent fewer than in November 2008 and 22.5 percent lower than October 2009. According to RealtyTrac’s October 2009 Metropolitan Foreclosure Market Report, national foreclosure filings decreased by nearly 8 percent in October—marking the fourth straight month that U.S. foreclosure activity declined after hitting an all-time high in July 2009.
• In August of 2009, national housing starts and building permits rose to their highest levels in nine months, with gains most pronounced in multifamily and apartment construction. While total housing starts rose 1.5 percent and building permits rose 2.7 percent, new home sales rose 9.6 percent in July—the biggest monthly increase in sales in more than four years. At the same time, the National Association of Homebuilders reported that its homebuilder confidence index rose for the third consecutive month in September—reaching its highest level in 18 months.