Housing recovery to depend on location

By Michelle E. Shaw

Published: Sep 18, 2009



Metro Atlanta home prices may have hit bottom this summer after two years of decline, but how fast they’ll rebound - or if they ever will - is a trickier calculation.



Some local experts are optimistic.



“I think we can make up 70 percent of the difference in the next year and a half,” said Steve Palm, president of SmartNumbers, a real estate research firm in Marietta.



But some homeowners will do better than that, and some won’t. What happens with your house will depend on where you live, when you bought and whether there was a lot of new homebuilding near you when the market collapsed.



In the 30075 Zip code in Roswell, for instance, median resale prices were $315,000 in this year’s second quarter, compared to $373,000 in the same period of 2007 and $318,000 in 2005, according to data from SmartNumbers.



That contrasts sharply with the nosedive in the 30058 Zip code in Lithonia, where median prices were $51,448 in the second quarter, less than half the $129,900 median for the same period of 2007 or $131,600 for 2005.



Key factors in such wild swings of fortune include the amount of inventory in an area and the number of foreclosures and other distress sales. The latter skew median prices downward -- severely if the market for conventional sales is so slow it does not offset fire-sale foreclosures.



Areas that were on the suburban fringes of the housing boom in 2006 and 2007 are going to struggle longer with lowered home values and a slow resale market, one expert said.



“You don’t see as many problems in north Fulton because it was already built out and it was relatively expensive for builders to go in and buy large tracts of land and put a lot of homes there,” said Mark Vitner, managing director and senior economist for Wells Fargo in Charlotte.



“So essentially the areas that had the most problems are the areas where it was the easiest for builders to go and quickly put up a lot of homes.”



Clayton and Rockdale counties and south Fulton County, he said, are examples of such areas.



“These places are having very significant problems,” he said, “and that’s where most of the oversupply is.”



Two Riverdale Zip codes, 30296 and 30274, saw median prices plummet by more than two-thirds, according to the SmartNumbers data. The second quarter median price this year was $33,999, down from $106,500 in 2007 and $131,600 in 2005.



A wave of foreclosures in Clayton County - more than 7,400 homes have been listed this year alone, according to Equity Depot - has weighed down the median price. Real estate experts say prices will have a better chance at recovery once all of the distressed properties have been sold.



More than 130,000 homes were sold in 2006 at the height of the building boom, according to Metrostudy, a national real estate tracking firm with a office in Atlanta.



But by the end of 2007, shortly after the average home price reached its apex, closings had fallen to around 105,000. They fell again to about 80,000 in 2008. The number should be about steady or slightly up for this year, said Eugene James, director of Metrostudy’s Atlanta office.



On average, a home bought in 2006 or 2007 has lost about 20 percent of its value, according to an analysis by Prudential Georgia Realty.



The most recent Case Shiller home price index, a widely watched national measure, showed the Atlanta region with a 1 percent seasonally adjusted gain from May to June. It was the first monthly uptick since 2007 and gave real estate pros hope that battered home prices will begin rising.



Values in some stable and established areas have held up better - also explaining why places like Roswell, Peachtree City and Decatur have not been hit as hard.



Homes bought in 2005, 2004 and 2003 are estimated to have lost 16, 12 and 9 percent respectively.



Those bought before 2000 are likely to have seen an appreciation in values, the numbers say. In other words, home values are much like 401(k)s - many people who’ve been in homes for a few years or more still have booked gains, though they’ve been trimmed by price drops of the past couple years.



Those who bought closer to the market peak, however, have a much tougher hill to climb.



Eddie and Kimberly Morris, who bought their Douglas County home in 2002 for $250,000, fear they are in the latter group, even though they’ve been in the house for seven years.



The couple, who have three children, saw the seven-bedroom, five-bathroom home as “a steal at the time” because it appraised for about $390,000, Eddie Morris said.



Now the estimated appraisal is $100,000 less than the Morrises paid, and there are multiple foreclosures in the golf course community. A house nearby recently sold for less than $150,000, Morris said.



“This is not where we thought we’d be right now, as far as equity in the house goes,” he said. “We couldn’t move if we wanted to.”



Thirty miles east, Amy and Duffy Beigel want to move, but they can’t afford the loss they’d face on their Capitol View Manor home in southwest Atlanta. They bought it in 2005 for $147,000; the home was appraised for $110,000 a few weeks ago, said Amy Beigel.



The three-bedroom, one-bathroom home is now too small for the Beigels and their three children. The disappointing appraisal put on hold their plans to move closer to family in New York she said.



“We knew things were bad, but we were hoping things would be better than that,” Beigel said. “I guess now we just have to wait and see what happens.”



Palm, the real estate analyst who forecasts the region will make up most of its price declines in about 18 months, noted that inventory is steadily declining amid bargain-hunting by buyers and little new building activity.



“We have 30,000 fewer houses on the market than we did in 2007, so that helps,” he said. “And if we get any type of demand back, that price is coming back.”



How far and how fast is impossible to predict, said another expert.



“As far as prices returning to 2007 levels, it is a mixed bag,” said Alan Wexler, president of Databank Inc., a real estate analysis firm. “I don’t see prices ... in many areas - not all, but many - returning to the past normal for quite a while. There will be a ‘new normal.’ ”



Prudential Georgia Realty owner Dan Forsman thinks it could be three or four years before overall prices increase significantly. If the job market doesn’t get better, it could take longer, he said.



“I think the second half of 2010 will be a strong transaction market, but I don’t expect to see any increase in average sales price,” he said. “So as we roll into 2011, there isn’t going to be much inventory and there will be far fewer foreclosures. I think 2012 and 2013 will be seller’s markets.”



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