May 2010: Cover Story Preview

A New Real(i)ty

There's no crystal ball, but one thing is certain: Change awaits.
By Amanda Heckert

Last year my fiance and I walked into a craftsman-style two-story in Oakhurst, just south of downtown Decatur. “This is the one,” said my now husband, as our footsteps echoed on the hardwoods. “I can feel it in my gut.” It was our first day searching. This was the third house we had seen.

My husband was right, though; no matter how many homes we scouted, the memory of the robin’s-egg-blue refuge in Oakhurst tugged at us. Two months later, palms slightly sweaty, we signed on the dotted line (about fifty times). It was ours. Like numerous others (including the buyers whose new homes are highlighted on page 62), we could not resist leaving rental life behind and taking advantage of that $8,000 first-time homebuyer tax credit and insanely low mortgage rates—as well as a home that would have cost more a few years ago.

Everything, from the price and incentives to our timing and job security, seemed just right. But no one has a crystal ball. We could only guess then that the market had further to fall. In fact, our home might have cost us even less now; Atlanta home prices are down 4 percent from a year ago, as of February.

The market is still unpredictable; home values are on the upswing in some spots, slumping in others (see page 66 for your neighborhood). But the following pages will make navigating the real estate scene a little easier. Because one thing is certain: When the market does stabilize, get ready for a new reality.

“There won’t be as much mass sprawl, and new construction will be around city centers like Roswell, Smyrna, Atlanta—where the jobs already are,” says Shea Zimmerman, president of the Atlanta Board of Realtors. “Those homes are going to look different, too. We had an explosion of McMansions in the metro market. We’re not going to see that. We’ll see homes that are more modest; builders will have to be sensitive to what the buyer is looking for and not what they want to build.”

Population trends support these predictions. The ten-county metro area gained only 24,700 people in 2009, the fewest since the fifties. Outlying counties such as Cherokee and Rockdale have seen growth sputter. Meanwhile, the city of Atlanta’s population is now 480,700, the highest it’s been since the 1970s. But there will be limitations to infill development as well. Let’s remember the great McMansion debate of 2007, when the Atlanta City Council regulated the popular practice of knocking down older residences in established neighborhoods to put up outsized homes.

Building or buying, it’s not enough for you to think you’re ready. Someone holding the money has to agree. Our lender, Wells Fargo, scrutinized us from every angle—our spending habits, our credit history, our 401(k)s and IRAs. Why didn’t everyone take the time to do this? I wondered.

Indeed, thanks to risky lending and poor oversight, thirty-seven Georgia banks have failed, the most of any state. As the banks tanked, a vicious cycle began. Without sufficient funding, new construction vanished, taking with it many of the 128,000 jobs the industry supported. And as our carpenters and contractors joined the rest of the jobless Georgians, bills and mortgages began to go unpaid. Last year, lenders sent foreclosure notices to more than 117,000 homes in metro Atlanta, a 47 percent jump from the year before. Many who have continued to pay their mortgages face an uncertain future themselves: Almost a half-million metro homes are “underwater”—meaning the owner owes more on the mortgage than the home is worth—or close to it.

There are hints that a turnaround is not too far away. Thanks to Atlanta’s glut of condos, only 600 new units were put up for sale here last year, the fewest in a decade. And according to Eugene James, director of the Atlanta market for housing information firm Metrostudy, total housing inventory is down 66 percent from three years ago—and fewer homes on the market means hope for home values. “When demand outpaces supply,” says James, “prices will start to go back up.” Hot spots where James has seen builders begin new projects already? North Fulton and south Forsyth counties. “And that’s to replenish,” he says. For the past three years home sales have surpassed the number of new homes being built.

I’ve seen the market begin to take baby steps firsthand. For months, several homes on my street were for sale with no takers. In the past few weeks, all but one have sold. And whoever owns the abandoned shack three houses down from mine began renovating it into a beautiful bungalow last month. That doesn’t mean fears of layoffs and sinking home values don’t dance through my head some nights. But we didn’t buy our house to make money. We bought it because after years in Atlanta, we were tired of bobbing like buoys, lease to lease. We wanted roots. We wanted a home. And most importantly, we could afford it. It’s our little acre of the American dream.