HOUSES STACK UP AS MARKET SOFTENS ALPHARETTA, GA

Houses stack up as market softens
By JULIE B. HAIRSTON: Atlanta Journal-Constitution: 07/01/07

Lela Hinson put her Campbellton Road house on the market last fall just as the U.S. real estate market plunged into its deepest sales slump in years.

Working without an agent, Hinson only managed to draw a few lookers and no takers. Month after “stressful” month, her house languished on the market.

“I did get a few calls, but mostly people just wanting to look at the house and who were not prequalified,” said Hinson, 28, a paralegal. “Nobody was really interested.”

Throughout metro Atlanta, agents and brokers are reporting slowed sales and rising inventories of unsold houses, even as national reports indicate month after month of falling sales and prices now projected to last well into 2008.

Harvard’s Joint Center for Housing Studies reports that the current national oversupply of unsold houses would take two years to sell off.

We work closely with sellers now to negotiate the tricky choices the soft market imposes.

“Are you willing to list your home slightly below the market value in order to make the sale?” she asks them. “Some sellers are not willing to do that and some are.”

From May 2006 to May 2007, inventories of unsold houses in metro Atlanta soared in every county, climbing between 18 percent and 70 percent in just one year, depending on the area.

Cobb County seems to have struck the best balance in the softening market, holding its inventory to less than an eight-month supply, an increase of just over 21 percent from the year before.

Hardest hit were Rockdale County, where inventory increased more than 70 percent to more than one year’s supply, and south Fulton, where a 53 percent increase pushed supply to almost 13 months.

The marketing director for a local RE company said Atlanta’s market slowdown began last spring and “the bottom fell out at the end of the year.”
“South Fulton,” Carver said, “a few years ago was the talk of the town. Everybody was flocking there. Then, the months supply [of unsold homes] just rocketed up.”

Soft-market strategies
After mulling her options, Hinson, whose home was in that tough south Fulton market, decided to call in an expert. She had met an agent this year when Wilson stopped by to look over the property.

When Hinson decided to hire the agent, the agent made a careful analysis of the property’s value. Impressed with the 1-acre lot and attractive interior features, the agent actually advised Hinson to raise her asking price to $130,500 from $120,000 based on sales of comparable properties in her area.
Potential buyers sometimes suspect a hidden flaw or legal entanglements when a house is priced below its market value.

Two weeks later, Hinson and her agent had a firm offer. The property is set to close at a price of $129,500 on Tuesday — more than six months after she first began her efforts to sell.

“It’s just taking longer to sell. Buyers have so much to choose from,” she said. “A home might be out there 60, 90, even 120 days now.”

Cancellations rise
Greg Duriez, division president for KB Home, the national builder that debuted the popular Martha Stewart line of homes last year, said the slowdown is showing up in more ways than one.

“Net sales are slower than they were last year, and not only are sales slower but [contract] cancellations are up,” Duriez said. Hampton Oaks in south Fulton County was the second Martha Stewart community in the country. The company has since launched Windchase in Cherokee County, also a Martha Stewart community.

KB Home is reporting about 30 percent of its contracts for new homes in metro Atlanta are being canceled before closing. In 2004 and 2005, he said cancellation rates averaged in the 15 percent to 20 percent range.
In part, Duriez blamed tighter mortgage lending standards for the high cancellation rate as a growing rate of default on risky, subprime loans sweeps the nation. He said he expects the effect to fade as buyers become more accustomed to the new standards.

David Tufts, president of the Marketing Directors, a national marketing firm for new condominium developments, said the real estate slowdown has affected metro Atlanta sales, but he expects the area to be spared its worst effects.
“There really is a lull in the market, but it’s not for any economic reason in Georgia,” Tufts said. “Atlanta in particular is not a ‘bubble market’ and never has been.”

Cities like San Diego and Miami are prototypical of the so-called bubble markets. In those cities, real estate prices experienced double-digit increases for several years running as speculators bought and sold property for quick profits. Such areas have been especially hard hit as investors withdraw and overbuilt, speculative projects sit unsold.

Atlanta, by contrast, has seen smaller but steady gains in the 3 percent to 5 percent per year range, and growth projections for the metro area continue to buoy developers’ optimism that currently high inventory levels will be absorbed quickly in the recovery.

“Once the national market improves, [Atlanta] is really going to pop,” said Metro Brokers’ Carver. “We’re going to see a huge pent-up demand.”
Duriez shares Carver’s perspective.

Metro Atlanta, which is gaining some 500 new residents every day according to the U.S. Bureau of Census, is expected to gain 1 million more people by 2030.
“It’s still a healthy market,” Duriez said.

Intown, luxury hold up
While average prices nationwide have recently experienced their steepest decline in 16 years, Atlanta’s median home price continues to increase at about 5 percent a year, reaching $191,587 from $182,500 in 2005. Fayette County on metro Atlanta’s Southside posted the highest median price for a new home at $370,187, while north metro’s Forsyth County posted the highest median resale price at $252,000.

With empty nesters and traffic-weary suburbanites repopulating the city’s core, prices and inventories in the city of Atlanta are faring better than many other areas, according to Carver.

And outside the Perimeter, Douglas County and north Fulton are faring well in the luxury house price categories starting around $1 million, Carver added.
“Right now, the high end in certain areas is holding up well,” Carver said.
But metro Atlanta is unquestionably a buyer’s market, with developers sweetening their incentive packages and sellers showing great flexibility in price negotiations.

“Don’t be afraid to ask for things now,” Carver said.
Having fared well as a seller, Hinson and her architect husband, Antonio, ended up in good position as buyers of a new College Park house, where the builder upgraded their new home’s accessory package while they were waiting for the contract on the Campbellton Road house to close.