The State of the Atlanta New Homes Market From Smart Numbers

Steve Palm of Smart Numbers gives an update on the Atlanta new homes market and the stark differences between the peak of the market and where we are at the end of first quarter 2011.

Peak permits versus permits for Q1 2011:

• Barrow county 560 (peak) – 14 (today)
• Walton 435 (peak) – 13 (today)
• Rockdale 343 (peak) – 11 (today)
• Newton 733 (peak) – 11 (today)

There were 1,655 new Atlanta home permits pulled in Q1 2011. We would have to go back to the 1950s to get this low again. The Atlanta new home housing market is down 90% from its peak in 1Q 2005. Steve asks a series of questions, “What happens when you are down 90%? What happened to the roofers and other small businesses? Did you know they are not included in job loss numbers? What about inflation numbers? Did you know that food and energy are not included in inflation numbers?” He continues, “First quarter permits are key to knowing how many homes will be built in early spring and summer.” Apparently construction starts in metro Atlanta are going to stay relatively low this year. Steve comments that all of the new construction success stories are a result of the right product, price and location.

Lot Supply Trending in metro Atlanta is worth looking at as well. Pickens County has a 1,400 month supply of lots as compared to much lower inventories in the core metro counties. When reviewing the total median lot price change by county, North Fulton is down 45%, but by comparison other counties are down 90%. Median lot prices are below $10,000 per lot in Rockdale, Spalding and Paulding. How this all happened is simple: at the peak of the market as lot prices continued to double in price every month, builders went farther and farther outside the perimeter seeking lots. This created what Steve Palm has dubbed “the ring of death” a group of counties with extremely high lot inventory and little hopes of selling through this lot inventory anytime soon.  The ring of death is comprised of Newton, Jackson, Hall, Carroll and Paulding counties.

It’s a Great Time to Buy a Home in Metro Atlanta

Almost 50% of all closings in 2011 to date have been under $100,000, and 23% of them have been under $50,000.The percentage of closings over $1,000,000 is under 10% overall with 18% of all closings in North Fulton over $1,000,000.

Stark Statistics: The new home market remains a tough sell. Currently resale homes cost 47% of new homes, thus it is no surprise that 7 resales sell for every 1 new home – this represents job loss. Atlanta has gone three straight years of averaging less than 500 permits pulled a month with Butts county only puling six permits in the past two years.

Inventory is declining. The current level of inventory of Atlanta homes for sale is lower than the January/ February 2011 inventory. In other words, if you don’t have to sell your house, you are not putting it on the market.

The number of homes under contract has been increasing this year. However, in March and April 2011 we expect to see this level off and start to decrease.

What we need for a turn around: demand, new corrections, to burn through foreclosures and to stop foreclosures. Unfortunately, super hyper inflation is the only way we can get out of this.

Steve Palm’s Long Term Forecast:

• Slight improvement in core counties-  Cobb, Dekalb, Fulton and Gwinnett
• Huge growing instability – nukes in world, increasing gas prices, etc.
• Double Dip recession
• Deficits – the final frontier – to boldy spend what no man has spent before.

Steve Palm comments, “The Smart Number’s forecast is to plan for the best and prepare for the worst.”

Quantitative Easing for Dummies – printing money is the last resort for failed economies.
We (the US) have got to stop spending. The interest rates are going to take off when the economy starts to come back. Unfortunately,
Steve predicts that next year will be worse. He says that the only thing that is deflating at present is the Feds credibility.

We’d love to hear your thoughts. Is it all gloom and doom or are their bright spots out there?