Homebuilders cling to Atlanta's stable market

Julie B. Hairston, The Atlanta Journal-Constitution

Aug. 9--Homebuilders are clinging to metro Atlanta's market stability like storm-tossed sailors.

Mounting evidence of an end to the frenzy fueling U.S. home sales for the past two years has enhanced Atlanta's appeal to corporate builders feeling the pinch elsewhere.

In stark contrast to other markets, Atlanta's home sales remain high, although unsold inventories of new homes are rising and it's taking longer to sell existing homes.
Economist Donald Ratajczak said he expects to see some "moderation" in Atlanta's housing market but little long-term disruption in sales. "There's no question that we've increased inventory," he said. "The numbers are showing we're up about 20 percent."

Beazer Homes President and Chief Executive Ian J. McCarthy runs an Atlanta-based home builder now working in 40 urban markets nationwide. Compared with many of those markets, McCarthy said, the outlook for both sales and prices here remains upbeat.

"Atlanta is still the largest housing market in the country, particularly for single-family homes," McCarthy said. "Homes are still a good value here."

New home sales nationally declined 11 percent from June 2005 to June 2006, according to the U.S. Census Bureau. In the South, new home sales for June 2006 were less than 1 percent lower than in June 2005, while other regions, especially the Northeast, saw a steep decline.

The National Association of Realtors reports that existing home sales in Georgia, driven largely by metro Atlanta's market, for the first three months of 2006 increased by 7.7 percent over the same quarter of 2005. Nationally, existing home sales in the same period fell 2.1 percent from the previous year.

Unwavering population expansion and modest home price growth over the past several years is sheltering Atlanta from the kind of dramatic market swings now being reported in places like Florida and California.

While average home prices nationally grew by 57 percent over the past five years, Atlanta's average prices increased a modest 25 percent. Compared to red-hot markets such as metro Washington that saw a 113 percent increase over the same period, Atlanta's homes remain more within the financial reach of its work force, McCarthy said.

That keeps home sales moving, builders said.

"Right now, we're not really seeing any [market] softening," said Alicia McPhee, president of Pulte/Del Webb's newly created Georgia South division.
Atlanta's unusually competitive housing market is getting even more so, as builders previously absent from the fray have stepped into the mix. Meanwhile, companies long active in the area are fighting for bigger shares of sales with new locations, niche appeals and product promotions.

Both Pulte and market newcomer Levitt & Sons are banking on metro Atlanta's lure for retirees from other areas, as well as the coming local wave of aging-in-place baby boomers, with their branded active adult developments.

KB Home chose Atlanta to roll out an early prototype of its high-profile Martha Stewart home designs at Hampton Oaks in south Fulton County.

Earlier this summer, Beazer rolled out a nationwide low-interest promotion. One year ago, the company was spending about 2 percent of its revenue on incentives, such as closing costs and decor upgrades, McCarthy said. But in the most recent quarter, that proportion rose to 5 percent.

And the company also embraced metro home buyers' reurbanization trend with its construction in the Atlantic Station development near Midtown.

"Intown is going to be a very big driver," McCarthy said.

But the most visible drive intown is more vertical than lateral.

Already, a flock of busy construction cranes are transforming the urban skyline with sleek, steely perches for young professionals and empty nesters.

"You've got a lot of condos coming up," said Ratajczak. "I don't know that we're going to be able to absorb it without some concessions."

Lately, the Atlanta condo market, which has been dominated by developer Jim Borders' Novare Group, has witnessed the splashy entry of several high-profile players, including celebrity developer Donald Trump and a Miami powerhouse, the Related Group.

Related recently sold the Las Vegas site once slated for the company's heralded Las Ramblas project with hotel rooms, condos, retail and a casino.

In the meantime, Related is pressing ahead with neighborhood negotiations and requested zoning approvals from the city of Atlanta for an ambitious multitower mixed-use cluster on Roxboro Road near Lenox Square. The company is also eyeing other intown properties.

"Atlanta is still a very strong market," said Senior Vice President Robert Dorfman. "We're confident that we're going to do well."

Borders, who recently launched sales for his second Atlantic Station tower, said metro area population growth remains well ahead of condo construction.

"Where you really run into big problems is when you get thousands and thousands and thousands on the market," Borders said. "We're not seeing that here in Atlanta."
Despite the recent entry of several new developers in the Atlanta market, Borders said the increased competition merely reinforces the metro area's economic strength.
"Atlanta is viewed as a very attractive urban market, and it's being viewed more and more as that every year," Borders said.

Where housing is concerned, he stressed, the only market that matters is local.
"We're very focused on getting our shovel in the ground first," Borders said.
Local economists, however, are tracking demographic data indicating the number of people moving to Atlanta is higher than the number of new jobs being created.
Ratajczak said that may suggest that many of the region's newest residents are retirees.

That would be good news for luxury condo builders, whose product is designed for the kind of secure, low-maintenance lifestyle many retirees want.
"Atlanta," said Related's Dorfman, "is a growth area, and we think it's going to continue."