Have we reached a New Normal in Real Estate?
The last couple of years have been tough in real estate all over the country. Originally, since Atlanta hadn't seen HUGE appreciation like California and Florida, I didn't think we'd get hit so bad because we hadn't seen as crazy a market with the extreme speculators.
What I've learned over the past couple of years is that Atlanta and Georgia had it's own unique challenges. Georgia had the easiest barriers to entry for starting a new bank. So, we saw a huge start-up of new banks. Many wanted to get on the real estate band wagon and mortgaged huge condo or townhome projects. This would have been fine if it was just a coule of them, but it turned out to be 100's. Then, all of the builders in Buckhead, Atlanta and Sandy Springs were fighting over every lot we had in 2005/6 to build a new McMansion and make a killing with a high end spec home.
Which leads us to today, Georgia is GROUND ZERO for bank failures in the country. There are a long list of banks to be closed as they get the man power to make that happen. The builders who have survived (and the list is limited) are doing major renovations or custom home builds. There are almost no new homes going up, as financing has become such a challenge. Many condo's or townhomes sit with unfinished cement poured that won't be built on anytime soon, or huge completed condo's that have literally NO lights on when you drive by at night.
In Atlanta, the Single Family Detached Homes are going to recover first. Inventories in December 2006 were about 60,000 homes. They decreased tremendously to 36,000 units in December 2009. Since there are so few new homes being started, it's almost negligible, the inventories are expected to decrease even taking into account shadow inventories. So inventories for DETACHED homes are decreasing, unfortunately, so is demand now that the tax credits are over.
Condo's and townhomes are much worse overbuilt, they are not part of the market I serve. These markets are much more challenged and will take longer to come out of the bottom than detached homes.
For Atlanta to recover, we need increased demand with the ability to purchase a home through our new normal real estate financing and appraisal processes. Today for financing this means your personal finances and all kinds of factors will be scrutinized beyond your wildest imaginings. You will be repeatedly asked for multiple verification of employment, savings and any items within your credit background. As well, appraisals will continue to be challenging, as there are so few recent comps of comparable sales along with a high percentage of short sales and foreclosures.
We have reached a New Normal in Buckhead, Atlanta and Sandy Springs, GA that will continue for the next couple years as the mortgage companies figure out how to do business in the current economy and beyond.
What do you see as the New Normal?
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