Georgia Condo Market Forecast: Not Good
The opening sentence of Haddow & Co.’s mid-year 2007 condominium market overview sends a blunt warning about Atlanta’s Intown market: It’s entered the danger zone.
“[We’re] definitely trying to send a message and want people to try to pay attention to what’s going on,” said David Haddow, president of Haddow & Co., a real estate consulting firm. He said “supply is running away from demand.”
At a time when the pace of development needs to slow, a record 3,050 units in 35 projects were started in the first half of this year, according to the report. This comes at a time when sales volume has decreased considerably and inventory continues to build.
In the current development cycle, which began in 1997, about 409 projects with a total of 32,454 units have been completed or started. Of this, 137 projects with a total of 13,366 units still have unsold units. Only 44.5 percent, or 5,949, of the active condos have been sold to Georgia mortgage holders or are under contract.
The report also shows that the current supply-demand conditions have worsened over the past year. During mid-year 2006, the ratio of unsold units to annual unit sales was 1.37, or 5,457 to 3,981. As of mid-year 2007, the ratio was 3.31, or 7,417 unsold units to 2,239 annual unit sales.
With more supply and fears about a crashing housing market, condo buyers don’t feel the sense of urgency to buy like they did a few years back, contributing to decreased sales, the report states.
Other reasons the report gives for the decrease in condo sales include: cyclical slowdown after two years of gangbuster sales, investors exiting the market, more stringent mortgage loan financing standards, rising prices due to elevated construction and land costs, softness in the single-family housing market that inhibits consumer mobility; media coverage of housing market woes, and more condo and townhome development in surburban areas.
“These projects generally offer an affordable price point, unique product and distinctive location,” the report explains.
“You can’t paint the condo market with a broad brush … some developments are doing well because there’s something special about them,” Haddow said.
Roger C. Tutterow, an economics professor at Mercer University, said he thinks “the trend to absorb inventory will be sustained” in this particular Georgia housing market.
Tutterow said over the next couple of years, inventory will remain elevated, but “anyone that’s willing to take a longer term perspective of this should be in good shape provided that we don’t continue to bring as much product forward.”
Tutterow said the continued migration Intown will help to absorb the existing condo supply.
“The migration Intown is real. After decades of talking about people moving back Intown, it’s actually coming true,” Tutterow said, adding that planned retail and restaurant projects such as the Canyon-Johnson Urban Fund’s 12th & Midtown, a 2.5 million-square-foot, multiphase mixed-use project spanning three city blocks, will continue to be a draw.