Expect continued, steady growth in new home construction as the housing market continues to grow healthier – unless, unless, unless…
Well unless things turn around, the trends are good, said Steve Palm, president of Smart Numbers, an Atlanta analysis firm.
“The market is shifting very positively,” Palm said.
With relatively few existing homes for sale, new construction is increasingly important. and building has picked up.
Palm said. “I think it will go up 9 percent next year. I think we could get 30 percent up if the House is won by Republicans” (in November).
Palm spoke Thursday to a housing conference that drew several hundred builders and other real estate professionals to the Cobb Galleria. Also featured was John Hunt, a senior analyst at Smart Numbers and the president of ViaSearch.
Palm has his worries – besides the politics.
Among them: Fear that the price of building materials may rise faster than the ability of buyers to pay. Also, the huge funds that bought up depressed housing might freeze their holdings. Or a crisis in the Middle East might spur soaring energy prices, ripping off consumer spending power and tipping the economy into recession .
Yet metro Atlanta’s current situation is a bit odd, historically.
Atlanta for decades thrived on a housing market that grew with near-frenzied construction. Year after year, metro Atlanta was either among the leaders in new construction or right at the top.
Then came the crash and a virtual freeze on building. As the economy slowly improved, construction has steadily come back, but proportionately few homeowners have put their own homes on the market.
The result has been less inventory – supply – than usual, and when demand kicks up, so do prices.
That balance is changing – albeit very slowly, Palm said:
Inventories now are inching back toward the trend line of supply before the massive over-building of the boom.
“Inventory is going up .2 or .3 percentage points each month so each three months, so our supply of homes ought to go up about 1 percent,” he said.
Among Palm’s worries is that the price of building materials may rise faster, that the huge funds that bought up depressed housing could distort the market and that a crisis in the Middle East might spur soaring energy prices.
Perhaps most crucial to a market that depends on a buyer with modest but decent income is the fear that inflation and stagnant paychecks are taking a bigger bite all the time, Palm said. “The middle class is getting beat-up, big time.”
But so far, the market has been growing – and changing.
First time home buyers had traditionally accounted for about a third or more of the metro Atlanta market, peaking around 35 percent in 1998, according to Hunt. That has fallen to a little more than 20 percent now.
In contrast, the buyer who has owned several homes before and who may be – or may be about to be – an empty-nester now accounts for about 38 percent of sales, Hunt said.
Not every older person wants to live in an “older-only” developments: he said. “Fifty percent of new home buyers over the age of 55 don’t buy a home in an age-restricted community.”
Buyers likely to want those kinds of developments tend to be those moving to metro Atlanta to be close to children or grandchildren – but not under the same roof.
Different demographics act differently and even among groups there is a splintering of taste and attitude and purchase, he said. “The market is getting more fragmented.”
Among other observations:
•A sizeable number of Atlanta home purchases are by people moving to the area.
•One-third of the new townhomes are being built in the north half of Fulton County.
•Even in the Internet era, a significant minority of potential buyers use print information find out about homes-for-sale.
•And despite the immense amount of information available on the Web, the vast majority of homebuyers still use agents in their search and purchase.
Smart Numbers provides residential real estate information, analysis and forecasting for brokers, builders and developers, as well as mortgage and banking professionals.