What will stop the BOOM in Atlanta

Question

If anyone has been paying attention to the Atlanta market it started rising around 2011 and has continued to rise.. effectively property values have skyrocketed. Albeit..... it was coming from a nose dive in 2007 of as much as 70% losses.

Fundamentals still look great? Its got jobs,  people moving to ATL,  business moving headquarters to ATL has certainly helped.

My question to those who are playing in this market is.... What will stop the Boom, as currently inventory is very low, prices are still rising.    Booms don't last forever

Rick Baggenstoss · Answer

Hi @Marisa Rowe - I could see the national economy causing pause in Atlanta.  Interest rates may rise with uncertainty and we have to remember that we have very low rates now that are unlikely able to remain low.  Income inflation is likely to cause an increase.  Cost of contractors has certainly gone up.

As far as the local economy, it's strong and diversified.  There's plenty of demand for houses $500k and below in town and not enough supply.

Rental demand seems much stronger than home purchase demand.  There's a lot of Class A apartments coming online so 'affordable' rentals have lots of applicants.   If Atlanta quits creating jobs, then the apartment market will crash.

A huge surge in fuel prices would probably have the biggest impact on GA.  Atlanta has become a major logistics hub - largest airport, UPS HQ, huge FedEx presence, Delta HQ.

Marisa R. · Answer

I can’t see this market slowing down, inventory is low

I sold a SFH in one week, full asking price, great sellers market

Michaela G. · Answer

The last down turn most of all that stuff close to intown Atlanta imploded for value and almost became worthless. The ones making money there are the sellers cashing in equity gains and moving to more stable markets through the cycles. Some will have dips of course but not as bad as some intown Atlanta areas.

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The collapse of the real estate market intown Atlanta was hugely effected by the systematic mortgage fraud that was being done by groups of scammers.

It started in 30310 and likely was very easy to buy fixer-uppers for under 100K. You had some really nice VIctorians in West End that were restored and sold for 250-300K. So, those scammers would buy a fixer upper for 70K, put in new windows (vinyl windows was a sure sign of a fraud, because no restored home would put those in) and do a basic renovation. Then an appraiser would use that restored victorian as a comp, because on paper they have the same sqf, bed/baths etc. The straw-buyer would buy for 300K . And there's 150-200K to divvy up on each house. And from there they kept buying and doing the same thing over and over until 250-300K was the standard sales price in the area. And of course it branched out from 30310 into the other zip codes.

The FBI started up a financial fraud division in Atlanta just for this, because 30310 was worse than any other zip code in the whole U.S.

So, that also explained the total collapse of the housing market here. The straw-buyers and other scammers just walked away from their properties and banks just wanted to wash their hands off everything and threw everything on the market at ridiculous prices.

So, even if there's a recession coming or whatever, we're not going to have a repeat of the above situation.

Marisa R. · Answer

Love Atlanta for investing ....... but Atlanta traffic = nightmare

Rick Baggenstoss · Answer

@Joel Owens  I was thinking we would see outer suburban crime pick up as more people have road rage driving an hour into the urban core for a good job. :-)

@Marisa Rowe  That reminds me.  If More Marta doesn't get done and traffic gets much worse then job growth will slow.  Amazon HQ2 certainly viewed Atlanta's major flaws as bad traffic and a stupid Lt. Governor.  The Lt. Governor is easy enough to fix, but the traffic issue has been a slowly developing issue.  Fortunately, the urban core now has an answer.  Suburbs will suffer.

Joel Owens · Answer

I only do commercial real estate these days. If residential I like more the suburban areas in GA within a 45 minute drive into Atlanta.

The last down turn most of all that stuff close to intown Atlanta imploded for value and almost became worthless. The ones making money there are the sellers cashing in equity gains and moving to more stable markets through the cycles. Some will have dips of course but not as bad as some intown Atlanta areas.

I have lived in GA all of my life but I am more of a suburbanite  so do not like to be in these ultra compact areas so my views might not be the norm. Close to intown I see crazy prices that are not sustainable, lot's of old houses falling apart with lipstick on them and over valued, high property taxes, aging county and city water and sewer systems (some 100 years old), etc.

It's just not my cup of tea but other people love it. A key to an area is if everyone is building or buying and reselling. That typically means they do not believe in that market long term and want to make a quick buck. The areas where not as much property changes hands or developers build to hold generally means there is a stronger consensus for the long term viability of the area. Look at crime for the area violent versus non-violent. If there is uptick in crime with violent offenses that is not a good sign. With population growth areas will automatically have uptick as a percentage in crime in most cases but generally non-violent calls. It's the murders, drugs, rape, car jacking, home invasion type stuff that can be more alarming as a percentage of police calls and activity to an area.

Curtis Rouse Jr · Answer

@Marisa Rowe

I believe that the market is still very strong for both rental and housing as population and job growth has continued to steadily rise along with great diversification of employment. Althouth inventory is tight, the constant development (i.e Beltline) going on around the metro Atlanta area, I still think we have a good 2 - 5 year run before you see any real correction here. I invest purposely in rural areas because I cannot find the desired returns with compressing cap rates in the apartment community space. At the end of the day, there are deals in every market it's just in these times you have to get a lot more creative and make a deal. How do you see the market up there in Detroit?

What will stop the BOOM in Atlanta

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