For first time Norton issues mid-year report By Pamela A. Keene
Real estate expert Frank Norton Jr. has been projecting real estate trends and economic forecasts for Northeast Georgia for 22 years. Developers, chambers of commerce and other industry professionals rely on Norton’s data to stay ahead of the curve of growth trends and market slumps.
So when Norton issues a mid-year report for the first time ever, people are taking notice.
“For the last 18 months the regional real estate market has moved with such downward velocity that it makes even the strongest person’s head spin,” Norton said in his report. “While there are great opportunities amidst the hubris and rubble, the soundings are at best confusing and sobering as reality is taking hold of the marketplace.”
He identifies three key areas that have lead to the current conditions in the marketplace – too much residential product has been built in the wrong price ranges; the abundance of money that came into the market from 2001 to 2005 with little regard for lot cost to construction cost ratios, supply and demand, rates of return, equity ratios and credit scoring; banks are now in a “state of shell shock” as developers’ interest reserves shrink and buyer interest continues to decrease.
Norton said that inventory peaked late in 2007, and most counties have long-standing inventory of both homes and lots. However, he predicted that the second half of 2008 and into 2009 will see slight improvements.
“Despite reports to the contrary, houses are selling every day,” he said. “Mortgage companies have money to lend and are anxious to qualify prospective buyers. Small industry is still producing strong goods and services and North Georgia comparatively, is weathering the storm better than most communities.”
Norton said that only the most motivated sellers are listing in today’s marketplace, driven by relocation, family situation changes, health issues or financial necessity. He also said that “prices for the most part are the most realistic in decades.” For resale sellers, the competition is not only the new-home inventory and foreclosures, making it even more difficult in the resale market.
Because developers have large amounts of standing inventory, most construction has slowed or stopped. Those with new-home communities are offering more incentives, model home parks and other motivations to drive traffic. Rather than continuing to build spec homes, they’re working to move current inventory. Norton also predicts that there won’t be much of an uptick in development of new lots or of phase two and phase three communities for at least 18 to 20 months, with the exception of homes priced under $200,000.
“Work-force housing, not row after row of petite McMansions, is the true market for North Georgia,” he said. “Our demographics are solid; the deepest part of the housing pool is under $250,000.”
Good news, sort of
Senior housing is likely to be a strong driver in the market’s recovery in North Georgia, according to the report.
“Our region’s story is too compelling, attractive lifestyle components, reasonable land and infrastructure cost, low taxes, great health care, close proximity to urban attributes, forests, trees, lakes and recreational stuff to do, all give our region the edge,” he said. “We are confident that over the next five years we will see a waterfall of retirement and active lifestyle product come our way. The downside for that market today is 70 to 80 percent of the buyers have another house to sell.
Lake homes: time to buy
Long popular as a second-home Mecca and then becoming a place of primary residences, Lake Lanier real estate activity has slowed, in large part because of the drought.
“What goes down must come up,” he said. “Cycles come and go as we have seen for 50 years now, El Nina vs. El Nino. We project that with moderate rainfall, Lanier could fill up by spring of 2010, but that the fall of 2009 will set month-by-month new lows.”
In the first six months of 2008, 55 homes with private docks sold and closed, compared to 99 for the same period in 2007 and 132 in 2006. However, while the number of homes sold was significantly down, he cites the average sales price as off by only two percent.
“This points to the resiliency of the Lake Lanier market’s ability to weather most any storm – or lack thereof,” he said. “By year end 2008, we project lake sales will register at the same level as those sold in 2003. For those wanting to buy in on Lanier this is the time to buy the most house possible.”