The HomeFront

New homes sales set a record in 2005, across the county, throughout Georgia and within Metro Atlanta.

If, as predicted, the new home market in Georgia drops by about 6 percent this year, that will take us all the way back to … 2004. Which was a record year, in its time.

The long run of strong new home sales isn’t likely to be over, experts say. Not anytime soon, and not in Georgia. In fact, as David Ellis, president of the Greater Atlanta Home Builders Association points out, it might even be a good thing, loosening up what’s become a tight market in labor and building supplies.

What’s driving the market nationally are still fairly low interest rates. Within the state, it’s the availability of land and lack of expensive regulatory fees, coupled with the fact that Georgia is a desirable place to live. That’s not to say that there aren’t pockets of distress, particularly in small towns that have lost their manufacturing base.

“In these towns, you’re likely to see the inventory of existing homes build up, and that affects the new home market,” says Roger Tutterow, dean of the school of business and economics at Mercer University

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Within Atlanta, there are challenges related to availability of land inside the Perimeter. Debate continues on the infill issue, with some neighborhoods welcoming new development and others trying to preserve their community’s character. But overall, the new home market in Georgia is poised to continue its remarkable performance, with areas such as Columbus and Savannah stepping into the spotlight.

Now you may have a hard time believing it if you’ve shopped for a house inside I-285 lately, but Atlanta is still an inexpensive place to live. Median home prices run about 80 percent of the national average of $213,900, coming in at around $175,000. Those numbers put Atlanta at number 32 in the rank of affordable housing nationwide.

“Affordability isn’t an issue discouraging homebuyers in Atlanta,” Ellis says. Lower impact fees help keep prices down, but the number one reason new homes remain affordable is land prices. “There is land available in Atlanta,” he says.

Some of that land, however – parcels inside the Perimeter – is requiring builders and developers to get creative about how it’s used. Beazer Homes, for example, is looking at redeveloping below-market apartment complexes and retail centers, says Christopher Jones, director of planning and development for Beazer Intown. “That affords us acreage we wouldn’t normally be able to acquire,” he explains.

Take, for example, Dresden Place, a townhome community with units in the $200,000 range, on Dresden Drive in Brookhaven. It stands where an old apartment complex used to be. “We demolished it, but we kept the rolling hills,” says Jones, whose company also built single-family homes at Atlantic Station. “We didn’t clear-cut. We kept the oak trees and much of the landscaping, so when this neighborhood is completed it will already look mature.”

Based in part on its experience at Atlantic Station, the huge mixed-use development where demand for in-town living led to waiting lists for new homes, Beazer is examining sites for development around commercial corridors, even in the suburbs. It’s been an interesting transformation for the company, which made its reputation as a suburban builder.

“Two years ago, I would define the company as one with a suburban mentality that then experienced great success at Atlantic Station,” Jones says. “Because of that, we now have an all-over Atlanta mentality.”

While the move toward intown living mirrors a national trend, long commute times in Atlanta give it an extra boost. “So much of our market in Atlanta is dictated by traffic,” Jones says. “That is affecting how we choose our sites. We’re looking at revitalizing areas such as the Cheshire Bridge Road corridor, for example. That’s going into areas that would have been unheard of a few years ago, especially for a production [subdivision] builder.”

Others are building up more than out – as Jones points out, density is fueled by higher land costs inside the Perimeter, so developers have to maximize every inch of space. In Buckhead, that’s led to a spate of proposed and under-construction “vertical mixed use” projects – office towers or hotels topped by condos. Cousins Properties’ Terminus is rising at the corner of Peachtree and Piedmont roads; the first building will contain office and retail space, while subsequent towers will house condos.

A recently announced development at the corner of Peachtree and Peachtree-Dunwoody roads is projected to have two high-rise towers with office space and about 300 condo units; developers include Post Properties, Novare Group, Duke Realty Corp. and Pope & Land Enterprises. And The Mansion on Peachtree is making a statement about Atlanta’s luxury home market, with 127 hotel rooms and 45 condos starting at $3 million.

In The Back Yard

Building within an urban area requires some maneuvering that developers haven’t had to worry about in the past, as new construction abuts established communities. “We now try hard to listen more to the community,” Jones says. “I think developers have fallen short there in the past. For a developer to be unaware of what’s happening in someone’s back yard, when it’s their back yard we’re building in, is just unimaginable these days.”

Even so, the debate about infill continues in Metro Atlanta, with new regulations proposed in Atlanta as well as DeKalb and Cobb counties. While “smart growth” and higher density are generally seen as positive for urban areas because they reduce traffic, most Atlanta neighborhoods have not been dense in the past. Residents of established neighborhoods may object to new homeowners who want to tear down an existing house to build one that’s bigger on the same lot.

“Parts of the infill issue are a real challenge,” Ellis says. “I’m not an urban planner. But it makes sense that when you shorten people’s time in the car, it improves quality of life. At the same time, it creates other challenges, especially when you bring new construction right up against older construction. As a community, I think we’re starting to face that and figure out appropriate ways to deal with it. A lot of the older housing provides a great opportunity for affordable housing. You have to balance that with someone who buys a house or piece of land and wants to build their dream house.”

Both Ellis and Jones believe that there’s no one-size-fits-all answer to the infill question, and that individual neighborhoods should get a say. “There are some neighborhoods that want new housing and new energy in the community,” Ellis says. “There are others that may be more historic and residents may want to preserve the look and feel of the area. As diverse as Atlanta housing is, it’s hard to create a rule that will work all over the area. It just won’t happen.”

Jones, who lives in Ansley Park and says he’s constantly approached by people who are trying to put together assemblages of land for infill, believes working with each community is key. “At Atlantic Station, our relationship with the neighboring Home Park community was a key element of its success. We changed our designs, layout and materials because of community and customer input. And we have a much better product because of that.”

Tight Market In Columbus

Density also is an issue in Columbus. “People always hate two things – density and sprawl,” says Cathy Williams, president and CEO of Neighborworks Columbus, a nonprofit community-based housing developer that does infill development in distressed neighborhoods. “So it’s an education process.”

The market for new homes in Columbus is tight, and it’s no surprise, Tutterow says. “Columbus is the metro area that’s doing as well as anyone in the state this year,” he says. “Its industries – banking, insurance, information systems – are all strong. And Fort Benning is going to add personnel under the Base Realignment and Closure plans. All that is bullish for Columbus.”

That growth is putting some pressure on the housing market, especially affordable housing. Williams, who is also president of the Greater Columbus Homebuilders Association, says buyers looking for starter homes and affordable housing have to go to Phenix City, just across the state line in Alabama.

“We’re sitting in this triangle of growth, with the recently announced Kia plant to the north of us, Fort Benning here, and a great deal of growth in the Auburn-Opelika corridor,” she says. “Columbus isn’t built out, but the land that’s left has to accommodate larger lot sizes. We’re seeing higher-end growth, with houses priced about $225,000. It’s hard to build houses at $180,000 to $220,000 in Columbus.” Builders are looking to Harris, Russell and parts of Lee counties, which fall within the Columbus metro area.

One reason for the lack of land is social, one geographic: as Williams explains, much of the land left to be developed is zoned for fives acres or above in an attempt to slow growth. In addition, the area left for development in north Columbus lies along a granite fault line. “If you’re going to build along the River Road corridor, you have to have more than three or four acres because you have to find a place to site the house where you won’t have to blast granite,” she says.

Redevelopment is a possibility, though it would be subject to regulations and, Williams says, won’t do much to alleviate the need for affordable housing. “We’re starting to see a little bit of redevelopment in the neighborhoods that have maintained their desirability,” she says. “Our historic foundation worked hard to increase the historic district footprint so there can be some control over scraping off and building back. I think that’s great. But it causes some extra cost. It will be slow to develop, but it will develop because of demand.”

The New Gold Coast

The Savannah market is also experiencing rapid growth, fueled in part by the lower cost of housing along the Georgia coast compared to Florida.

“The price of land in Florida has gone through the roof,” says Jack Wardlaw, co-owner of Jerry C. Wardlaw Construction and one of the largest developers of single family lots in Savannah. “We can hit price points that people in Florida just can’t hit anymore. We can deliver a house in the $150,000s that’s a nice home and would run $225,000 to $275,000 at a minimum in Florida.”

The heart of the market in the Savannah area is around $200,000 to $225,000, says Wardlaw, who is also president of the Homebuilders Association of Greater Savannah. The trends there track national trends, with some softness in the upper market.

“There’s always concern about over-supply,” says Wardlaw, who expects the market to decline by the predicted 5 percent this year, although he says so far he’s not seen a drop-off in his business.

That’s because Wardlaw builds in the Pooler area, which, says Mercer’s Tutterow, is expanding at a rapid clip. “Where I-16 and I-95 come together, in the Pooler area and spilling over into Effingham County, there’s a lot of new home construction,” Tutterow explains. “All the way down I-95 to Brunswick. You have to be bullish on any new home construction through Coastal Georgia.”

You’d get no argument from Wardlaw, who expects the area to keep growing. “I think Savannah has been a hidden jewel, and now people have discovered it,” he says. His only worries are the macroeconomic forces at work: how strong the national economy remains, and how high interest rates rise.

So far, none of the builders has experienced any materials or labor shortages caused by rebuilding efforts in New Orleans, although a wholesale reconstruction of housing in the Crescent City has yet to begin. When it does, it could have some minor effect on Georgia’s new housing market; but no one expects anything drastic. Prices for materials have risen, but not necessarily due to the demand in New Orleans. And so far, the increases have been tolerable to both builders and homebuyers.

Indeed, even if the market slows down a bit, these builders expect demand to continue at a steady pace. As Williams says with a laugh, “We always say builders don’t create growth, we just accommodate it. Growth is created in the boardrooms and the bedrooms. So unless people stop economic development and stop having babies, we’ll keep building houses.”