Atlanta: "For Rent."
That's the picture painted by new housing data released this week by the U.S. Census Bureau.
From 2000 to 2010 the supply of new housing units outpaced demand by 50 percent in the four largest metro Atlanta counties (Fulton, Gwinnett, DeKalb and Cobb). The result: In those four counties alone, more than 143,000 houses, condos, apartments and other units were vacant in 2010 -- and 67,000, or nearly half, were for rent.
That’s good news for renters and bad news for landlords and often for neighborhoods.
Just ask Edward Nyankori, an Atlanta man who thought he was ahead of the investment game when he purchased a few rental properties eight years ago. That belief was quickly shattered when the economy tanked.
"People are not willing to pay the price I need just to break even, because there are so many other things on the market," he said.
The recession also converted many owners to renters, often against their will. Owners still outnumber renters across the 28-county metro region, but the balance has shifted in the direction of rentals, according to the census data.
And that trend may have legs, as more people reassess the benefits and risks of ownership, said Larry Connor, president of Ohio-based The Connor Group, which operates 17 apartment communities in the metro Atlanta region.
Some people, he said, are “realizing that the American dream of having a home maybe isn’t the right dream to have.”
For much of the decade, Atlanta enjoyed a housing boom, adding houses, apartments and condos at a dizzy pace. But the recession reshaped Atlanta's housing market in innumerable ways.
As unemployment soared, suddenly there were more housing units than people who were willing or able to buy them. Joblessness also led to foreclosures, which caused people to double up with friends with family.
The disappearance of jobs in the construction industry spawned an exodus of the immigrant population, leaving a glut of low-income apartments on the market.
Homeowners who wanted to sell, but found no buyers, became reluctant landlords. That dealt long-term landlords a blow to their bottom line, as competition drove rental rates down.
Nyankori and his wife first purchased a single family home in the Southwest neighborhood of Pittsburgh for about $105,000, he said. After fixing it up, they rented it out for $950 a month. They also invested in a four-apartment complex.
When the economy plummeted, their tenant in the single family home lost her job and stopped paying rent, ultimately leading to eviction. A combination of higher property taxes on investment properties and falling rental rates made it untenable to keep the home. They tried to work with their bank but ended up in foreclosure, Nyankori said.
It's now on the market for $35,000, he said.
"It was very difficult because we put in a lot of hard work and invested our own money, and at the end of the day, we are in the middle of a foreclosure," he said. "Eight years ago we thought we were set for life. We’re still relatively young, but we are wondering how did it get this bad?"
His problems didn't end there. Because investors have purchased several foreclosed properties in his area for rock-bottom prices, they've then rented out those homes for equally low rates, Nyankori said. That's undercut his ability to keep tenants in his apartments. One tenant has decided to move from her one-bedroom, one-bath unit, which costs $500 a month, to a two-bedroom home down the street for the same price, he said.
Renting out properties for less than their monthly mortgage is a bitter pill for many new landlords to swallow, said Gabby Gray, managing broker with RMG Properties in Decatur.
"A lot of times they want the market rent to be what their loan is, and that’s not usually the case," said Gray, who has seen her rental property management portfolio grow from 18 in 2008 to about 80 today.
Connor said that in the apartment market, rental rates tumbled as much as 20 percent between 2008 and the first half of 2010. That forced his company to streamline its resources and double-down on customer satisfaction in efforts to keep residents.
"It was not unusual in 2009 to see apartment communities offering the equivalent of two or three months free rent," he said.
Jason Levine, a real estate broker and owner of Pride Realty, has observed an interesting phenomenon among potential tenants who have lots of options at hand: beggars have become kind of choosy.
"I don’t think a day goes by that I don’t have people calling us with horrific credit, that were evicted, cars have been repossessed or have walked out on their mortgage, and they still feel they are entitled to the best of the best with a reduced deposit," he said.
Despite the grim census figures taken one year ago, however, housing experts say that Atlanta's rental market is looking up and will continue to improve in coming years.
"We’re seeing tremendous home rentals in Atlanta and even further out in the outer ring," said Frank Norton Jr., head of The Norton Agency and a real estate market analyst. "That’s helping stabilize the overall housing market."
Adds Chris Hall, a real estate consultant and vice president of Haddow & Company in Atlanta: "The apartment market is going to be the first sector of Atlanta’s real estate market to come back."
