Experts: North Georgia housing market in depression

The housing market is so bad that some banks and builders that had been business partners are now adversaries, and experts are using the dreaded “D” word.

“In northeast Georgia we’re not in a housing recession, we’re in a housing depression,” Jim Williams, president of Southern Highlands Mortgage in Blairsville, told state lawmakers at a daylong hearing Wednesday. “The retiree market, the secondary market has all but dried up. There are no homes being built.”

Likewise, Eugene James, head of the Atlanta division of the research company Metrostudy, said the 22 metro counties it covers “are in a housing depression right now.”

James said sales closings were down 44 percent for the third quarter, compared to the same period last year, and housing starts had plunged 67 percent. The metro area also has about 148,000 lots with infrastructure but no homes — a 117-month supply, he said.

Legislators are trying to figure out what they can do to encourage home buying and rescue residential builders. The General Assembly convenes next month, and new bills might be introduced calling for tax incentives, expanded down payment assistance or reductions in home building regulations.

“A down payment assistance obviously would be very, very beneficial to citizens,” Lt. Gov. Casey Cagle said after speaking to the joint economic development committee.

A federal down payment assistance program ended last fall and the current state down payment assistance program, Georgia Dream, is limited.

Sen. Chip Pearson (R-Dawsonville), co-chairman of the meeting, was intrigued by a California rescue plan that Chuck Fuhr, Ryland Homes’ Atlanta division president, described.

In the 1990s, the California Public Employees’ Retirement System began making loans to home builders and investing in residential projects in order to turn around that state’s faltering housing market, Fuhr said. The CalPERS program was so successful, it expanded out of state, he said.

“Almost every small builder I know today has his bank knocking on the door, trying to collect his loan and put him out of business,” Fuhr said. If builders continue to fold, competition will lessen and home prices will escalate, he said.

Kurt Cannon, president of Rabun Builders and the Home Builders Association of Georgia, said at the hearing that worried bankers have turned on builders, even those with good credit, by calling in loans and threatening to sue.

Cannon presented several pages of e-mails he’s received. A Paulding County builder wrote: “The president of the bank replied back that five of the seven bank presidents in the county had lost their jobs and he was not going to lose his. ‘I am going to foreclose on the property you have here. Then I am going to come after you personally and sue you for the money you owe me and everything else you have.’”

The vast majority of metro Atlanta’s home builders are small companies dependent on small or regional banks to fund their projects. Many of those banks are staggering because of bad construction loans.

Elliot Eisenberg, economist with the National Association of Home Builders, said Atlanta should continue to build even though demand isn’t there.

“Yeah, we are robbing Peter to pay Paul,” he said. “But that’s OK because Paul is dead.”

The housing pain may get worse, Cagle said. “I don’t think we’ve found bottom yet,” he said. “Once we’ve reached there, I think we’re going to be there for an extended period of time.”