New-home construction on the rise

Charlie Bostwick can’t build houses fast enough.

Every speculative home he’s started in the past two years has sold before he’s finished building it. “There’s more demand than product right now,” said Bostwick, one of the owners of Brightwater Homes in Sandy Springs.

Though the numbers are still down substantially from the boom, new housing starts in metro Atlanta are on the rise — particularly in certain areas. More residential construction is going on in Buckhead, Brookhaven, East Cobb, South Forsyth, North Fulton and parts of Gwinnett than in the past five years .

In 2012, 8,288 new homes were started in metro Atlanta, a 53 percent increase over 2011, according to Eugene James at Metrostudy. But the trend is even better. In the last three months of 2012, housing starts were up 91.2 percent over the last three months of 2011.

Experts say existing homes that were in foreclosure or in desirable areas have been snapped up.

“We had an oversupply a long time ago, and it caused building to subside. We had to get rid of extra houses, and we’ve done that,” James said. “Builders had absolutely no choice but to start building again.”

Despite the uptick, the landscape has changed for builders: The region’s housing market is being recalibrated to provide fewer new homes overall. The metro area churned out 60,000 new homes a year during the housing boom, but analysts say the region will be lucky to have an economy that sustains 25,000 new homes a year in the years ahead.

Even with the lower number, new home construction benefits the metro region, including those who aren’t in the market to buy.

In addition to the jobs that new construction brings to the area, it can kick-start the area economy as builders buy supplies and new homeowners buy insurance, take out loans and buy new furniture. The spending ripples throughout the region.

New homes in an area also can help to raise the prices of existing homes — as long as the houses that are built are constructed at a higher price-point than existing homes.

Of course, that isn’t always the case. In the Marseille community in southwest Forsyth, homes were originally built to sell between $500,000 and $600,000, said Caroline Simmel, the director of marketing for Edward Andrews Homes. New construction is priced lower — an average of $390,000.

“It’s a correction,” she said. “It’s about being more accessible to the market.”

Edward Andrews Homes has been buying lots in existing, unfinished developments, Simmel said. Even if the price point of a home is lower than its neighbors, it can still help a community by building in an area filled with empty lots.

In many areas of Atlanta, building is still slow or nonexistent — and will likely stay that way.

The new construction recovery has been slower in the outer-ring suburbs and areas south of the city. In areas where there is still a large, affordable supply of homes, there is less incentive to build new.

The aftermath of the Great Recession lingers, but at least there’s been improvement, said David Ellis, executive vice president of the Greater Atlanta Home Builders Association.

“If you haven’t eaten for a while, anything you eat tastes pretty good,” he said. “It’s probably better, but we’re still not close to using terms like ‘healthy.’”

Ellis said many home buyers want new construction, so they can pick out details like colors and cabinets. But when people are nervous about their job stability, they are less likely to go out and buy a new house. As people have become more confident, he said, they have been more willing to make a big investment, whether it is a first-time buyer moving out of an apartment, or a family moving into a larger home.

While the construction that is happening is primarily taking place in specific areas, where schools are good and there’s a strong sense of community, Ellis said he expects it to spread. Builders say the supply of available lots in coveted areas is dwindling.

“As the super-attractive areas are built out, there’s still going to be a need for housing,” Ellis said.

If metro Atlantans were to continue to buy homes at the same rate, the region would run out of available houses in three months. It’s the lowest supply of homes on the market since the 1990s, said John Hunt, a senior analyst with Smart Numbers. Builders also say it’s still hard to get loans for speculative construction.

Builders like Stephen Palmer, the chief financial officer of Home South Communities, said his company is starting to look at undeveloped land, where there’s no existing infrastructure, as available lots are sold off.

Eventually, a new normal might be 25,000 housing starts a year, said James from Metrostudy. It might take as many as five years to reach that pace, he said, but it will happen.

“We’ve seen a very steady, progressive upward trend,” said Ellis. “We’ve got our feet under us. Things are going in the right direction.”

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