U.S. rate: 16.9 percent
Austin, Texas: 7.9 percent
Dallas-Fort Worth: 8.6 percent
Charlotte: 16.3 percent
Miami-Fort Lauderdale: 19 percent
Orlando: 20.9 percent
Tampa: 21.2 percent
Atlanta: 26.1 percent
Jacksonville: 27 percent
Source: Zillow Fourth Quarter 2014 data
In hot intown neighborhoods and northern ‘burbs like Brookhaven, Sandy Springs and East Cobb, the supply of homes is tight, bidding wars have pushed prices towards pre-recession highs and agents and home builders are gearing up for the buying season.
But while many richer areas have shrugged off the worst of the housing collapse, the hangover remains for many poorer intown and outlying communities — particularly along and south of I-20.
For some, the recovery is barely apparent.
In 16 ZIP codes in south Fulton, Clayton and DeKalb counties, data from real estate firm Zillow shows, more than half of homes with a mortgage are “underwater,” meaning the owners owe more than the homes’ values.
Homes are cornerstones of family wealth and key cogs in the economy and local, school and state tax bases. The Atlanta Journal-Constitution analyzed real estate data from Zillow and other organizations and found that while regional trends are positive, the recovery is extremely uneven.
One key measure is the number of underwater homeowners.
Overall, only four major U.S. metro areas had higher rates of underwater homes than metro Atlanta. For homes priced in the bottom third of the market, less than about $116,000, only Detroit is worse.
Being underwater, also known as having negative equity, saps household wealth and can keep people from moving for better jobs. Underwater households are more likely to suffer foreclosure and less likely to maintain a home.
Areas with the highest rates of negative equity haven’t kept pace with the property value gains seen elsewhere. That means richer areas are riding the wave of price gains and regaining equity while poorer areas are left behind.
The fear in some places is “you might stay underwater forever,” said Svenja Gudell, Zillow senior director of economic research.
Jeff Hammer took a personal and professional hit during the crisis. A broker in Henry County, Hammer bought a new home in 2003 and despite a refinance and the reawakening of the Henry market, Hammer said he’s still underwater. During the darkest days, he said, agents’ phones stopped ringing.
“Some agents would call themselves to see if the phone was still working,” Hammer said.
Today, Henry has come a long way, he said, bolstered by builders filling incomplete subdivisions.
There is little question the overall Atlanta market is improving.
More than half of the metro area’s houses with mortgages were underwater in mid-2012. At the end of 2014, it was about one-quarter, according to Zillow.
Home values that plummeted to mid-1990s levels are now back to 2004 prices, according to a one closely-watched gauge.
Home building has returned, even to hard hit counties such as Clayton and Henry where builders are filling empty lots in stalled subdivisions.
But in 24 of the 28 counties in the Atlanta Metropolitan Statistical Area, the percentage of underwater homes is worse than the national average of 16.9 percent.
It’s often far worse.
In Clayton County, nearly three out of five homes are underwater — more than three-and-a-half times the U.S. rate, according to Zillow data. It was once more than eight in 10.
Five other counties — DeKalb, Douglas, Newton, Rockdale and Spalding — have negative equity rates double the national average.
Even folks no longer underwater could still be locked in because they won’t net enough from a sale of their home to generate a down payment on another. Zillow estimates that number could be as high as nearly half of all homes in the region with a mortgage.
Affluent areas recover
The healthiest areas are among the most affluent.
Forsyth (10.8 percent) and Cherokee (15.9 percent) had the lowest rates of underwater homes among counties. Of the 10 metro ZIP codes with the lowest levels of negative equity, seven were in North Fulton, Forsyth or Cobb.
Lowest of all, at 7.8 percent, is 30075 in Roswell. Stretches of Alpharetta, Johns Creek, Suwanee, Duluth, Dunwoody, Buckhead, Cumming and Decatur are among the more than four dozen metro Zip codes with better than national averages.
Four of the 10 worst ZIP codes are in Clayton. The highest: 30296 in Riverdale, at 65.3 percent.
Retailers and other companies are less likely to locate or expand in areas with high rates of negative equity. Unemployment also tends to be worse in these areas. Crime can be, too.
Many areas that have seen prices and equity rebound have seen new construction boom, largely in the upper-middle to high-end market. That’s also helping propel values for resale homes, creating equity for existing homeowners.
In the areas with large amounts of negative equity, there’s simply more ground to make up.
In metro Atlanta, nearly half of the homes priced in the bottom third of the market are underwater, according to Zillow. For homes in the upper third, or greater than $230,850, the figure is about one-in-10.
“Those who least can afford to be challenged by these problems are the ones faced with it,” said Susan Adams, policy director with the Atlanta Neighborhood Development Partnership, a nonprofit that works to preserve mixed-income communities.
How we got here
Prior to the bust, metro Atlanta was among the nation’s more affordable markets. In general it didn’t see the superheated price gains of some areas. It simply spread out and overbuilt, driven in part by available land, development policies and surging demand among lower-end buyers.
The development was funded largely by community banks, many of which failed after the financial collapse. As a result, unsold and unfinished homes and subdivisions piled up, driving prices down.
Too many homes were built in outlying areas that are no longer see as much in-migration, Zillow’s Gudell said.
“The sprawl phenomena contributed to the downfall,” she said. “Many outlying areas are still very far behind.”
There was also a boom in subprime lending, particularly in poorer and largely minority communities. It helped fuel new in-fill housing in older in-town neighborhoods and starter and middle-market homes in emerging black middle-class communities.
The crash eroded household wealth, particularly for minorities. Community groups also have sued several big banks alleging discriminatory lending practices and that they didn’t maintain foreclosed homes in minority communities as well as majority white neighborhoods, exascerbating the damage.
John Bartholomew, an attorney with Atlanta Legal Aid Society, said the areas with the highest rates of underwater homes correspond to minority areas with the most mortgage lending abuses. In some cases, those hurt are elderly people tricked into onerous refinances during the boom now fear they won’t live long enough to pay off the home, burdening their heirs, he said.
Federal programs to refinance loans have helped, but some programs are soon to expire. Many lower-income homeowners are still skeptical of help.
Legal Aid and other housing agencies have worked to help borrowers refinance to low interest payments, but for many, Bartholomew said, the discussion needs to be about waiving portions of the debt. That would require action by lenders, investors and taxpayer-backed entities like Fannie Mae and Freddie Mac who own the loans.
“There’s good evidence that principle write downs in many situations would help those entities save money, not lose money,” he said.
Though improvement has been slow, banks are becoming more flexible and traditional sales are replacing foreclosures at fire sale prices.
“A lot of people have a payment they can deal with and they’re going to wait the market out,” said Carol Ellis, a real estate agent with City Limits Realty in Clayton.
In Henry, about one-third of homes are underwater, down from two-thirds just a few years ago. New construction is helping lead the way, said Hammer, the broker with Keller Williams Realty Atlanta Partners in Stockbridge.
During the crisis, Hammer said he’d often meet with families who wanted to sell their homes but could do little to help. That’s rare now.
The resale market picked up strength in 2013, he said, though it’s since tempered.
“We don’t seem to be as confident about things as we could be,” he said.