Shortage of existing homes on market boosts construction

With too-few resale homes available, particularly in high-demand areas of metro Atlanta, the only solution for someone who wants a new house may be to build one.

While it remains hard to find existing homes for sale, even as buyer demand picks up, the number of new homes planned and under construction in the region has risen dramatically.

“New homes are having a renaissance,” said John Hunt, a senior analyst with the real estate analysis firm Smart Numbers.

New-home permits are up 73 percent in the 20-county metro area, to 7,600, for the first six months of the year, according to data from Smart Numbers. That's a far cry from the 60,000 permits at the peak in 2005, but a sign of an improving housing market.

New-home closings are up more than 50 percent through the first six months of the year, Hunt said.

Large-scale construction has also started to return. Builders who were buying lots here and there are now acquiring raw land, developing it into lots and planning communities of 200 or more houses.

Still, the growth is not universal. Most of the activity is concentrated in parts of Cherokee, Cobb, Forsyth and Gwinnett counties and north Fulton County.

Southeast Forsyth County is one of the region’s most active building markets, said Caroline Simmel, the vice president of marketing for Edward Andrews Homes. Her company will be clearing land there for Bridleton, a development with nearly 300 houses.

“If you were to drive around certain submarkets, pockets, there’s quite a bit of activity,” she said. “I’m pleased to see demand come back.”

As people want new homes in specific school districts and with easy access to job centers, presale backlogs have risen, Simmel said. Atlanta is usually a speculative home market — meaning that builders start construction on houses before they have buyers lined up — but the lack of inventory means builders are selling more homes before they start to build them.

Base prices continue to rise with demand. In some cases, Simmel said, builders are increasing prices in the hopes of slowing sales. They simply can’t build the homes they need to meet demand quickly enough.

When the recession hit, a lot of workers left the state or moved on to other jobs. The home-building infrastructure that was once there no longer exists.

“We’re being stretched pretty thin right now,” Hunt said.

All signs point to continued demand for new-home construction. David Ellis, the executive vice president of the Greater Atlanta Homebuilders Association, said he continues to see improvement in the market. The industry is in better shape than it’s been in five years, he said, and the shift seems to be sustainable.

“It’s certainly gotten better and better and better,” he said. “There’s no falling off, there’s no curtailing of the market.”

Though the increases are off a small base, demand is picking up, said Eugene James, the Atlanta regional director of the housing information company Metrostudy.

“It’s a great time to be building,” he said. “We’re starting to see signs of life in south Fulton and Henry as well. There was almost zero activity in some portions of Atlanta a year ago.”

In Henry County, the 253 housing permits through June represent a 188 percent increase for the first six months of the year, Hunt said.

Other counties, though, have far greater activity. In 2011 and 2012, Forsyth County had more permits than anywhere else in the region. But its 1,319 permits for the first six months of 2013 were topped by Gwinnett, which had 1,614 permits in the same period.

In all of 2012, Gwinnett had 1,547 housing permits, Hunt said.

As demand has returned in some of the farthest-flung counties, 75 percent of the total closings in the 20-county area have been concentrated outside I-285 and north of I-20, Hunt said. In 2007, as prices skyrocketed, 40 percent of all closings were in that same area.

Whether growth moves back into counties such as Barrow and Bartow remains to be seen. Terry Russell, the CEO of FrontDoor Communities, who is building a 400-home community on 158 acres in south Forsyth, said he does not think metro Atlantans will be as willing as they once were to drive until they qualify.

Russell’s development, Traditions, will not begin selling homes until the end of the year. But he said he is already receiving inquiries.

“At some point, it’s going to have to push farther out, but I’m not brave enough to go farther north,” he said. “There’s going to be a shortage of home sites and homes up (Ga.) 400. There’s land. Not a lot, but there’s some.”