I had a good conversation today with Dan Forsman, president and CEO of Prudential Georgia Realty. His background is accounting, but he’s built a mega-successful real estate brokerage firm here, and part of that success comes from keeping up with the numbers.
He swears a real recovery in residential real estate has already begun, with home prices firming up and large institutional investors gathering from parts unknown to buy up inventory of bank-owned homes.
These vacant, decaying homes have contributed mightily to the persistence of the real estate depression that has gripped this state for the past several years. While the banks seemed unable or unwilling to do anything to unload these foreclosed houses, the houses themselves poisoned resales in their surrounding neighborhoods.
The good news is that these investors have the capital and the inclination to restore these homes to livable condition, thus rendering them capable of generating a monthly income in the form of rent. Funny how capitalism works that way: An action designed to make a profit also works to benefit an entire community.
Back to Forsman and his statistics. He claims that the decline of vacant houses has coupled with an increased interest in homebuying and the result today is a reduction in the supply of homes for sale in the metro Atlanta area. How much of a reduction?
Well, just a couple years ago we were looking at an 18-month supply of homes for sale in this market. Of course, that excess supply creates a buyers market, with sellers having to make major concessions in order to get a sale.
Economists state that a 6-month supply is a state of equilibrium, creating neither a buyers nor a sellers advantage in the market.
Forsman says that today the tables have turned. With only a 4-month supply of homes available for sale, and with the spring buying season just around the corner, he feels that the laws of supply and demand are working to create a sellers market.
Time will tell. But before you begin celebrating, know that the average single-family residence in metro Atlanta has lost some 30 percent of its value since prices began declining in 2007.
Also know that lenders still have plenty of foreclosures ahead of them. Thousands of Atlantans owe more than their homes are worth and are simply unable to make regular payments for a variety of reasons. Renewed refusals by lenders to modify good loans to good borrowers may wreck this recovery as soon as it gets started.
But for now, the numbers are beginning to be encouraging. And that’s the first time that word has been used to describe this market in several years.
This is not the end of the worst real estate depression we have seen in modern times. We’ve got a long way to go before we get back to any kind of normal, whatever that may be. But I’m beginning to think that this may, in fact, be the beginning of the end.
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