Missing the Forest When Staring at the Trees?

I read the following inflammatory article on the Atlanta Business Chronicle website yesterday and it infuriated me.

Read on, then we’ll discuss.

Atlanta condo demand ‘evaporated’
Atlanta Business Chronicle – by Lisa R. Schoolcraft

Condominium demand in metro Atlanta “evaporated” in the second half of 2008, making 2009 a “pivotal year” for developers and their lenders.

Just 645 new condo units sold in 2008, according to the year-end condo market trends report by Haddow & Co. in Atlanta, down 62.1 percent from 2007, and down 86.4 percent from 2005, the peak of the market.

“Sales have particularly stalled in the Buckhead submarket, with only 103 units sold in 2008, compared to an annual average of 1,066 units from 2005 to 2007,” the report said.

Of 130 active projects in Atlanta’s core markets, Buckhead, Midtown, Downtown and Decatur, almost half had no sales in the second half of 2008, the report said.

“Sales during the second half of 2008 were a paltry 66 units, following a modest 579 units in the first half,” the report said.

One reason for the low number was 178 contracts lost in the last six months of the year as projects halted, converted to apartments, or suspended marketing, the report said.

“Developers and lenders carry a heavy burden,” said David Haddow, president of Haddow & Co., in the report, “and 2009 should prove a pivotal year.”

Developers and lenders will face “some tough decisions about how to cope” with the market, he said, “particularly how to restore marketing momentum and determine a trading price.”

First things first. The title of the article is completely misleading. “Atlanta condo demand ‘evaporated.’ The title suggests there is no demand for new condos or re-sales and it’s completely incorrect. I know Lisa is really talking about the demand for new construction projects, but clearly the title is sensationalist and a bit irresponsible.

Haddow & Company isn’t the only source to get statistical data on the condo market. There are a number of other sources which can be used to compile useful and accurate data. I pull numbers from a variety of sources (including the Fulton Country Tax Records and First Multiple Listing Service) to get the most accurate picture I can. My numbers (and other’s in the industry) are completely different.

As soon as I saw the words “paltry 66 units,” it sent me into overdrive. Now I’m not going to say that there is a huge demand in the market right now for condos, but one thing is certain. There are buyers in the market right now who are purchasing condos at great prices and transactions are closing. Why it’s necessary to paint a “doom and gloom” picture of our market makes no sense for anyone, especially when the information is inaccurate.

Here are some facts on the Atlanta condo market:

  • Sales for condos were down -29% compared to sales in 2007
  • Full Year 2008 sales show 1,780 new sales and 5,276 re-sales for a total of 7,056 units sold
  • 45% of all transactions required a price reduction in order to sell
  • 53% of the 7,056 condos sold received 96% of the original asking price 

I know the real estate market has slowed in general, but the reality is the condo market was only down -29% from 2007; a far cry from the -62% quoted in the article. These numbers might give developers who are considering new projects pause, but they should excite buyers.

Now is the perfect time to make a purchase on a new or re-sale condo. I have never seen a better buyer’s market. There is a good supply of inventory, interest rates are at historic lows, the offer prices for units have been substantially reduced over the last year and lenders are indeed loaning to qualified buyers.

Perhaps the best deals can be found in new construction condos – developers want your business and they are offering seller concessions like forgiving monthly maintenance fees, offering dining club privileges, and throwing in extra storage spaces for units. The incentives being offered right now have never been better.

I am not so prophetic as to call the bottom of the market, but my gut tells me that we are near its low. So what if you don’t buy your condominium at the absolutely lowest price? If you are trying to “time the market” you are most likely going to get in only after price start to ascend … and you are going to miss the bottom anyway. 

Contact me if you are looking to buy or sell your condo.

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10 Comments

  1. says: Chris

    Very misleading. The avg. ABC reader is very astute, I would expect this irresponsible journalism from the AJC not the business journal. Thanks for the facts Kevin.

  2. says: Casey

    First off, the report is not focused on the resale market. You can get upset about how the article is worded but the numbers reflect New Construction. The numbers also do not reflect all of metro Atlanta, just intown projects encompassing four major submarkets; it is off-base to call them incaccurate. I agree though, it is a great buyers market.

  3. says: Kevin Grieco

    I have read the article and still believe it’s misleading. Focusing only on 4 core submarkets is an inaccurate picture of the total number of new construction units sold last year in metro Atlanta. The spreadsheet I obtained from Haddow & Company didn’t have the December sales figures included.

  4. says: Dan Doughty

    Thanks for giving a more accurate picture of what is going on in the market. There has never been a better time to be a buyer. I can guarantee you will not see an accurate state of the market on the front page of the ABC… they are only interested in the doom and gloom. They should be telling people to get out and buy NOW!
    Regards,
    Dan

  5. says: Paul

    One thing I’m curious about that neither the article nor your post addressed: what percentage of these sales are foreclosures? That would be a telling indication of the state of the condo market. My guess is that number is fairly high and will climb higher in 2009.

  6. says: Jason Frost

    Please note that to my knowledge “NONE” of the numbers quoted in the article are correct. Viewpoint had 124 closings from July-December 2008 and I would consider Viewpoint an intown condo. In that same time frame Tribute lofts closed 36, Twelve Centennial closed 30, 1010 Peachtree closed 26, etc..Fulton and Dekalb County had “New” condo closings that totalled 529 units in the second half of 2008. That is a far cry from “66” units.

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