Some interesting news and updates on the residential front has been popping up recently. The lot count update for the metro Atlanta area showed up in an article in Friday’s Atlanta Business Chronicle.
At the end of 2009, the area had 149,277 lots, down slightly from 149,782 in 2008, but above the 143,253 lots in 2007.
The inventory of lots kept rising because even has Atlanta’s housing market crashed, lots continued to be developed, said Eugene James, director of the Atlanta division of Metrostudy Inc., a residential real estate research firm.
“We were watching developments being reluctantly finished up,” James said.
In the 12 years Metrostudy has been recording data from metro Atlanta’s housing market, the area had the fewest new home starts — 4,400 — in 2009, James said.
That means in 2009, effectively only 500 lots came off the market in the metro Area, or about 1/3 of 1% of the available developed lots. Doing the math on new starts, 3,900 lots were developed last year in Atlanta.
At 4,400 new homes a year equates to a 34 year supply if no new lots were developed. A reasonable number of starts for the metro area in a normal economy is probably in the 20,000 unit range, meaning there is about a 7 year supply of lots. However, the reality is that anywhere between 10-20% of the current developed lots will likely never see houses on them either because of location or other factors including poor configuration and environmental concerns.
A good article from Inman News highlighted the area that many investment funds are headed to – residential lots.
As a result, finished lots are being dumped back into the market at 50 cents on the dollar — or much, much less — by builders and banks, which took back the properties due to loan defaults.
In bigger developments, investors have been buying these lots at 30 cents on the dollar, notes Nate Nathan, president of Scottsdale, Ariz.-based Nathan & Associates. In fact, well-funded investor groups have been sweeping up these long rows of unfinished lots by the dirtful leaving individual investors with no other option than to haunt smaller projects. And that, too, has been a worthwhile use of time and resources because, as Nathan points out, customized lots are selling for 10 cents to 20 cents on the dollar.
Think of it this way, lots are being acquired below finishing costs, which if new construction proceeds means the land cost is negligible, if not zero-valued.
The article noted that investors are expecting to hold the unfinished lots for 3 to 4 years and that they aren’t expecting significant new building to start until 2012. It also notes that we’ll need 1.2 million housing units in the next 10 years for population growth alone. (1.1 million units were built in the previous two years.)
- Twitter
- Facebook