AJC: Experts: North Georgia housing market in depression

That was the headline in one of today’s AJC stories.

My reaction – no kidding.

In fact, that’s the same words used by a client earlier this year. It was quite obvious that the problems were huge. In fact, they’re bigger than huge – they may be insurmountable for a long, long time. Take a look at this statistic from Metrostudy, a group that tracks Atlanta’s housing industry.

James said sales closings were down 44 percent for the third quarter, compared to the same period last year, and housing starts had plunged 67 percent. The metro area also has about 148,000 lots with infrastructure but no homes — a 117-month supply, he said.

A 117-month supply – or nearly 10 years. 148,000 lots without a home. Even in the best of times, that supply is at least 4 years. A healthy supply would be 18-24 months.

The rest of the article is a bit unnerving for the simple reason that the reactions to this problem are not realistic. Down payment assistance, as proposed by the Lt. Governor, won’t solve the problem of buyers not being able to get loans. The banks foreclosing and suing small builders is pointless. The idea of using the state employee’s retirement fund to buy residential projects only makes sense if they pay the right price, but using California as the example is bit silly given that economy is in worse shape that Georgia’s.

The answer is for the market to work through the supply. The prices will come down to the point where they will be bought – but it’s going to take time. Almost certainly years. But that’s the market. Speculation is the very definition of risk and a lot of people speculated on the metro Atlanta housing market. Some won and a lot lost. It’s unfortunate, but that’s the risk of chasing a speculative market.

The comments that follow the article are, for the most part, hilarious. People don’t realize the broad reach of the residential building market. It employees hundreds of thousands of people. It’s not just the developers and builders who are hurt in this market. It’s government employees, teachers, engineers, retailers, doctors – nearly every business gets an not insignificant percentage of their work as either a direct result of the housing industry or indirect result. It’s the furniture stores who sell new furniture to the new homeowner. It’s the road improvement projects that result of the sales tax from those furniture sales. It’s the new business that starts because the road as been improved and now people travel that road.

Metro-Atlanta is certainly facing some very tough times, but the market will eventually correct itself. We’ll be smarter, at least for a time, and we’ll make better decisions. That’s the lessons that successful businesses learn in times like these. The ones who don’t learn go out of business – and that’s the way it should be in a free market.