| Atlanta, Georgia
After employment growth averaging almost 80,000
jobs annually between 1993 and 2000, Atlanta’s
economy weakened significantly during the past
18 months. As the national economy slowed, 2001
began with layoffs announced at a number of
high-profile corporations in the metropolitan area,
including Turner Broadcasting System, Amazon.com,
and Sony Music. The rate of employment growth
declined throughout 2001, and losses began in
August, accelerating in the aftermath of the
September 11 events. The area’s transportation and
convention businesses suffered as a result of the
drop in air travel and tourism, and the area’s
high-technology industries continue to lay off workers.
Atlanta has the largest concentration of
high-technology workers in the Southeast. However, most
of the high-technology employment is concentrated
in telecommunications and software, which is
now contracting sharply. The largest job reductions
recorded by the Georgia Department of Labor for the
metropolitan area in the fiscal year ending June
2002 include Delta Air Lines, Lucent Technologies,
Wachovia Bank Card Services, Scientific-Atlanta,
Thrall Car Manufacturing Company, and Sprint PCS
Customer Solutions. Nonagricultural employment
declined by 58,300 jobs for the 12 months ending
June 2002, a drop of 2.6 percent. The pace of
layoffs has declined from the fourth quarter of 2001,
although continued weakness in the
telecommunications sector is expected to generate layoffs over
the next several months. However, with continued
improvement in the Nation’s economy, most
observers expect net job growth to return to the
Atlanta area by the end of 2002.
Atlanta’s new home market, the largest in the
Nation during the last decade, continued its
record-setting performance in 2001. The volume of new
and existing home sales in 2001 was essentially
unchanged from 2000, as sales of new homes
continued to rise while resales declined. Declines in
sales volume occurred in several Northside
counties, while several Southside counties had explosive
sales growth. In the first quarter of 2002, new home
sales were up only slightly from year-earlier figures
on the Atlanta area’s Northside, where development
moratoria, impact fees, and increasing traffic and
other infrastructure problems may be constraining
development. However, sales in the area’s recently
popular Southside have steadily increased during the
past year to more than 30 percent above year-earlier
figures. Starter homes priced from $120,000 to
$160,000 are now commonly available on Atlanta’s
Southside and have sold well. Sales of smaller
homes have recently increased, and the number
of first-time homebuyers remains strong because
of historically low mortgage interest rates.
The inventory of existing homes for sale has
increased, and the length of time on the market is
growing. In some popular neighborhoods that have
experienced a rapid increase in prices over the past
several years, prices are reaching their limit. Sales
have slowed and length of time on the market has
increased for higher priced homes. Sales of new
homes in close-in locations remain strong. The
condominium market remains overbuilt, although
sales of entry-level units have improved in many
neighborhoods.
Rising finished-lot prices may also be dampening
demand, and higher density development that
reduces land costs frequently draws opposition from
neighborhood groups concerned about the additional
demand placed on already overstressed roads and
schools. According to NAR data, the median sales
price for existing homes in the metropolitan area
was $140,600 at the end of the first quarter of 2002.
Sales prices have increased by approximately 40
percent over the past 5 years. Some signs of a
slowdown in the pace of development are apparent,
although the pullback is comparatively modest.
Single-family permits for the 12-month period
ending in June 2002 were down by 6.8 percent from the
year-earlier period.
Atlanta was also the Nation’s busiest multifamily
market during the late 1990s boom, as strong job
growth supported robust in-migration and rental
demand. As job growth began slowing in 2001,
rental occupancy in the Atlanta market declined
markedly. The drop accelerated in the fourth
quarter, as large numbers of new units were delivered
during the period of uncertainty and layoffs that
followed September 11. The decline in occupancy
has continued through the first half of 2002,
although at a more moderate rate. Most locally
available surveys place the rental vacancy at
nearly 10 percent. Because younger households are
more likely to be renters affected by recent job
losses, the rental market has borne the brunt of
the economic slowdown in the Atlanta area. At
the same time, higher priced apartments continue
to lose tenants to homeownership because of
historically low mortgage interest rates. Concessions
are substantial and widespread, with 2 months’ free rent available in some submarkets. These
factors have exerted downward pressure on rents,
particularly when the value of concessions is taken into
consideration, and some developments have reduced
rents to reflect the new market conditions. The
pipeline of units under construction remains large,
estimated at 15,000 units at the end of the second
quarter, with thousands of additional recently
completed units as yet unoccupied. Atlanta’s future
supply of apartments is the Nation’s largest.
Building permits indicate only a modest pullback
in apartment production to date. The number of
multifamily units authorized by building permits
peaked in the Atlanta area in 2000 at 17,469. In the
12 months ending June 2002, the number of
authorized units totaled 16,738, a decline of only 1.6 percent
from the year-earlier period. Some analysts have
concluded that Atlanta has experienced an absolute
decline in the number of renter households over the
past three quarters, with substantial new
completions continuing to put upward pressure on vacancy
rates. Despite the current oversupply, the number of
announced developments remains large. Even if the
employment situation in the Atlanta area improves
as expected, the current excess supply and large
pipeline are expected to preclude a return to
balanced market conditions over the next 2 years.
Residential development in Atlanta’s downtown
continues with completion of three condominium
developments near Centennial Olympic Park
anticipated by the year’s end, adding more than 350 units
to the growing inventory of downtown housing.
One development directly adjacent to the park is
80-percent sold. Construction is scheduled to begin
in July 2002 for a 231-unit apartment development
at Atlantic Station, adjacent to Atlanta’s downtown.
More than 3,500 residential units are eventually
planned for the site of the former Atlantic Steel
manufacturing plant.
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