In Atlanta, Housing Woes Reflect Nation’s Pain

Housing prices continue to fall nationwide, despite a few modest signs of improvement. But not all markets are equal.

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Places like Miami and Phoenix — symbols of boom-time excesses and later the sites of fierce crashes — were not the weakest performers last year. That distinction goes to Atlanta.

A sprawling Southern metropolis, Atlanta has become one of the biggest laggards in the economic recovery. In November, prices of single-family homes were down close to 12 percent compared with a year earlier, the largest decline among major metropolitan areas, according to data released on Tuesday in the Standard & Poor’s/Case-Shiller Home Price Index. Home prices regionally are now below their levels of 2000, making Atlanta one of only four metro areas to have experienced such a slide. The price of entry-level housing in the area — the lowest tier of the market, valued at just under $96,600 — fell by close to a third last year.

Even though the national economy shows signs of strengthening, the beleaguered housing market remains a significant drag on the recovery. Across a group of 20 metropolitan areas measured by S&P/Case-Shiller, prices of single-family homes were 3.7 percent lower in November compared with a year earlier, with average prices at their 2003 levels. Economists say prices are unlikely to hit a nadir until at least late spring.

Tom Porcelli, chief United States economist at RBC Capital Markets in New York, projects that average prices could slip by as much as 5 percent nationally this year because of the large amount of distressed properties for sale and a shortage of buyers. Although Mr. Porcelli describes a “generally better outlook on housing” than he has over the last few years, he added, “we still have a long way to go.”

Here in Marietta, a suburb north of downtown Atlanta, the decline has attracted bargain hunters like Andy Heller. One damp afternoon last month, Mr. Heller, a part-time investor, examined a four-bedroom, faded yellow house that had sold seven years ago for $208,000.

Last fall, after a foreclosure by the Department of Housing and Urban Development, the house was put up for sale. The asking price was slashed by more than a third last month to $99,900. Mr. Heller, eyeing kitchen cupboards with missing doors and signs of leaks in the upstairs bathroom, figured he could lop $30,000 more off the price.

“I am concerned as a citizen,” he said. “And on the other side as an investor, I see the opportunity of a lifetime.”

The reasons for Atlanta’s housing woes are both representative of the nation’s troubles and special to this former boomtown, where housing appreciated handsomely, though not to the lofty heights of Las Vegas, Miami and New York.

Where the region once attracted thousands of prospective home buyers drawn by plentiful jobs and more affordable living, that influx has dwindled. Local unemployment , at 9.2 percent, is slightly higher than the national rate, in part because one in every four jobs lost was connected to real estate, a much higher rate than in the rest of the country. Those jobs have yet to return, while even people with work are having trouble qualifying for loans.

The region, plagued by mortgage fraud and developers who dotted the exurban landscape with large luxury homes that never sold, is inundated with foreclosed properties. In fact, Atlanta has the most government-owned foreclosed properties for sale of any large city, according to the Federal Reserve .

Nationwide, sales of existing homes have recently picked up, prompting some economists to suggest that the housing market is finally starting to repair itself. But the number of new homes sold fell to a record low in December, and many homeowners are stuck in houses that are worth far less than they owe on their mortgages.

Last week, the Federal Reserve described the housing sector as “depressed,” and in his State of the Union address President Obama unveiled a refinancing program for homeowners waiting “for the housing market to hit bottom.”

Atlanta has suffered greatly from a contracting pool of home buyers. The number of people moving from within the United States to Atlanta peaked at 100,000 in 2006 and plunged to just 17,000 by 2009, the latest census figures available.

“Most of the housing activity that we experienced in the past 10 years was people moving to Atlanta from other markets,” said Domonic Purviance, real estate market analyst for the Federal Reserve Bank of Atlanta.

“If you lose 80,000 people a year coming to your market,” Mr. Purviance added, “that’s the whole issue.”

The collapse of the housing market also put many prospective homeowners out of work.

From February 2008 to August 2011, Atlanta lost 60,000 jobs in construction and real estate, about 25 percent of job losses in the broader metropolitan area during that period. Across the nation, construction and real estate jobs were only 15 percent of total positions lost, according to an analysis of Labor Department data by IHS Global Insight.

Many homeowners forced into foreclosures or distressed sales are people whose livelihoods had depended on a robust housing market. That’s what happened to the owners of a three-bedroom house in Dacula, about 45 minutes northeast of downtown Atlanta.

The husband, a home remodeler, had not had steady work in three years and the family was struggling to keep up with their mortgage payments. The couple, who asked not to be named because they were embarrassed to tell their extended family, were on the verge of foreclosure last month. Then Matt Hermes, an agent with Keller Williams who drives a bright red Ford F-150 pickup bearing the license plate “BUYAHOM,” persuaded them to try to sell it and negotiate with their lender to take a loss.

The couple recently accepted an offer on the two-story brick home, which cost them $160,000 in 2002, for $119,000 and are planning to move into a rental.

Such distressed sales are putting pressure on traditional sellers to slash their prices, too. In an upscale subdivision nearby, Christina West waited four years before giving in to the reality of the housing downturn.

She and her husband bought a four-bedroom home on a manmade lake in 1999 for $374,000. They spent $100,000 installing a pool, a hot tub, a basement bar and home theater.

When her husband lost his job as a sales executive at a consumer products company in 2007, the couple moved into a house that Ms. West had inherited from her mother in St. Augustine, Fla. They put the Dacula house on the market for $599,900.

They rejected several offers that they considered lowballs. “Everybody kept saying ‘Oh, it’s a great house, it will sell,’ ” Ms. West recalled. A contract for $447,000 fell through when the buyer could not secure a loan. Last month, the couple signed a contract for $360,000, effectively erasing previous gains and their large investment in improvements.

Other owners have simply been forced to give up their homes. In the third quarter of last year, the most recent period for which figures are available, foreclosed homes represented 24 percent of all sales in Atlanta, compared with a national rate of 12 percent, according to RealtyTrac, a data provider. Georgia is one of 30 states where a lender can foreclose on a home without appearing before a judge, which suggests that many more homes may be at risk of foreclosure in states where proceedings require court approval.

On a recent tour of several homes, James H. Sinnott, a corporate lawyer who is trying to raise an investment fund for distressed properties in Atlanta, was struck by the sheer volume for sale at astonishingly low prices.

In a well-kept subdivision in Jonesboro, south of downtown Atlanta, teenagers and elderly couples strolled the wide streets. Mr. Sinnott inspected a three-bedroom brick home that had floor-to-ceiling mirrors in several rooms, garish chandeliers and a number of stripped-out basement walls that made him suspect it had been used as a brothel. The asking price was $69,900. In Norcross, a northern suburb, he looked at a sun-filled three-bedroom home up a steep driveway that had sold for $131,300 in 2003. Now, the lender was asking just $39,900.

The glut is likely to grow. According to RealtyTrac, Atlanta has a nearly 12-month supply of foreclosed homes, about 70 percent of which are sitting on the books of servicers and lenders, waiting to go on sale. The release of just a chunk of properties can push down prices. “You can’t get a bottom until you clear the backlog,” Mr. Sinnott said.

Mr. Sinnott, who is new to the investment market, is having trouble raising capital. But even an expert like Mr. Heller, who has bought more than 100 houses with a partner over the last 20 years and says he has never missed a mortgage payment, is frustrated by his difficulty securing loans.

Typically, he buys in middle-income neighborhoods and then signs tenants to rent-to-own contracts. If he had financing, he said, he would buy as many as 100 homes this year. “If I had a lot of cash I would be going ballistic right now,” he said.