Atlanta condo sales fell 88% in second half of 2008

Only 645 new intown condominiums sold last year, report says

By KEVIN DUFFY

The Atlanta Journal-Constitution

Wednesday, January 28, 2009

Demand for condominiums in intown Atlanta has “evaporated,” with just 66 new units sold in the second half of 2008, according to Haddow & Co., a local real estate consulting firm that’s been studying the condo market since 1999.

That’s an 88 percent dropoff from the number of units sold in the first half of 2008. Just 645 new condos sold all of last year — 76 percent below the annual average of the previous eight years.

“Interest rates are very low, prices are falling, product availability is enormous, but closings are scarce,” the report says. “In the words of one observer, ‘we have a buyer’s market with no buyers.’”

The numbers are chilling for a company like the Novare Group, which is scheduled to open the Atlantic condo tower at Atlantic Station in June. The 46-story luxury high-rise will have 401 units, 27 percent of which are under contract. But how many of those contracts will actually close remains to be seen.

Novare did not respond to a request to comment.

The Haddow report also says the condo “resale market faltered in the first half of 2008 and has still not recovered.” Resales plummeted 44.2 percent last year compared to 2007 and the average sales price declined 11.6 percent.

Prices of single-family homes in metro Atlanta are down about the same amount, according to the Standard & Poor’s Case-Shiller Home Price Index that came out Tuesday.

In all, intown Atlanta has more than 5,100 unsold new condos, or 6,032 if approved but unbuilt units are included. The market’s best year was 2005, when 4,747 condos sold and 4,455 were under construction.

“Sales have particularly stalled in the Buckhead submarket, with only 103 [new] units sold in 2008, compared to an annual average of 1,066 units from 2005 to 2007,” the Haddow study says.

After the peak year, condo sales began to slip while condo construction remained steady. The resulting surge in inventory has led some developers to take unusual steps, such as auctioning units and converting condos to apartments.

The foreclosure rate accelerated in the second half of last year, the report says. A sampling of 10 sold-out projects with 3,202 units shows that 4.93 percent of the homes were foreclosures.

“The short-term prognosis for a rebound in demand is not good,” the summary says. “A restoration of consumer confidence, improved resale market and lenders willing to lend are essential to recovery.

“Developers and lenders will face some tough decisions about how to cope in these most difficult times. 2009 should prove a pivotal year.”