Quick Hits: If you’re planning to buy a home do it now, because prices are going up for the next few years. Investments in single-family rental properties have good potential, especially in Clayton County. Apartment developments have the best potential in Gwinnett County, where splitting homes into rental units is also attractive. Mortgages and construction loans have lower risk in Forsyth County, where demand will be strong. Best bets for investments in retail are Forsyth and Cherokee Counties; worst bets are Gwinnett and Clayton.
For decades Atlanta was a market of constant growth, pulling in families from all over the South as well as city-slickers from up North. The population grew close to 4 percent every year, with jobs to match – many of them in the high-paying manufacturing sector. Real estate investments could hardly go wrong, home builders could hardly keep up.
Today’s Atlanta is different, with slower growth, a service economy, and a pile of foreclosures from heavy sub-prime mortgage lending. Some parts of the area are now growing well while others just creep along. Investors have to choose the sub-market and the type of investment that’s right for them. Fortunately, the low level of construction in recent years will give landlords the upper hand for a while. And the jobs being created, most importantly in business services, healthcare, hotels and retail – are the kinds of jobs that encourage renting.
Home prices have followed the economy: a big bust, a spurt of speculation in foreclosed property, and now moderate increases that have upside potential. I expect a 20 percent rise in prices over the next three years, but it could be more as demand runs up against the limited supply. The biggest increases are likely in Forsyth and Cherokee Counties, the smallest in Clayton County.
Fulton, Clayton and DeKalb Counties have a high proportion of renters – close to half – which makes them the best candidates for investments in rental properties. The ratio of high rents to low home prices is especially favorable in Clayton. The strongest population growth has been in Forsyth, but it doesn’t have many renters. In Gwinnett County, higher home prices and higher rents encourage investments in apartment properties and favor cutting single-family homes into multiple rental units.
Mortgages are a good investment right now because home prices are still below the income level and will rise steadily, building equity cushions. Construction loans have lower risk because of the expanding demand, which will be especially strong in Cherokee, Forsyth and Henry Counties. I expect 7,000 new homes in Cherokee over the next three years, 6,000 in Forsyth. The larger counties will have more construction: 14,000 new homes each in Fulton, Gwinnett and Cobb, 10,000 in DeKalb – as well as 18,000 new apartments in Fulton and 10,000 each in Gwinnett, Cobb and DeKalb.
Because of the rapid population growth, investments in retail stores and restaurants are favorable in Forsyth and Cherokee Counties – both are under-served compared to the other counties. Clayton County is also underserved in retail but the income demographics are less favorable – half of local jobs are connected with the cyclical airport industry. The rapid growth of healthcare jobs in the big counties and in Cherokee County will require more office space as well.