If you live in the Athens area then you probably know our real estate market is booming. Granted, there are a few pockets and price points that have not performed too well, but in general the market is thriving. I recently wrote an article about Athens home buyers where I described the current frustrations of home buyers in this seller’s market. Over the last several months, I have had many people ask me what I think is driving our market and how long do I think it will last. In reality, no one knows for sure, but when asked I try to give an open and honest opinion based on what we see in the market on a daily basis. This morning I find myself in the office looking out the window while Athens is under a tornado watch and flash flood warning. This being the case, it seems like a good use of time to write a post and share my thoughts on this topic.
For many of us, the past mortgage crisis and real estate bust is ever present in our mind, and that influences our caution or even pessimism about the future. Nevertheless, it doesn’t’ mean we are heading that way once again. A wise man once said, “Those who do not learn from history are doomed to repeat it”. With that in mind, I think it would be smart to consider the Athens market before the last recession. I began my career in real estate here in Athens right after graduating from UGA. It was the early 2000s and the real estate market was strong. It is fair to say I was pretty green when I started, but with a little hard work along with some help from others I was able to find a little success and make a living. Nowadays, I am a little older, a little heavier, and a lot wiser. And I have found that my experience of living through the recession has really helped and given me a good perspective on where we are now in Athens real estate. I am sure many of my colleagues feel the same way. That being said, what was going in real estate before the bust? And how does that compare with what we are seeing now?
Well I can only speak to my personal experience during this time with regard to what I saw in Athens real estate from 2003 to 2009. At this time rates were not too high but they definitely were not this low. In some cases, prices were even higher than they are now. I saw condos finance with ease at prices that have still not returned. I saw numerous people move towards Watkinsville for schools, more land, and 3,000 plus square feet. While 5 Points was still very desirable it was nowhere near as popular as it is right now. In fact, many areas of 5 Points were heavy with rentals for students. As for Normaltown and Boulevard, they were also filled with rentals and prices per sq. foot much lower than the $175 to $200 we see today. I often heard clients refer to 5 Points as overpriced and out of date. To quote a past client, “Why would we pay $300,000 for a 1950s kitchen and no closet space?” Overall, it seemed more and more Athenians were moving out and into newer subdivisions. We all seemed to think real estate values could never go down, and most folks outside of our industry had never heard of loan terms like sub-prime, no doc, stated income, and the dreaded adjustable rate. Lastly, it seemed every builder believed “if you build it they will come”. Looking back I did a lot sitting in neighborhoods asking myself, “Where in the hell I am going to find all the people needed to buy these houses?” So what is different between then and now? The major difference between then and now is the Supply and Demand. Back in those days I never saw anything that resembled what I am seeing today.
Many things have changed since the “Great Recession”. First of all, we all know low interest rates have helped and they continue too. While we should expect rates to increase, I don’t think we will see anything drastic in the near future. Interest rates aside, I think the major difference seems to be the demand for housing in our area. While the University has not grown significantly, people’s desire to live and work here has increased greatly. In 2005, if a client asked me to find them a home in Athens under $250,000 the options would greatly exceed what you find today. There would even be feasible options in 5 points and Normaltown. In the end, the supply was slightly ahead of the demand back then. Not much but a little. Nowadays, we have a scarcity of affordable in town housing, and sadly I don’t see that changing anytime soon. This demand has been created by numerous factors. Athens as a whole has become a retirement destination to people in Georgia and across the country. We have a vibrant college town that offers great food, better music, and a good quality of life. Thanks to technology more folks are able to work away from their office in Atlanta which has brought even more people into our area. I personally have worked with 4 clients in the past year that work inside I-285, but have chosen to reside here in Athens. Furthermore, our in town neighborhoods just have more to offer now than they did in 2005. You can walk to dinner and drinks in many areas, and the shopping is better from the Eastside clear across to Epps Bridge. As I have mentioned before, HGTV shows have influenced numerous people over the years and have helped create many remodels in our area. While these remodels and tear downs are not always popular with everyone they are a sign of strong local market where demand is way out in front of supply. To further this point, just look to the recent moratorium on new development in Oconee County which could have a similar impact on the housing climate in Watkinsville . I do not have a crystal ball, but I think our residential housing market will remain strong in the near future barring any unforeseen national crisis or drastic jump in interest rates. As for our student housing market, well that is probably better discussed in a future post. In closing, the market is strong and shows no signs of weakening at the moment, but that doesn’t mean you can buy anything anywhere. You still need to consider all the factors to purchase wisely.