Around Town: Economics prof says real estate sector reviving, but ... It’s a Seller’s Market
by Lee B. Garrett, Joe Kirby & Otis A. Brumby III
Around Town Columnists
April 09, 2013 12:29 AM | 5783 views | 3 3 comments | 6 6 recommendations | email to a friend | print
LOOKING TO BUY a new house? You’ll never find cheaper rates — but you might need good luck finding one to buy. Why? Because the housing market is steadily coming back to life in the wake of the Great Recession, and there’s a shortage of new houses. That’s according to Mercer University economist Dr. Roger Tutterow.

“If you talk to the homebuilders and real estate agents they’ll tell you that unavailability of completed but unoccupied new housing is one of their biggest challenges,” Tutterow told Marietta Kiwanis Club members on Thursday. “As measured not by months of supply, but by the number of units available, new housing is at an all-time low in terms of availability of inventory here.

“And I will tell you for those in the building industry in Cobb: If you are in Cobb, north Fulton, extreme south Cherokee, extreme south Forsyth, Gwinnett, ‘the northern donut,’ the closer to I-285 the better; if you can get the land and build the house, you will sell as fast as you can complete it.”

It’s unlikely that developers will return to their pre-recession focus on building in western Paulding and eastern Newton counties, he said, at least not for another decade.

“But if you’re in the near-in part of the ‘northern donut,’ it is very much a seller’s market right now on the new home side, and developing that way with some improvement on the existing home side as well,” he said.

That is indeed welcome news.


NEW HOME SALES went up 20 percent in 2012 and could easily go up another 25 percent this year.

“That’s very good news,” Tutterow said. “But here’s the problem: From peak to trough we dropped about 80 percent. And if you drop 80 percent, how much do you have to back up to get to the same place? Not 80 percent, but 400 percent. So we’re going to see some big percentage changes in 2013 and 2014 and still find ourselves 18 months from now down 40 percent from where we were in 2004 and ’05. We need to understand we’re not going back to 2004 and ’05 levels in the near term, and perhaps on a per capita basis ever again in my lifetime.”


NUMBERS SHOW the recession ended three years ago and the economy is growing.

“But if that’s the case, why the heck doesn’t it feel like it?” asked Tutterow.

Although the stock market has risen to historic highs, for most households in the country the biggest portion of their wealth is not in stocks, but is in the equity they’ve put into their homes.

“And what we did between the peak of the housing valuations in 2006 and the trough in 2011 was erase by about 50 percent the equity the household sector had in residential real estate,” Tutterow said.

“My friends, when about half of your wealth is obliviated in about three years with no price corrections, it takes a while to get you bullish on consumer spending again. And that is why consumer confidence, though well off the lows we were at back in 2008, is still not back at what we would consider normal levels.”


THE NAMES of two GOP dark horses for U.S. Senate continue to come up. What makes them intriguing is that neither is an elected official, although one of them, David Perdue, is the first cousin of former Gov. Sonny Perdue and a longtime member of the Georgia Ports Authority. Perdue is former chair and CEO of Dollar General, former chair/CEO of textile giant Pillowtex, former president/CEO of Reebok and former VP of Haggar and Sara Lee. A Perdue candidacy based on his ties to middle and coastal Georgia could undermine Kingston’s strategy.

The other dark horse from the world of business is Kelly L. Loeffler, VP of Intercontinental Exchange, a leading operator of global commodity and financial markets. Raised on a farm in Illinois, she is co-owner of the Atlanta Dream women’s basketball team, and has served on a long string of high-profile civic boards, including the Red Cross and the Atlanta Symphony Orchestra. Her political experience includes co-chairing the Romney Finance Committee in 2012. Although unknown to most of the public, she has the potential to sign a seven-figure check to jump-start her bid and be an instant contender in what’s sure to be a crowded field. Her lack of political experience might come as fresh air to many voters looking for “an alternative.” Stay tuned.


LOOK FOR another candidate to officially announce Thursday for the congressional seat being vacated by U.S. Rep. Phil Gingrey (R-Marietta), who plans to run for Senate instead. Former U.S. Rep. Bob Barr (R-Smyrna) was the first to jump into the race.


HOW SERIOUSLY is the Obama administration taking North Korea’s saber-rattling? Here’s a clue: The Pentagon has lifted all flight restrictions on its fleet of Lockheed Marietta-built F-22 Raptors. Safety concerns had caused the Raptors to be prohibited from flying more than 30 minutes from a safe landing area. The restrictions had been announced in May by then-Defense Secretary Leon Panetta after more than a dozen pilots displayed signs of oxygen deprivation during flight. Investigators later traced the primary cause of the pilot hypoxia to a leaky valve in their life-support vests, which caused the vests to inflate unnecessarily at low altitudes and inhibited pilots’ ability to breath. New valves have been placed on the vests, and the Pentagon also is in the process of retrofitting the Raptors with new oxygen systems. The Pentagon sent a pair of F-22s to South Korea last week in a show of force.


THE WELLSTAR FOUNDATION will hold its 16th annual Grand Gala April 20 at the Cobb Galleria. Proceeds will benefit WellStar’s “A Campaign Today for More Tomorrows,” which seeks to align all of WellStar’s cancer services under one roof. The event has raised more than $1 million in just the last three years. The theme of this year’s gala is football — a call to tackle cancer before it has a chance for a first down. Attire for the evening is cocktail in your team’s colors, according to Foundation president Tracy Atwater. Multiple Atlanta Falcons players and cheerleaders reportedly will be at the event. Emcee will be Chuck Oliver of 680 The Fan radio.


SICK BAY: Calvary Children’s Home founder the Rev. Snyder Turner is recovering from knee replacement surgery


TUTTEROW SAYS the other issue affecting public confidence has to do with wages and job security.

“First the good news: We continue to expand our payrolls. The bad news is that we’re doing it at a much lighter pace than we’d like to see.”

And that light pace seems even lighter now than it did Thursday when Tutterow was speaking. Government figures released on Friday show that employers created only 88,000 jobs in March, much lower than had been expected.

Tutterow told Kiwanians the economy added about 164,000 non-farm jobs per month last year. During normal times that figure would be between 225,000 and 250,000, he explained.

“So while we have been growing payrolls, we still have not dug our way out of the hole created by the Great Contraction. Though the recession itself lasted only 18 months, the period of recession-impacted employment is likely to be around seven years, he said.

In comparison, the “Reagan Recovery” after the recession of the early 1980s saw the economy add 600,000 to 700,000 workers month after month, peaking in January 1984 when 1 million jobs were added that month.

Georgia was a state with a heavy concentration in residential real estate and thus suffered worse during the recession than many other states. Which ones held up best? North Dakota, Alaska, Texas and Oklahoma. Why?

“It’s all about energy, baby!” Tutterow exclaimed. “If you’re an energy extracting, refining or distributing part of the country, you held up better in the Great Downturn.”


SPEAKING OF EMPLOYMENT, it’s down to 7.7 percent from 10 percent nationally, and down to 8.6 for Georgia and 7.4 percent for Cobb (in February), he said.

“That’s something to celebrate,” he added. “But it will not feel right in Main Street America until we start getting down in the low 6s.”
Comments-icon Post a Comment
off balance
April 09, 2013
With respect to Dr Tutterow, he must be looking around Macon only. The value of residential property in my neighborhood is hovering around $67 a sq/ft. My home is valued by Zillow at $156K and I bought it for $180K and put $20 K into recoverable improvements.

There are many homes for sale, still, that are part of the decline in the economy. There are HUD and foreclosure homes aplenty in the Atlanta area.

While there has been a mild recovery in prices, many homes are available on the market.

As someone who had been transferred eight times in my active career, (retired now), I would not want to buy a new house at higher price when there are so many foreclosed bargains on the market that also bring down prices in the whole market.
Pat H
April 09, 2013
Shortage of houses? Drive around and see the numerous foreclosed and empty properties that are deliberately being withheld because the entire industry would collapse if they were all offered.

The secret portfolio also has many commercial properties, sitting empty and obvious as you drive along our streets. This large group is nationwide, not just our area.
Roger Tutterow
April 09, 2013
For three decades, I have enjoyed reading "Around Town" and appreciate the insights and accuracy of their reporting. Last week, I had the pleasure of speaking to the Marietta Kiwanis Club, one of the finest civic clubs in the state. My comments were accurately reported. However, I realize that I should put a few comments into context, particularly as it related the employment growth in the mid-1980s.

Between 1983 and 1985, non-farm payrolls grew from approximately 89 million to 98 million. Over the subsequent 35 years, the size of the economy and of the labor force gradually expanded and pushed employment to 138 million just prior to "the great recession" of 2008-09. As such, when we compare the strength of the mid-1980s recovery with the ongoing recovery, we need to adjust for the differences in the base size of the economy.

Between 1983 and 1984, non-farm employment growth averaged 4.7%. In "today's terms" that growth would translate into around 630,000 jobs per month. In other words, to match the job gains achieved between 1983 and 1984, we would have to expand current employment by between 600,000 and 700,000 jobs per month. While we did have a single month in which non-farm employment increased by over a million jobs. It was a bit of a technical blip that also followed a contraction the previous month. The most accurate representation of the pace of job creation is the 600,000 to 700,000 outlined in my comments and above.

We celebrate that non-farm payrolls have been growing for over three years. The most recent data, released last Friday, show payrolls growing by 159,000 over the past 12 months after averaging gains of 183,000 per month during calendar year 2012. However, we also need to acknowledge that employment growth remains timid, particularly when benchmarked against the pace of growth in the mid-1980s - a period that followed the other “great recession” of the post-WWII era.

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