Why Atlanta is 2018’s Sleeper Hit Real Estate Market
It’s a new year, and predictions for the real estate market are about as common as abandoned resolutions (it’s January 10th so be honest, are you still hitting the gym?). The blogosphere is saturated with claims that this city or the other will be 2018’s hottest, and you need to know how to filter through the noise.
If you’re local to Atlanta, you’re probably aware of the city’s ongoing trend of explosive growth that shows no sign of slowing down any time soon. If you happen to work in real estate, you’re probably A.) doubly aware of that fact, and B.) overworked as a result.
So we understand your surprise when Atlanta seems to be left off the majority of these lists.
What gives? Isn’t it obvious that Atlanta is not only growing at a rapid pace, but has been doing so for the last few years as well? Well, maybe not when you take the methodology behind these articles and surveys into account.
The reason for this is that most publications will use searches on real estate listing aggregator sites as benchmarks for their predictions and work from there. While Atlanta may be high on the list, it probably won’t crack the top 20 due to a few factors. Before we get into that, it’s important to understand that most of these surveys are commissioned by the publication and/or listing site. It’s understandable that they’d use their own data, after all.
Still, listing searches aren’t the full story (nor would they be if said surveys used, say, the MLS instead). This is because, in addition to the need to account for employment, business and residential development, building permits, commodity prices, inventories, and population growth, you also need to get on the ground and see what the city or area is truly like.
But before we get to that last one, let’s look at the first few. Most of them are relatively consistent across the board when looking at major cities in the United States: high demand, low inventories, and low unemployment. The differences between various cities can be significant, but by and large these things are mostly true no matter where you look.
So when scouting an city – or even an area within a city – for growth potential, you want to look at these factors as well as things like school district performance, building permit issuances, and property taxes. As your field of examination broadens to include an entire metro area, then averages will do just fine (but really, as an investor, you should be getting into specific zip codes).
It’s no secret that Atlanta has been experiencing population growth rates that border on the insane. That’s part of what’s responsible for our legendary traffic and everyone’s famously short tempers on the roads these days. But population increase doesn’t mean anything specific for real estate unless you have a good idea for what job growth looks like. In other words, high population growth with sluggish employment can mean higher rents, while higher-paying jobs and low unemployment spurs new arrivals to look for homes.
Atlanta is home to hubs for Delta, Mercedes, Porsche, and a whole host of other skilled-labor jobs. It’s also a leading contender for Amazon’s highly anticipated HQ2, especially given its business-friendly environment, distinction as a logistics powerhouse, and hosting of the world’s busiest airport. Overall, unemployment has remained lower in the metro area than the national average, and with business continuing to move here, there’s no reason to expect that will change anytime soon.
This means that demand for housing is high. With low inventories, competition among buyers is fierce and property values are continuing to climb ever higher, especially in the metro area as attractions like Atlanta Beltline and Ponce City Market usher in high-end apartments and lofts.
Building permits, then, are being issued right and left, and construction companies are even having a hard time finding enough workers to meet their contracts. While this is somewhat of a check on new construction, it also indicates a continuation of the current trend for the next few years.
And so we’re back to employment, and worker shortages necessarily mean higher wages as businesses compete for quality employees. That in turn increases consumer confidence, tax revenues, municipal spending, and economic activity while giving consumers the security they need to consider home ownership. If nothing else, they need to rent as they save up for their first home purchase. Again, all of these things add up to a booming real estate market.
Okay, so all of this should be fairly obvious, right? It is, but in most cases it’s not enough to push Atlanta to the top of most hot market lists. To fully understand why Atlanta beats out most other cities, you have to get on the ground and take a look at the norms that define the city’s lifestyle and professional culture.
What do we mean by that? Well, if you’ve lived in Atlanta for more than few years, then you understand very well that we measure distance in minutes (i.e., “Yeah, it’s 20 minutes away”) and we consider a 40-minute drive to be “down the street.” Seriously, Atlanta is unique among other cities for its massive sprawl. People who live in outlying suburbs like Alpharetta or Stockbridge will still tell someone from another state that they live in Atlanta because, unlike most cities, what’s considered Atlanta goes about 25 miles outside the metro area.
This is what we’re talking about when we mention lifestyle and professional culture. Atlanta was never designed to hold the massive population swell that occurs daily as people commute into it for work, so the city grew outwards far beyond the actual limits. For most people, a 50-minute commute one-way is normal, and our lifestyle is centered around that standard.
The point we’re driving at is that Atlanta proper is a relatively small area. Once you expand outwards into the suburbs, the market grows much hotter but the kicker is that these areas are still informally considered to be part of Atlanta. This is why zip code-specific searches and listings in the metro area don’t tell the full story here.
Make no mistake; we’re not knocking these other studies. After all, no one should expect someone from Chicago looking up zip code searches to understand the intricacies of Atlanta if they’ve never been here. What we’re saying is that, in our estimation, you have to get on the ground to fully understand a market’s potential for growth, and as a real estate investor you should be doing this anyway as you scout areas. All we’re saying is don’t write off Atlanta because it’s not a buzzword in the many articles you’re reading; trust the data you’re able to acquire from being in the thick of things.
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- Get It Right Solutions LLC