This is the first of a three-part series examining how explosive growth and the housing market collapse have changed the face of Newton County.
Ronda Wilkerson had a lot going for her in 1989. A good job, close friends and a loving daughter, but one thing was missing: her very own piece of America.
It's a dream shared by Americans of all generations, a symbol of freedom and progress ever since the country's inception. To find her piece, Wilkerson moved to Newton County western's end in 1990, to a house she fell in love with.
"It looked like it belonged on a hill on Cape Cod with the wind whisking by," Wilkerson said of her home off Kirkland Road. "It gave me a firm foundation, a place I could say would be mine. My parents rented and moved a lot when I was younger... this was my first home, home."
Wilkerson arrived just before a housing boom that would reshape much of the county and put Newton County into the spotlight as one of the top 10 fastest growing counties in the U.S. More than 54,000 Americans would follow Wilkerson over the next 17 years, doubling a population that continued to creep closer to 100,000.
Building a Bedroom
As Covington was outgrowing its sleepy town label, Newton County was quickly developing into a bedroom community.
It's a common sight in the areas around large cities - huge populations, small job bases, commuting communities. And if Newton was the bedroom, then the rest of the house was in Atlanta.
Jobs were flooding into Atlanta in the 1990s as the U.S. was in the midst of historic economic growth, fueled by the dot-com and technology booms. Atlanta used its 1996 Olympic win and rising-city status to vault into another level of growth said Jim Skinner, an Atlanta Regional Commission research analyst.
Atlanta added more than 800,000 jobs from 1992 to 2000, a 29 percent increase, and consistently grew its job base by 4 to 5 percent every year. That pace outstripped other large cities and the country's overall job growth during the period, which was shy of 20 percent.
The newest metropolitan hotspot, Atlanta became home to more than 400 Fortune 500 companies, the largest concentration of federal agencies outside Washington, D.C., and the busiest airport in the world according to a 2009 market summary by Parkway Properties, a real estate investment firm.
While many of those new employees were locating in Atlanta, others were following the age-old trend of moving to the suburbs.
According to the 1990 Census, 50 percent of all Newton County residents worked outside their county, and in the western most reaches those percentages were over 70.
In 2000, those western percentages didn't change, but now 60 percent of all residents were commuting outside the county, signaling a clear trend - the west was filling up.
Nothing but Cows
In 1960, Newton County's population was just shy of 21,000, and the western end was a mixture of dairy farms, timber farms, a scattering of homes and land. Empty land.
"The only business out there was the AT&T on Salem Road, the rest of it was just open land - nothing. I mean nothing, it was really the country," said Ann Fuss, whose husband Ray owned a dairy farm where the Silos subdivision now exists.
Fuss moved to Newton County in 1962, before the growth, and before Interstate 20 even extended to Covington. That didn't happen until 1964. Growth was fairly steady for the next three decades as the county added between 5,000 and 8,000 people per 10 years. Covington was growing, with occasional houses spilling out into the county, but it was Rockdale County that was finding the commercial growth to accompany its homes.
Fuss said a lot of these initial movers came from Atlanta or other states to enjoy the rural lifestyle, but they wouldn't stay for long, because that lifestyle would soon disappear.
The farms disappeared for two reasons: the growth from Atlanta, the late 1970s and 1980s saw some high job growth years as well, and the decline of profitability due to more competition and higher interest rates for farm loans. When the Fuss's sold their farm in 1984, they were given $800 an acre, a good price at the time, but nothing near the $3,000 those acres would sell for a decade later.
Ray Fuss said they sold the land to another dairy farmer, who in 1988 sold the land to investors who were speculating: they made the right choice.
Hubert White is one of Newton County's most polarizing figures, both for his land development practices and his political activities, and there's no question he had a big hand in shaping the current landscape.
White made a lot of money over the years, because he was willing to take a risk and knew where to invest. He began developing in earnest in the late ‘80s, in plenty of time to beat the rush.
"(As a developer) you're looking for land, that's not necessarily the cheapest, but land where you can see a vision of development, where something can come together and have an intimacy to it. You look for certain qualities: a large stream, a pond, trees, those eventual amenities for people in the subdivision that are already present," White said. When he looked at the west end, that's exactly what he saw.
Developing is a long, money-intensive business. Developers are the ones who purchase and grade the land, get the appropriate permits, build the subdivision's roads, install water, sewer and gas lines and stormwater drains and place underground electric wires if needed. The whole process took about two years during the 1980s, and big-time developers like White had several developments going at a time.
In the early to mid-1990s developing cost about $7,000 per acre, $3,000 for the land, $4,000 for the infrastructure. Once some land was eaten up by roads, trees and greenspace, the actual lots equaled out to about an acre: they sold for $10,000. For a 60 or 100-acre development, the up-front costs are large, but the down-the-road revenues are larger. That's always been the game, and the game continued to grow.
Land prices more than tripled from the mid-80s to the mid-90s, but in some cases they septupled from the mid-90s to the mid-2000s.
During the housing peak of 2005, land was selling for $15,000 to $25,000 an acre. However, development regulations, enforced by the county planning department had changed slightly. Instead of including an acre of private greenspace per house, larger common greenspace areas were promoted. Lot sizes decreased and, therefore, yields increased; one acre could now be sold for two lots.
Inflation and skyrocketing demand were driving up the cost of building materials and infrastructure was now costing $30,000 a lot. No problem - the lots themselves were selling for $55,000 to $60,000 a pop.
Here's the math: $17,500 profit per lot multiplied by 250 lots a year - $4.37 million. It's obvious why developers flooded the county snatching up any land they could: there were fortunes to be made.
Location, Location and Home Prices
Atlanta was booming, and demand for land in Newton County was following, but why were people choosing Newton?
"Location, location, location," answered Bob Goucher, president of the Newton County Home Builders Association. "Newton County is on a major thoroughfare and was next in line to grow. It was to the east so you could drive (to and from Atlanta) with the sun at your back both ways.
"Plus Newton County had a very rural feel, an All-American clean atmosphere, and Covington is a jewel of a city."
Newton County is 30 miles from Atlanta's perimeter, about a 40-minute drive on a bare I-20. With what they thought was a manageable drive, prospective residents were lured by a friendly, small-town feel and beautiful, new, inexpensive homes with that wondrous amenity: the yard.
The Rev. Sharon Collins moved to Fairview Estates in 2004, because she wanted to get out of Atlanta. She wasn't going to leave a good job at the Department of Labor, but she was determined to leave the hustle and noise. Her sister was a pastor in Porterdale, so Newton County seemed like a perfect choice.
"I always watched the ‘Heat of the Night,' and Newton County seemed like a very quiet, faith-oriented community. It was a place where I wanted to sit down on my porch and drink coffee," Collins said. "I like the peace and quiet, and I believe in knowing your neighbor and being able to ask them for a cup of sugar."
But many of Newton's newest residents didn't come from Atlanta, nor were they necessarily drawn to the metropolis' burgeoning economy. RE/MAX Realtor Bill Blair said many came from the north; New York, New Jersey, Philadelphia and even Illinois.
"At one point in time, these people may have gone to Florida, but it was filling up and prices were overinflated. They get a similar climate and nice lifestyle here and a much cheaper, probably larger home," Blair said.
During the late ‘90s and 2000s, Newton County was at the crux of change, with Atlanta pushing people out and Newton inviting people in.
Straddling the Line
Tom Bailey has been a realtor in Newton County for 44 years, so he's seen pretty much everything. He said that growth didn't come at first, because Rockdale County was in the way and because Newton wasn't ready. In the 1980s, the telephone system wasn't fully developed, so a phone call from Covington to Atlanta was long distance. In addition, the school system was merely average with antiquated facilities and not a match for Rockdale's well-reputed modernity.
Two things happened to drive the growth across the border: geography and politics. Rockdale is small and named appropriately after its rocky soil, most of which is unsuitable for building. The limited space shaped most subdivisions into denser, single-family developments. Secondly, Rockdale decided it had enough people.
"In the 1990s, Rockdale County decided to cut off growth; they enacted heavy regulation and required more sidewalks, streetlights, curbs and gutters," said Bailey, who was on Newton County's planning commission during the time. "We didn't have that. Our zoning had not caught up with what Rockdale was doing, so it pushed builders and developers to Newton instead of fighting Rockdale, while staying as close to the Rockdale line as possible."
Although land prices were increasing, property in Newton County was dirt cheap compared to the rest of Metro Atlanta. When White was selling lots for $10,000, builders were selling the lowest-end houses for around $70,000 to $80,000, Bailey said. These were nearly one-acre lots with good-sized homes for well under a $100,000.
And Bailey said it wasn't just the west that was growing, people were moving north and east, where lots were even larger, and there was even some southern growth. But the west was clearly king, and Bailey said some distinct developmental lines were drawn.
The northwest corner began to draw the nicer, higher-priced homes, while the south-west became home to those lower-priced subdivisions. Some of those southern developments were still nice, but some were decidedly not, as their tenants would soon discover.
As the late ‘90s approached, home demand and prices increased for every type of house, small, big and mansion. Prices pushed into the $200,000s and were poised to shatter previous preconceptions.
Sept. 11 caused everything to stop, and the double crash of the twin towers and the dot-com industry a year earlier brought the economy to its knees. In an effort to jump start that ailing economy, Federal Reserve Chairman Alan Greenspan lowered interest rates from a relative high of 6.5 percent in March 2000 to 6 percent in early 2001. Following 9/11, he lowered them again and again and again, until they stood at 1 percent on June 25, 2003.
According to award-winning CNBC Financial Journalist and Author David Faber, the U.S. had never before experienced 1 percent interest rates. With rates so low, consumers and businesses alike could pretty much borrow money for free, and borrow they did, which had the intended effect of bringing the country's economy out of the doldrums
Lower interest rates meant lower mortgage rates. Local banker Fred Vick, like any banker, will tell you that the traditional, conservative American mortgage is a 30-year, fixed interest rate loan with a 20 percent down payment. According to Faber's book "And Then the Roof Caved In," the average interest rate for a 30-year mortgage in 2000 was 8.05 percent, while in 2003 that had been slashed to 5.84 percent.
Lower interest rates equals lower monthly mortgage payments, which opened the housing market up to a lot of new people. Lower interest rates also meant developers and builders could buy, develop and sell more land and more houses.
Job growth in Atlanta recovered, but it wasn't nearly at previous levels. Skinner explains that population growth continued because of an aging population exiting the job market and the quality of life factor which remained.
Newton County gained 20,193 people during the 1990s, but it would one up itself by adding 34,018 from 2000 to 2007.
"The late ‘90s growth was more of a steady growth, fast, but still contained. The 2000s was unbridled growth, it was almost reckless. It was every place you looked," said Steve Dubois, builder and former NCHBA president.
The number of new residential permits, which are required to build a new home, tell the story. The number of new permits hovered around a 1,000 through most of the 90s. The permit peak was in 2004, and it crushed previous levels as 2245 permits were handed out. 2005 and 2006 weren't far behind, with a respective 1908 and 1569 given out.
People were flocking so quickly to Newton County that houses could barely be completed fast enough. As more and more land was purchased for those houses, land prices shot up, and a whole new market was created. Now low-end homes were selling for $125,000 to $150,000, while high-end mini-mansions were going for $500,000. Incomes weren't even close to keeping up.
How did people begin to pay for these homes? That's where next week's story and the insanity begins.