Atlanta-based Kerley Family Homes wanted to buy 32 vacant lots in the Covington Place subdivision near Ashton Hills Golf Club and build out the remainder of the subdivision, but the homes they wanted to sell for $225,000 only appraised for $205,000 pre-construction. The company has pulled its plans for now, but owner Joe Kerley said he’ll keep an eye on the area and check back in six months.
Some home building is returning to Newton County, but local and area builders say the area still is a year or two away from seeing any significant levels of new building.
"Honestly, at this point, I wouldn’t be too concerned," Kerley said last week about his company’s low appraisals. "Everything is on the uptick; it’s just a matter of time. Within the next 12 months, (the market) should be strong enough for someone to build.
"Covington is on the outskirts of metro Atlanta, and we mostly focus on Cobb and Cherokee. Prices are going up, which is pushing people further and further out to get (their desired) prices for homes in this area."
Home prices in the metro Atlanta market as of March 2013 have increased by 19.1 percent from last year, according to the S&P/Case-Shiller Home Price Index, a national survey of home prices. However, Atlanta’s prices remain slightly below where they were in 2000, while nationally prices are back up to 2003 levels.
For years, new residential construction has been at a near standstill because homes cost more to build than they could sell for given a market saturated with foreclosures that dragged down prices.
According to the U.S. Census Bureau, Newton County had 66 new residential building permits in 2012, up slightly from 54 in 2011. The county had 2,115 permits in 2005, according to the Census Bureau, during the height of the local building boom.
However, in Atlanta, the numbers are skyrocketing. Through April of 2013, the Census Bureau reports there have been 7,403 total new housing units authorized for building this year, including 4,704 single-family units. Through April 2012, the number of total new housing units was 4,613 and only 2,618 through April 2011.
However despite the strong trends, foreclosures are still an issue, said David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices in a press release.
"The larger-than-usual share of multi-family housing, a large number of homes still in some stage of foreclosure and buying-to-rent by investors suggest that the housing recovery is not complete," Blitzer said.
Kerley said his company was looking at Covington because of pharmaceutical manufacturer Baxter International’s decision to build a $1 billion campus on the eastern border of Newton County that will employ 1,500 workers by 2018.
"There’s an opportunity to build homes considering there’s a pretty big job transfer to the area," Kerley said. "Covington is a great town. I went down to the chamber; it’s a very pretty town. We like the subdivision, Covington Place, the golf course, woods, it’s nice. Unfortunately, it didn’t work (this time).
Kerley said the proposed homes in Covington Place were the first construction appraisals he’s had come in below what the company was looking for. However, Kerley said the appraisal was based on sale prices from three months ago. Prices have gone up steadily since then, so he’s optimistic the Newton County market will turn around soon.
"A lot of it is due to the fact there hasn’t been a tremendous amount of sales, and the sales that have come through have been depressed due to the market. Until it gets stabilized, it will be hard for a builder to come in and pick up lots at a price and make a profit," Kerley said.
The lots in Covington Place were a good price, Kerley said, at around $18,000 apiece, considering it costs $30,000 to put a lot on the ground on raw, undeveloped land.
Newton County has no shortage of already developed lots. Crown Communities, a large Atlanta developer, is planning to build a 211-house subdivision at the intersection of Jack Neely and Harold Dobbs roads called Silver Ridge Farms. The 110-plus acre property was in the midst of being developed before the housing collapse and already had 82 developed lots along with around 85 undeveloped acres.
"When Baxter kicks in, it will hopefully get that rolling," Kerley said. "Everything is trending upward, and if you’ve made it this far, you’re on the recovery side… A town like Covington will definitely come back; it has the infrastructure to support (more home building).’’