Dan Forsman, president and CEO of Prudential Georgia Realty, one of the largest real estate firms in metro Atlanta, spoke to Smart Business about his predictions and concerns for the metro Atlanta real estate market in 2006.
Where do you see the Atlanta real estate market heading in 2006?
I see us having as many transactions as we had in 2005. Atlanta is one of the most diversified economies of any in the country. Even with the announced GM restructuring and phasing out of the Doraville automobile plant, things are going to continue as they have in metro Atlanta. This area has a robust, healthy real estate market and that should continue in 2006.
What about mortgage rates?
While mortgage rates have been at historic lows in the first part of this decade, I believe interest rates will creep up a half to a whole point in 2006. I do not see them getting above 7 percent and do not believe rates will have an adverse effect on the real estate market.
Do you see the new home construction market as remaining strong or tapering off?
Construction materials are increasing at a faster pace than the rate of inflation. I think the luxury homes market will taper off a little due to the cost of materials. However, I think this will drive the luxury home resale market.
The resale market for homes below $500,000 will continue to be healthy. New homes, as a whole, are going to continue strong. There’s nothing to indicate a significant slowdown in home construction. In fact, the Southeast leads the nations in housing starts and it will continue to do so in the future.
As a nation, we are living so much longer and people are, consequently, staying in their homes longer. This trend is fueling a demand for more houses.
What about the commercial market, in terms of areas like retail space?
Although my expertise is more in the residential market, I believe more space will be absorbed than delivered in 2006.
How will the real estate market in 2006 compare to recent years?
I see no slow down in what has been a very strong real estate market, not only here in Atlanta, but around the country. In the last few years, organizations like the National Association of Realtors and home building organizations have been reporting record closings and record home starts.
We may not top the staggering numbers of 2004 or 2005, but I think we will be very close. This translates into next year’s real estate market continuing to be an excellent investment.
What real estate trends do you see developing in Atlanta?
A very strong entry-level market with the influx of internationals and first-time home buyers. The area is also very desirable for corporate migration so we will continue to have a large number of relocations into the area.
In addition, there’s a huge resurgence in the convergence and remigration into the heart of downtown Atlanta with projects like Atlantic Station and the opening of the Georgia Aquarium. More and more people, particularly those in the 30 and under age group, are realizing the benefits of living, working and playing in town.
How does the Atlanta real estate market compare with that of other major cities in the Southeast?
Atlanta isn’t a coastal market and, as such, we are not exposed to the risks of coastal cities. According to PMI [Private Mortgage Insurance] statistics, the probability of a drop in our average sales price is less here than other cities in the Southeast.
How do Atlanta’s average home prices compare with others in the Southeast?
Our average home sales price is very favorable compared to other cities in the region and around the country. I see our homes having greater appreciation in the future as well.
Where do you see the Atlanta real estate market in the next five years?
It’s projected the area will continue to grow faster than the national economy. That, coupled with the desirability of the region and the favorable price point for homes, will continue to result in strong growth. This was also positively affect home price appreciation, which is always great news for all your readers who are homeowners.
Dan Forsman is president and CEO of Prudential Georgial Realty. In addition to his role as head of the 10th largest Prudential real estate affiliate in the U.S., Forsman has a degree in accounting and is a Certified Public Accountant. He is a former president of the Atlanta Board of Realtors, one of the largest real estate trade organizations in the Southeast with 7,000 members and was named Realtor of the Year for this organization in 2004. Reach him at (770) 649-5040.