Moderated by Rick Badie
Early in the recession, flipping houses was all the rage in metro Atlanta and other markets. Investors as well as everyday people embraced the practice in hopes of pockeing quick returns on modest investments. Today, a real estate executive says those days are practically nil in Atlanta, given the tight housing market and rising home values. The companion essay explores whether it’s best to rent or own a home. And a Georgia State professor dissects the recession’s impact on the state’s health are network.
Buying sensible home still makes sense
By Peter Morici
Whether to rent or buy a home is one of the toughest choices young people face.
A recent Deutsche Bank study compared renting vs. owning a home in 54 cities. It estimated the monthly payment on an average house, factoring in property taxes, homeowners insurance and the tax break for mortgage interest deductions.
It concluded that in 20 metro areas, it’s cheaper to rent than buy. In metro Atlanta, however, renters pay about 34 percent more than homeowners for shelter.
Most people don’t move between cities once they settle into an occupation. In large metropolitan areas like Atlanta, teachers, accountants and most other professionals change positions and advance within regional job markets, especially where state licenses apply. Most can stay put if they like, and they know whether they will want to move to another city anytime soon.
The investment climate has changed dramatically over the last 15 years, indicating that homes are a better investment than stocks, especially in and around thriving cities like Atlanta.
Many people are scared. Homes have recovered only about 40 percent of the total value they lost during the financial crisis, while stocks have set record highs.
Yet that’s a short-term view. In this century, U.S. economic growth has slowed to 1.7 percent, about half the pace set during the prior 20 years. Consequently, the S&P 500 is up only 23 percent, while the S&P index of home prices for the 20 largest metro areas is up more than 60 percent.
Young folks like to live close to work near cities, where land is scarce and construction costs higher. If anything, appreciation will be stronger in those locations.
Realtors are fond of advising young folks to plan on owning three homes during their lives: a starter home, a larger dwelling for raising children, and scaled-back accommodations for retirement.
Often, though, it’s more practical to buy one home that works throughout your life cycle. Young people should stretch their expectations for a first home. They should ask: What kind of house do we reasonably need to raise a family? Then, buy in a good school district.
Children can be raised without two rec rooms, a home theater, 3½ baths and a huge back yard. What children want most is to be close to their parents, and more sensible, uncramped space.
My wife and I raised a family in a moderate-sized row house in the historic district of Alexandria, albeit with a family room that served multiple purposes, 20 minutes from the White House. We met lots of interesting folks taking our children to city parks.
As empty nesters, we live comfortably in the same dwelling with the prospect of retirement in a home not too burdensome to maintain. The mortgage is paid. All that money we did not spend on real estate brokers, lawyers and mortgage bankers will make retirement more comfortable.
Bottom line: Buy a sensible home to raise your family, and it will prove a sound investment over the long haul.
Peter Morici is an economist and professor at the University of Maryland’s Smith School of Business.
A new era of house ‘flipping’
By Frank Norton Jr.
It seems that it’s starting again. With the uptick in the Atlanta housing market, the “house flipper” may have emerged from the dust and smoke of the market collapse to re-enter Atlanta’s battle for housing supremacy.
REALTYTRAC’s first-quarter Atlanta data showed a flip blip in its data radar. Flip homes are those sold one month, then resold two to six months later at a higher price. REALTYTRAC’S data showed such houses, on average, selling for $96,496, then flipped at $139,969.
But buyer beware. These days, “flipping” could be a statistical anomaly. When you drill down into the core, you get a much more defined picture of the true market and impending housing war ahead.
The flippers of 2003 to 2006 were small investors snapping up a home at one price, pouring money into the house — sometimes just lipstick on a pig — then selling their diamond at a $30,000 to $50,000 profit.
The rising tide of inflated home prices and rampant appreciation covered all traces of what lay beneath. The urban legend of ordinary folks making killer profits was glamorized and ripe for prime time reality TV shows like “Flip this House,” “Property Brothers” and “Flipping Out.”
This time, it’s different. With a metro Atlanta single-family home supply at 17,000 homes or a 3.9-month supply, demand is quickly outpacing supply. Atlanta’s population growth is unabated. Housing is in such short demand that the pendulum has quickly shifted from flush to scarce in a span of 21 months.
A large part of the recovery swing was the entry of national single-family home aggregators as major buyers — Blackstone/Invitation Homes, Colony American Homes, Five Ten Capital and Key Property. They bought and are now institutionalizing a new real estate product class called “single-family rentals.” As much as 25 percent of the sold inventory over the last three years may have moved to their real estate corner.
The REALTYTRAC data in part can be attributed to this voracious appetite for housing. With the dramatic drop in inventory, the aggregators’ scouts are scraping the bottom for houses that have been overlooked, outbidding traditional buyers, rehabbing, then flipping them to larger institutional players for their expanded rental pools.
As the market tilts forward and the remaining Atlanta inventory evaporates, expect hand-to-hand combat for home purchases. There are too many buyers and far too few homes to buy. The traditional family purchasers will have to claw and scratch their way in between the aggregator buyer vying for the best homes in the neighborhood.
We know of one Gwinnett County home that had 19 offers in 48 hours of going on the market, ultimately selling for $12,000 more than its asking price — a 21st century Battle for Atlanta.
To the victor belongs the spoils.
Frank Norton Jr. is CEO and chairman of the Norton Agency.
Georgia in need of health care fix
By Bill Custer
The Commonwealth Fund’s recent ranking of state health system performance found Georgia’s overall rank had fallen from 35th nationally to 45th between 2009 and 2012. The decline is largely a consequence of the recession, and it shines a light on the frailty of our health care system.
The recession led to lower employment, lost income and a reduction of resources. It reduced access to affordable, available and appropriate care.
Georgia fell in every category of health care the Commonwealth Fund assessed except “prevention and treatment,” where it rose from 45th in the nation to 43rd. The state’s ranking fell in “access and affordability,” “avoidable hospital use,” “equity” and “healthy lives.”
The low ranking is explained in part by poor health habits. Twenty percent of Georgians smoke, 29 percent of adults are obese and 35 percent of children are overweight or obese.
The recession reduced employment and income, which resulted in fewer Georgians with private health insurance, fewer private and public resources for preventative health care, and reduced access to care. The percentage who were uninsured increased from 2008 to 2012. Fewer adults had a usual source of care, and fewer children reported having a medical home. Adults were more likely to put off care because of cost.
The recession has made health care less affordable and highlighted the scarcity of availability. As many as 20 percent of Georgians live in health workforce shortage areas. Georgia ranks 39th in physicians per capita. It has fewer primary care physicians per capita than any surrounding state except Alabama. It’s also among the 12 states with the most restrictive laws that limit scope of practice for mid-level providers who could help meet the demand for primary care.
The consequences of limited access to care are stark: Georgia ranks 42nd in avoidable deaths, 39th in years of life lost, 43rd in breast cancer deaths and 38th in infant mortality. The Commonwealth Fund estimates that if the state’s health system performed as well as the best state, there would be 4,300 fewer deaths annually, and almost 50,000 fewer emergency room visits for Medicare patients. More than 1 million adults and 400,000 children would have a usual source of care.
There is ample evidence that health care in Georgia and the nation is inefficient and expensive. A key element in improving care is to increase access. The Affordable Care Act provides an opportunity to increase access to care, but it will require action at the state level to improve Georgia’s health care system.
Professor Bill Custer oversees the Center for Health Services Research at Georgia State University.