Effects of Excess Real Estate Inventory in Metro Atlanta and Surrounding Areas

While the home value bubble may have burst in Florida and California, the supply bubble in Atlanta has yet to pop.

According to Atlanta Federal Reserve President Dennis P. Lockhart, low-cost land and the highest rate of building permits in the nation created an excess supply in the metro-Atlanta area. Atlanta issued 61,000 building permits in 2005 alone. These factors helped create the current 12 month supply of houses on the market — the average supply lasts only eight months.

Due to the excess supply, Atlantans are building fewer homes now. In fact, building permit applications have decreased 81 percent since 2005. This helps reduce the number of excess homes entering the market, reducing the supply of houses and driving prices back up.

Overall, home prices have only fallen eight percent in the metro area, which is significantly less than other states, and because of foreclosures, the supply does not seem to be dwindling quickly.

However, with the combination of a growing population, slower new home construction and decreasing home prices, the Atlanta home supply will eventually stabilize and return to the six to eight month range. This will return the real estate market back to a normal, more profitable position.