Atlanta Foreclosure Lists Driven by Job Loss, Overleveraging
Atlanta foreclosure lists are still growing because of continued job losses and the lingering effects of overleveraging in the commercial property sector.
According to Georgia economist Rajeev Dhawan, the Atlanta area has lost over 200,000 jobs over the past 2 years and that jobs will continue to be lost in the coming months. He added that by 2011, metro Atlanta will have lost jobs by a staggering 9.3 percent. He explained that employment recovery will likely start in 2011, with an addition of about 46,800 jobs, but total jobs would still be lower compared to 2007 levels.
For years, Atlanta was among the most improved cities in the U.S. and among the most popular destinations for people looking for affordable homes, job opportunities and good weather. In the past several years, population in the Atlanta area grew by over 120,000 each year and jobs grew annually by more than 85,700.
Population growth drove economic growth because new residents purchased homes and consumer goods and services, encouraging more companies to relocate to Atlanta, more businesses to expand and more builders to construct new homes.
But when the housing meltdown came, Atlanta was not able to handle the pressure. Businesses collapsed, jobs were lost and homes went into foreclosure.
In the July-September quarter, the Atlanta metro area suffered nearly 25,000 foreclosure actions in the residential sector, representing 1.17 percent of all households in the area. The filings marked a jump of almost 5 percent from the previous quarter and a rise of nearly 14 percent from the same period in 2008.
Not only homes entered Atlanta foreclosure lists in recent months, but also commercial properties. Across the metro area, the values of commercial properties have fallen by 25 to 50 percent as tenants move out of buildings, pushing commercial vacancy rates to their highest levels.
Adrian Cronje, economist and chief investment executive at Atlanta-based wealth management firm Balentine, said that many investors over-leveraged in the real estate sector. They built and purchased homes and buildings at high costs and more than the city can absorb. He also added that easy mortgage money enabled investors to build more and homebuyers to buy more than they can afford to pay.
According to the Greater Atlanta Consumer Credit Counseling Service, the number of homeowners defaulting on their home loans continues to rise. It reported that currently Georgia is third in the U.S. in mortgage defaults.
