You think it’s hard selling a house these days? Try unloading a subdivision.
And not just any subdivision, but one with few if any completed homes and a weedy patch where the swim-and-tennis center was planned.
That’s the reality many Georgia banks find themselves in amid a foreclosure crisis that has claimed not only individual homes but also entire failed developments.
These idled, “zombie” subdivisions can be found across metro Atlanta, but they’re most prevalent in outer-ring suburban areas. Selling them has proven tough, with some properties sitting on the market for months on end without even a nibble.
The fallout has been stark.
Banks that backed these projects are taking it on the chin, recording huge losses as they foreclose on property and make sales at a fraction of the original loan price.
In the past year, 16 Georgia banks have failed, more than in any other state, largely because of residential real estate losses. Dozens more are struggling.
Residents who bought in these troubled developments, meanwhile, are seeing their home values plummet and in many cases are still waiting for promised amenities such as swimming pools to be built.
To say the market has been sluggish would be an understatement. The main problem is sheer volume – a staggering 150,000 vacant housing lots across metro Atlanta are available, more than a decade’s supply at current absorption rates.
The median sale price for empty lots has plunged from $57,000 at the height of the housing boom in 2007 to $30,000 this year, according to Smart Numbers, a Marietta company that tracks the local real estate market.
“It’s going to keep going down, because we have too many lots, and there’s not enough demand,” said Steve Palm, the firm’s president.
The hardest hit areas are on the region’s fringe, Palm said, such as Bartow, Jackson and Newton counties, where there’s tons of supply and few sales.
Sitting in front of a computer at his home office, Palm pulls up a color-coded map of metro Atlanta showing lot supply by U.S. Census tract. An ominous arc of dark reds and browns encircles Atlanta.
“This is the ring of death,” he said.
It’s “depressing”
A turnaround couldn’t come soon enough for residents of WaterLace, an upscale subdivision in south Fayette County where construction stopped after only a handful of homes were built.
Nearly 400 homes were planned for the 600-acre site, which includes a picturesque lake. But the project shut down last year and has become a suburban ghost town.
Winding streets and cul-de-sacs are lined with vacant lots. The unfinished clubhouse sits at the end of a dirt path, surrounded by chest-high weeds.
It’s not clear who will finish the job, or when.
The project’s developer, Stephen Macauley, went bankrupt last year. The lender, Security Bank of Macon, tried to sell the property through an Atlanta real estate company, but the bank failed two weeks ago. The Federal Deposit Insurance Corp. is now responsible for selling the property.
Jeff Hood, 39, moved to WaterLace last year with his wife and two children.
“We were promised these amenities and they’re not here. There was going to be a pool, a clubhouse, a walking trail,” said Hood, an attorney. “It’s kind of depressing seeing all the land. Some of the property is undeveloped. It’s an eyesore, all the weeds.”
Don and Stephanie Williams, who paid $475,000 for their home at WaterLace, hope a buyer will come in and finish the development. For now, they’re trying to enjoy the peace and quiet that comes with living in a failed subdivision.
“We have about 12 to 13 families out here, they are all great people,” said Williams, standing on his front porch on a recent sweltering afternoon. “We have all bonded together. We are in this together.”
Bankers’ tough choice
The flood of distressed subdivisions is unprecedented and has given banks numerous headaches.
Is it more cost-effective to complete half-finished homes before selling or to put them on the market as-is? Should they sell lots in a distressed market or hold onto them until prices rebound?
Complicating matters, subdivisions often were financed by more than one bank. And different lenders frequently disagree on what steps to take when problems arise.
“Every bank has a different model,” said Robert J. Romano, executive vice president with Coldwell Banker NRT Development Advisors. “Some want to hold until the market returns, some price to move [property,] ... and some just dump them.”
While the supply of lots remains at an all-time high, the pool of buyers willing and able to jump into such a distressed market is small.
The players include large national builders healthy enough to construct new homes and real estate investment companies with the resources to hold onto lots until the market turns around.
The market remains relatively strong in some spots, experts say, including affluent pockets of north Fulton and Forsyth counties.
Banks take different approaches to disposing of distressed property. Some sell lots and homes through real estate agents, and a growing number list foreclosed properties on their Web sites.
A few banks are throwing hundreds of lots from various subdivisions together and asking investors to make bids on some or all of the holdings.
Some banks eager to unload property are dumping huge quantities of vacant housing lots at fire-sale prices that have dipped as low as 20 to 30 cents on the dollar.
Crying foul
Synovus, the second-largest banking company based in Georgia, has been aggressively selling troubled assets, including many lots in the Atlanta area. Richard Anthony, the company’s president and CEO, said Synovus sold about 1,000 lots in the second quarter alone.
While the company has sold lots through auctions and bulk sales, the best prices have come when its bankers go out into their communities and sell property to local builders and developers, Anthony said.
But some Georgia banks are crying foul, saying the playing field is far from even when it comes to disposing of distressed property like vacant lots.
Large banks that have received federal bailout funds are better able to sell property at sizable losses, which pushes down prices for everyone, said Joe Moss, at Security Exchange Bank in Marietta.
“We don’t have the ability to take asset write-offs against taxpayer money like these larger banks have,” Moss said. “That’s really affected the market.”
Another victim of the crisis: home owners who bought in subdivisions that later failed.
Opportunistic companies are buying up remaining lots at a fraction of their original value, meaning they’re able to build new homes and sell them at lower price points.
The original owners may grumble at the erosion of their property values, but that beats the alternative, said Eugene James, division director for MetroStudy in Atlanta.
“It’s better to have some neighbors and have the development built out than have it look deserted,” James said. “Unless you prefer there being only five houses in a 300-lot development, so you can go and hit some golf balls.”
Those charged with selling failed subdivisions face a huge challenge.
Consider Jennah Village, a small, 28-lot subdivision in south Fulton County that fell into foreclosure before any homes could be completed. Five half-built homes sit beside empty lots.
The homes have generated some interest, but no one has even looked at the lots, said Logan Cook, the project’s real estate agent.
Cook is selling the property for First State Bank of Stockbridge. The small Henry County lender is struggling with a portfolio of bad real estate loans that reached $87 million this spring.
Here’s how Cook describes the current market: People looking to buy foreclosed property are turning first to finished homes, which are the easiest to sell. Partially built homes are next in line, followed by empty lots.
The 22 lots Cook represents at Jennah Village are listed for $25,000 each, down from an original asking price of around $40,000.
But no buyer has made an offer, and until one does it will be unclear what they’re really worth
Labels: Bank Owned, Bank owned properties, foreclosed land, foreclosed properties, foreclosure, Foreclosures, subdivision, vacant homes, vacant lots
# posted by
Brian Vanderhoff @ 8:59 AM
