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Start to look in the top end intown desirable areas in Atlanta and they are not really that much less than other cities anymore. Its in the outer suburbs that Atlanta suddenly becomes a lot cheaper than DC etc. With the increase in travel costs and congestion this difference will become more marked in the future.
All the points mentioned above are very valid in contributing to the home prices here, but yes, in some cases poor construction *IS* one of the reasons, too. Georgia has some of the most slack regulations for contractors in the U.S., so shotty construction is definately a problem here. Contractors cut corners here and there, and where they think people won't notice or that in their minds, it doesn't matter. The company I work for doesn't build homes but deals with the construction industry, and I am aware of the practices of some of these builders - I personally wouldn't buy a home from half the people we sell to due to poor construction quality and the way they cut those corners.
My advice: A good home inspection is necessary before signing on any dotted line.
Perhaps building codes influence cost as well, relative to some markets. My father is a builder in South Florida and he is always amazed/appalled by they way homes are built here. The difference is things have to stand up to hurricanes down there, but not here. What is perfectly safe for north GA wouldn't be for Miami.
Interestingly enough, I've been pondering a similar thing in regard to store size. So far I've been amazed at how tiny the grocery and big box stores are here compared to the ones I patronized back in Huntsville. I finally concluded that the land around here costs considerably more than it does there. Interestingly enough, I was out in Buford last week and checked out the Wal-Mart there, and it's approximately the same size as the ones back home. The price differential must be considerable for those big chains to even take them into consideration. I think it's interesting that the Wal-Mart on Peachtreee Industrial has an underground parking deck. I'm not sure if it's for cost or environmental impact, but it's still interesting.
Location: Mableton, GA USA (NW Atlanta suburb, 4 miles OTP)
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Originally Posted by Newyorker2
Initially i thought poor construction! Then i thought because its really country out there... but still I cannot make sense out of the reason why homes are so cheap.. is it because of sprawl? bcause you have to commute a long time to work?/ or do I go back to poor construction?
One might as well ask the reverse question: why are homes in other parts of the country so expensive?
Houses where I came from (the Twin Cities) are quite a bit more expensive than down here. Stronger roof construction due to snow weight and better insulation are possible reasons, but those don't account for the different in price by themselves.
Cheap labor and cheap land. The cost of construction materials for a new home in the Atlanta market is the same as the cost for a new home in suburban NJ, and even though the labor is somewhat lower here, it's not that big of a factor. The biggest factor is the land- I can buy 10 acres of raw land 30 miles from downtown Atlanta for less than what you'd pay for a 50'x100' lot in most neighborhoods within a 30-mile commute to NYC.
Spot on Bob.
Take current economics aside, and when we do move out of the downturn you will see this benefit erode here also. Supply and demand. Demand will be back and with the Atlanta metro area growing at 125,000 folks per year, in the not so long term the "affordability factor" will follow the same path of NJ.
On top of population growth, our water issues will also constrict building in the future too. Hey! when is it suppose to rain again anyway?
One might as well ask the reverse question: why are homes in other parts of the country so expensive?
Houses where I came from (the Twin Cities) are quite a bit more expensive than down here. Stronger roof construction due to snow weight and better insulation are possible reasons, but those don't account for the different in price by themselves.
Yep, and here in the deep south your home may be cheaper but the cost will be made up in "critter control" this being pests, termites, yard treatments, etc. Also, your overall maintainence from power wash to mold control (if we ever get back to normal rainfall).
Many folks move down here looking for life on the cheap, but find if they want to keep their home "nice" and "appreciating" the cost of upkeep will close the gap. All you need to do is travel neighborhoods. Bob and Jim have the same home next to one another. Bob spends the needed dollars to keep his home nice in the Southern humidity, he controls the bugs, he powerwashes the schmoo. Jim does not. You will see the big time difference as it will stand out.
The simple answer is: land costs more. It has nothing to do with the quality of construction, and on a citywide level is only marginally affected by taxes, schools, etc.
The deeper question, "why does land cost more", is complex. Probably as complex as asking why Mr. X falls in love with Ms. Y rather than Ms. Z. There are economists and city planners who write books on the subject.
As I understand it, the primary factors are economic health, size, physical constraint, livibility, and what I will call "inertia". Physical constraint can be broken down into natural and manmade.
I put economic health first because, without it, land prices can collapse expotentially. The cheapest houses in the US are located in Detroit, where some residential land actually has negative value. You can buy a 1500 square foot house that needs work for $2000. You can buy a beautiful old 2000 square foot house, in great shape and a pretty decent neighborhood, for under $200,000, less than the cost of construction. Other rust belt cities, whose economies have collapsed, have similar problems.
Economic health has a huge contributing factor of physical economic features. Transportation may be the greatest of these, at least traditionally, where access to water routes (especially oceans, i.e. great harbors) has dominated. Natural resources can be influential but are largely overshadowed by transportation.
(Atlanta is a very odd object lesson. It did not even exist until 1830, and only came into being because it was a convenient point for railroads to intersect. It grew because it is also a convenient place for highways and then air routes to intersect. As land and air transportation grew in economic importance, water transportation, and especially river and canal transportation, became less important. Towns along the Mississippi and Great Lakes are full of grand old houses nobody can afford. I guess Erie, Pa., got a double whammy.)
Size is clearly an enormous interdependent factor. Higher end jobs which attract ambitious and talented people generally require a city of a certain size, simply because such people require access to high-end facilities and people in other industries. And with size comes upward market pressure on land. (There are exceptions, but for every Warren Buffett there are a thousand traders in lower Manhattan.)
Size without economics equals New Orleans or Detroit. Economics without size does not raise land prices much, since cheap land is available within a reasonable commuting distance.
Physical constraint is the flip side of population size. More physical constraint equals higher density equals more expensive land. Population size drives demand, physical constraint limits supply.
Physical constraint can be natural -- Hong Kong and Manhattan would be prime examples -- or manmade, which includes primarily zoning and transportation.
At some point, livibility comes into play. In fact, it can drive economics and size greatly, as in the case of San Francisco and the Sunbelt. The opposite is also true, however, and livilibility can be driven to some degree by economics and size, as in the case of natural improvements (e.g. Los Angeles, which imports water from the Colorado River) or gentrification (e.g. Midtown Atlanta, which has gone from a drug and crime infested slum to the hottest part of town in several decades).
I used the term "inertia", which would include things like "history" and "congregation", etc. Palm Beach is more expensive than Daytona Beach in part because rich people want to live near other rich people, developers are going to put higher-end projects near rich people, rich people are going to want to buy near or in high-end projects, and so on. Most people don't want to own the most expensive house in the neighborhood.
In the same vein, if I'm interested in art or classical music, I'd want to live in Chicago or New York or Boston with their incredible museums and symphonies, etc. Cities like Atlanta or Phoenix will not have the same museum facilities for centuries, if ever.
(Joke: What's the difference between Cleveland and the Titanic? Answer: Cleveland has a better orchestra.)
Factors such as schools, taxes, and construction quality may be important on an individual level or the very short term -- they can drive individual decision-making in a specific instance -- but in the long term they are driven by other factors. Georgia and Atlanta's traditionally poor public schools have improved fairly rapidly where land prices have risen, and land prices rise when groups of higher-end socio-economic status congregate in a school district.
All the factors are enormously interdependent, which makes a discussion of "why are land prices higher in City X than City Y" difficult or impossible to answer in a short or simple fashion.
Okay, this post is long enough. I hope it added something to the discussion.
Perhaps building codes influence cost as well, relative to some markets. My father is a builder in South Florida and he is always amazed/appalled by they way homes are built here. The difference is things have to stand up to hurricanes down there, but not here. What is perfectly safe for north GA wouldn't be for Miami.
Exactly. A great example of this is this years strong tornado outbreak earlier this Spring, as well as a strong tornado season we had about 5 years ago in Spring. We saw examples of new homes in the burbs that were only hit by F0 tornadoes being LEVELED and ripped apart like paper. A F0 tornado should NOT be able to do that kind of damage to a home - even a direct hit. Broken windows, slight roof/chimney damage, or siding damage sure, but not homes ripped open like cans the way many of them were. And the ones they showed with the worst damage from weaker twisters on TV were always newer homes that this happened to - the older ones that were hit had significantly less damage to them with the weaker tornadoes.
This is why on top of the good inspection suggestion I always give people, these days I tell them if they're going to move into a newer model wood fram home, they should make sure and get a basement, too. I barely trust some of these new places to make it in a bad thunderstorm these days.
Interestingly enough, I've been pondering a similar thing in regard to store size. So far I've been amazed at how tiny the grocery and big box stores are here compared to the ones I patronized back in Huntsville. I finally concluded that the land around here costs considerably more than it does there. Interestingly enough, I was out in Buford last week and checked out the Wal-Mart there, and it's approximately the same size as the ones back home. The price differential must be considerable for those big chains to even take them into consideration. I think it's interesting that the Wal-Mart on Peachtreee Industrial has an underground parking deck. I'm not sure if it's for cost or environmental impact, but it's still interesting.
That specific Walmart had such local oppostion that they had to backpedal and add some concessions at that specific site to appease local residents and the Chamblee government. It still should not have been allowed though IMHO and apparently Chamblee couldn't afford to carry on the legal costs of fighting Walmart. What with the increased gentrification of that area its a shame that they could bully their way in. Most everyone local boycotts the place. It will be interesting with the changing demographics in that area to see if they are successful most of their core customers are moving out of the area. Apparently already they are stocking more expensive product lines than most Walmarts.
BTW I think right now the going rate is a million an acre for retail zoned land in Chamblee.
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