Why intown real estate prices will continue to rise

by Mary Welch

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Go back a few decades and Atlanta’s intown neighborhoods, such as Morningside, Virginia-Highland, Old Fourth Ward and Inman Park, were largely forgotten as the burgeoning suburbs attracted droves of young professionals flocking to Sun Belt cities. Why, asked the new residents from New England and the Rust Belt, should we pay $125,000 for an old rundown two-bedroom, one-bathroom home with small closets when we can go 10 miles “outside the perimeter” and get a three- to four-bedroom house in a brand-new community with access to a pool and tennis courts?

At the time, it was a good question. But there were some who didn’t want the cookie-cutter themed communities and opted for charming bungalows that needed repairs and took pride in restoring them while adding modern inside touches.

My, how far we have come. Today’s suburbanites are choking in some of the country’s worst traffic, and millennials are heating up the intown real estate market searching for the real estate phrase-of-the-moment: a “live-work-play lifestyle.” Add the BeltLine, a 22-mile walking and bicycling trail that rings intown Atlanta, to the mix and prices are skyrocketing, inventory is low and those charming 1,200-square feet 1920s bungalows are being torn down for $800,000-plus, 6,000-square feet “1920s-inspired bungalows.”

“People today are purchasing a lifestyle,” said Jamie Sternlieb, a real estate agent and team leader for Jamie & Associates.

Bullish is the term Allen Snow, owner of the Allen Snow Associates team under Atlanta Fine Homes Sotheby’s International Realty, uses to describe the market. “We have a long, healthy road ahead. Location is everything.” He is about to bring an intown project, 1200 Ponce, to market in Druid Hills, which starts at the mid $600’s and goes up to $1.3 million. “I’ve got 300 inquiries in two months and we’re just taking reservations — including from a lot of families, which is pleasantly surprising.”

Walkable areas such as Virginia-Highland are seeing rapid change due to this shift. According to realtor.com, the median list price in the popular neighborhood is $825,000; listings stay on the market an average of 59 days and sellers there get 98.96 percent of their asking prices. Trulia data shows an increase of $235,000 on median home sales over the past year in Virginia-Highland— an increase of 65 percent; the average price per square foot for the same period went from $329 to $356. This increase is part of a longer trend. Trulia found a two-bedroom listing averaged $257,000 five years ago and today it’s $532,675.

Mark Crouch, a real estate professional at Palmer House Properties, says sales he’s seeing this action on the streets. “Things are turning around quickly — less than 30 days and the price points are starting at $1.3 million in Morningside and $800,000 to $900,000 in Virginia-Highland,” he said, adding that such pricing tends to attract those with liquid assets to spend.  “Thirty percent of what I sell is cash. These kids have money bequeathed to them that we didn’t have as Baby Boomers. That’s what their reality is.”

Of course, a large percentage of the intown inventory is razed as people want bigger houses with modern amenities. “Half of the homes I sell are tear-downs,” Crouch said. “People are willing to spend $800,000 to build a multi-million-dollar home.”

An incredible tsunami into the intown market is the BeltLine, which touches 45 neighborhoods. All of the neighborhoods’ real estate markets are affected, but not necessarily at the same levels of intensity yet. Several less popular neighborhoods, such as Adair Park, Mozley Park and Washington Park, are seeing real estate prices slowing going up as the BeltLine comes their way.

“The BeltLine is like waterfront for Atlanta,” said Snow. “If you are near, on or close to the BeltLine, it’s a virtual lock that the project will be successful. It’s taking off but the land is now getting so expensive that all the development will be mid-rise and townhouses.”

Crouch agrees. “The BeltLine effect is tremendous, and it is absolutely going to continue to affect other parts of town for the next 25 years,” he says, noting the potential impact of infrastructure projects still on the way. “They’re not even putting light rail in until 2020.”

Mixed-use developments are also building up residential inventory, including 1200 Ponce, which consists of four buildings that house 42 one-story flats and nine multi-story condos with the square footage ranging from 1,6000 to 4,000 square feet. In addition to the coveted location, amenities such as an art studio, full catering kitchen, wine storage, outdoor space and yoga studio, make the property desirable.

“People want green space, a rooftop deck, gym, catering studio, washer-dryer, nice appliance package, hardware on main level and quartz or marble countertops—no granite,” Snow says. But he notes it’s about the lifestyle options as much as it is the features. Residents want “enough outdoor space for a grill and for your dog. Atlanta is very dog-friendly.”

The project is a perfect example of what developers have to do in intown neighborhoods, where open lots aren’t readily available.  Intown, the multifamily market consists of tearing down and building new or converting older buildings. The 1200 Ponce buildings were formerly church properties. Other recent redevelopments include that of Ponce City Market, which was once a Sears Roebuck & Co. distribution center built in 1926. “People who like living in a renovated building are very much into the architectural design and integrity of a building,” says Sternlieb, noting that these types of buyers are willing to forgo some features for that authenticity. “They’re not as amenity-driven as someone who is a hi-rise buyer. For instance, an older building usually doesn’t have a balcony.”

Crouch, Snow and Sternlieb agree that the sweet price point for most intown condo is in the $300,000 to $500,000 range. But with this healthy market poised to remain strong and viable, even higher prices are around the bend. “It’s not going to be too long,” said Crouch, “that you’re not going to get a house inside the Perimeter for less than $1 million.”