Just days before his company's grand opening in Atlanta, Bill Schmidt, divisional vice president for Toll Brothers in Horsham, Pa., was optimistic. Yes, interest rates had gone down, and Atlanta looks like a good market long term. But really, in this market, is there anything worth getting excited about?

CLOSE-IN FOR COMFORT: Atlanta's suburbs–with the exception of Forsyth County–are suffering, while closer-in product appears to be moving during the downturn. Photo: Courtesy Atlanta Convention and Visitors Bureau "Atlanta is so big–one of the things people realize is that in a bad market here, there are still a lot of homes sold," Schmidt says.

If early indications are anything, Toll may be able to capture some of those buyers. The VIP opening of Woodstock Knoll, Toll's first foray into Atlanta, pulled in 100 people. The project features homes priced from the $400,000s to the $600,000s. "The turnout was pretty good," Schmidt says. "It was good quality traffic as well. People are really interested."

A builder like Toll Brothers, which courts high-end buyers, thinks it can find success in Atlanta. The main reason: There are a lot of baby boomers and corporate headquarters in the market. But there are challenges as well; Metrostudy says closings have dropped since 2005 from 54,000 to 46,300. Things have gotten even worse in the past few months.

"Since the mortgage meltdown in mid-July, the market is the softest it's been in Atlanta since the early '80s," says Bryan Cohen, president of Suwanee, Ga.-based Touchstone Homes. "There's a supply-demand imbalance, and the psychology is very negative."

Builders need to change that psychology so they can burn off some of Atlanta's 5.6 months of finished, vacant inventory. The Atlanta Homebuilders Association is trying to get people to move with a buy-now initiative. The economy is good enough and the city is big enough that they should be able to move homes. "Long term, Atlanta will continue to be a good market," says David Clough, president of Norcross, Ga.-based Waterford Homes.

Retirement Haven

Like many builders, Clough sees great potential for Atlanta in the active adult market. "It has a good climate and great access to transportation," he notes. "My mother moved to Atlanta to be near me and her grandchildren," he says. "There's one other person in my company with same story."

Apparently, the situation at Waterford isn't different from the rest of Atlanta. Domonic D. Purviance, a senior consultant in Metrostudy's Atlanta region, sees a lot of factors pulling baby boomers to the area. "Their kids live here," he says. "They're still able to be close to their kids, have an active adult lifestyle, but [it's] far less expensive than Florida."

Since 2000, metro Atlanta has been the country's fastest-growing market, with those aged 55 and up leading the way. In the U.S. Census Bureau's 2005 population estimates, the 55 and older population growth rate of 30.6 percent was more than double the total population growth rate of 13.7 percent.

"In the long run, we will see strong activity," Purviance says. "We predict the active adult communities will be the best selling communities in the market."

Atlanta's attraction goes far beyond just being near family. In fact, a big part of its appeal is the place it's not: Florida. Leading the way are what Clough calls "halfbacks." These are people who moved south to Florida and received a rude awakening when the 2004 and 2005 hurricanes hit. So they relocated to northern Georgia–halfway back to where they came from.

"Florida is more expensive," Purviance says. "They have high insurance costs, and they have hurricanes. Georgia and the Carolinas became attractive to active adults. We still have good weather, but we don't have hurricanes."

Plus, there's a lot to do in Georgia. "It's close to the mountains, the ocean, and the Gulf, and has plenty of lakes and rivers throughout," says Rebecca Stahr, founder of LifeSpring Environs, an Atlanta-based group that helps builders, developers, and their customers address the various changing lifestyle needs of an aging population. "It has a lot of natural resources. It's economically sound. It's an international city; the city is multicultural." It's also inexpensive. "People who come here from certain parts of the country get twice as much [for their money]," Stahr says.

Job Factor

Although it would seem that the economy didn't really play a part in the movement of baby boomers into Atlanta, that's not always the case. First, many of these people are selling their homes. "We assume active adults are immune to some of the things in the market, except if they have a home to sell," Purviance says.

So unless a retiree is looking for a second or third home, they'll need someone out there to buy. That's dependent upon a strong economy–and a strong housing market.

But there's more. Many of these boomers who are moving to Atlanta from other places (Stahr estimates this number at about 30 percent) do so because their children and grandchildren are there. And these people need jobs.

Fortunately, the job market isn't bad in Atlanta. The city averages approximately 40,000 to 50,000 new jobs per year. "Transportation and trade have experienced the largest percentage growth," Purviance says. "Education, health, professional and business services, leisure, and hospitality are big. Government services has always been a big key because so many people are moving here. There are also a couple of large schools and hospitals."

Only New York and Houston host more Fortune 500 companies than Atlanta's 12, which include such well-known brands as The Coca-Cola Company, Home Depot, Delta Airlines, and the United Parcel Service in adjacent Sandy Springs. The headquarters of AT&T Mobility, Newell Rubbermaid, Arby's, Chick-Fil-A, Earthlink, Equifax, Georgia-Pacific, Oxford Industries, Southern Company, SunTrust Banks, and Waffle House are also in Atlanta.

"You really have a broad spectrum of companies," Schmidt says. "You have a lot of middle management guys here. Some of the markets around the country, they don't have that big of a pool for luxury buyers [like you find] in Atlanta."

But things aren't quite as good as they were in the late 1990s. "In the '90s, a lot of corporations moved here," Purviance says. "That spurred a lot of demand for high-end housing. We have not seen that level of activity lately. Those large companies are not looking to move. They're not coming in at as fast a rate as in the '90s."

Purviance voices other concerns about the Atlanta market's future. "There are so many different factors; the big one is the economy," he says. "If we go into a recession and job growth declines, how much of our economy is dependent on housing? It's not just construction; it's the mortgage industry and the appliance industry. A lot of people have real estate related jobs."

Atlanta also lost some pivotal manufacturing jobs in recent years, according to Clough. "The major auto plants for General Motors and Ford closed," he says.

Segment Differences

INTOWN ELEGANCE: Priced from the mid-$600,000s, Stonecrest Manor from Waterford Homes features cluster homes within close proximity of downtown Atlanta and the Hartsfield-Jackson Airport. Photo: Courtesy Waterford Homes Take the job shifts and large number of corporate headquarters in the Atlanta market, add the people moving into the market, then throw in subprime mortgage woes–what does it all mean to home builders? Stephen Palmer, CFO of Duluth, Ga.-based Bowen Family Homes, says the company's sales were down 21 percent and closings were down 10 percent through the end of August.

The surprising thing is that traffic is still pretty strong. "My actual visitor traffic per community is good," Palmer says. "This year is actually level with what it was last year. Now my conversion rate is bad. You just cannot get these people off of the dime."

The homes at the bottom of the market have been hit the hardest. Case in point: Bowen's project in Lawrenceville. The builder lost half of its 66 signed contracts. Many of those prospective buyers couldn't qualify for a loan.

"We've been whacked by subprime and Alt-A," Palmer says. "The whole national psyche related to subprime and the lack thereof started a lot of this mess that's gone on."

The jumbo loan market–those loans in excess of $417,000–has been impacted to some extent, according to Purviance. "Once you get above $600,000, the high-end segment is fine," he says.

Cohen attributes that to strong job growth. "Some of the higher-priced housing in great neighborhoods is still selling very well," he says. "Because the economy is doing well, there are still people making money who want what they want. For them, it's a great time to buy a house. They can still get a great deal, and interest rates are low."

That gives Schmidt a lot of hope as Toll opens in the market. "Atlanta has a large luxury home market," Schmidt says. "I think that will fit well with our luxury product and warranty. I think we'll be attractive to a lot of people in the market."

Learn more about markets featured in this article: Atlanta, GA.