A week before she was supposed to close on her new home, an Atlanta public school teacher learned that the homebuilder with whom she had contracted had no intention of honoring the real estate agreement for a $295,000 home and was raising the price.

What’s worse, it was perfectly legal.

Hanna James had signed a contract with Heatherland Homes of Atlanta in February 2021 to build a new house in a new south Fulton County subdivision, NBC affiliate 11Alive reported. James made a $3,500 downpayment and paid almost $5,000 in upgrades. She visited the construction site often and watched her new home take shape, photographing every stage of the construction.

James was unable to afford the house at the new price. The price of the house was eventually raised to $370,000, 25 percent higher than James’ original contracted price of $295,000.

James saw other people posting similar complaints online about the builder canceling customers’ contracts at the last minute for more money.

Someone who claimed to speak for the company responded that it had no choice but to cancel contracts because prices of building materials had risen during the construction period and the purchase price didn’t cover the rising costs, 11Alive reported.

Homes in metro Atlanta are now officially unaffordable, according to the Federal Reserve Bank of Atlanta’s Home Ownership Affordability Monitor (HOAM), Bloomberg reported. The bank uses home prices, interest rates and median income in the area to calculate the feasibility of residents buying a home.

The median income rose 1 percent over the last year, but the median price of a home rose 25 percent, according to the Fed.

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The annual mortgage payment for homes in metro Atlanta (DeKalb, Gwinnett, Fulton and Dawson counties) now exceeds 30 percent of the area’s median income, the Atlanta Business Chronicle reported. 

In January 2022, the median income for metro Atlanta workers was less than $73,500 and the median price of a house was about $350,000, according to the Atlanta Fed.

And Atlanta is not alone. In August 2021, the central bank’s Home Ownership Affordability Monitor index was down 11.5 percent from August 2020. Since March 2021, the HOAM index has remained below 100, which means a median-priced home on the market is unaffordable for a median-income U.S. household, according to the Atlanta Fed. 

Given current home prices, a median-income household would need to spend 32.4 percent of its annual income to own a median-priced home. This exceeds the 30 percent affordability threshold set by the U.S. Department of Housing and Urban Development (HUD).

All builder contracts are written to protect the builder and builders have many ways of getting out of their contracts, said Atlanta Realtor Kevin Maxberry of Maxberry and Associates.

“And there’s very little that a buyer can do,” Maxberry said, “because all builder contracts are what are called ‘unilateral contracts.’ They’re written to protect the builder … It’s unethical and unfortunate for the buyer to have to experience something like that.”

Small to medium-sized home builders are more likely than larger ones to be challenged by cost-overruns, Maxberry added.

“Prices are just going crazy” Maxberry said, and it’s happening in every facet of the housing industry.

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