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Tag Archives: investment

Can the Market Decide?

Monday, 16 May 2011 08:12
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Installation of a sidewalk in Middletown, Rhod...

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It has been almost a year since the last of the real estate targeted stimulus funds ended.  In fact, it was April 30th last year that contracts had to be written… with a June closing.

Interest rates were a touch higher than now… and sales were mixed compared to this year.  They were certainly up from the year before.

But there are some other VERY important facts to also consider:

  • Values in most of the country, including Gwinnett County, GA, are down from last year…  +$8000 tax credit…  -$15000 in value.
  • The government (taxpayers) borrowed about $17 billion for the rebates…
  • Much of the money went to people that would have bought homes anyway…
  • A good bit of the money went to people that weren’t actually eligible…

Maybe we should have just let the market work it out.  Maybe.

Here we are a year after the credits started to go away, and the market is showing signs of recovery… but the market tanked for a while immediately after the credits expired.  It would be VERY easy to argue that the reason the market is starting to turn is that prices have eroded further, not because of any lasting stimulation effect of the tax credit.

$17 billion here, $17 billion there… pretty soon you are talking about real money…

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Wayback Wednesday… Property Tax Valuations…

Wednesday, 27 April 2011 08:42
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International Money Pile in Cash and Coins

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It’s that time again.  Last week we got our tax valuation reassessed.  For us, it wasn’t a bad thing and honestly, it hasn’t been for the folks I have talked with.  Let me qualify that… for the amount of tax we pay, it wasn’t a bad thing.

Two years ago, Gwinnett County re-assessed our home.  The jacked us up by about 12%, even though there was NO justification in the comps.  They got away with it because it wasn’t worth the fight for us to carry on.  We disputed it a couple of levels, but eventually dropped it.

Oddly, this was almost exactly two months after the State of Georgia passed a law requiring the counties to consider foreclosures and short sales in the valuation process.  I think it might have been their “last hurrah” before having the valuations that were based in reality.

As mentioned, we got our valuation last week.  And it went down… way down.  in fact, it dropped by more than twice as much as it went up… we were down over 25%.  Good news for the house payment.  Bad news for the value of our house.  Bad news for Gwinnett county… the budget is not going to be happy with all of these lower valuations.

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Wayback Wednesday… Brand New and Foreclosed…

Wednesday, 30 March 2011 08:25
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A couple of years ago, I wrote about a development that was selling brand new bank owned homes.  There seems to be a bit more of that going on now.  I have run across a couple of subdivisions with brand new homes that are being sold by the bank.

One nice thing about a brand new home that is foreclosed is that it shouldn’t have many of the “deferred maintenance” issues that many foreclosed resale homes may have.  On the flip side, many of them will NOT have a builder’s warranty, although some might.  It would depend on if the bank is springing for a good warranty and whether the builder has gone completely out of business (sometimes the foreclose isn’t the result of the builder ceasing operations, but rather a restructuring of debt).  Careful though, some warranties aren’t that great… they might not cover much of the structure (which is why you want a builder’s warranty) for more than a year or two.

Wayback Wednesday… I was SO wrong…

Wednesday, 09 March 2011 08:36
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I try to step out on a limb regularly.  Anybody can talk about the past, and what they market did, but figuring out where we are going from here has a LOT more value.  But, if I am going to step out onto the limbs, I am going to be wrong.  And if I am going to be wrong, I have to highlight it and learn from my mistakes.

Last year, I wrote a post highlighting my huge mis-call of the real estate market in 2009.  I expected that the Atlanta market would decline 5% or so… and it went down 20%.  It may have dropped 20% more since then (at least according to Case-Shiller), but I think that a 36% market drop is a little overblown for most of my service area at least.

Even if you don’t want to read it to see how wrong I was, there is a good discussion about the difference in Leading and Trailing Indicators.  It might even be worth the price of admission.

Enjoy.

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Wayback Wednesday… Cram It Down?

Wednesday, 16 February 2011 08:25
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Last year I wrote a post about Cram-downs, comparing the pros and cons from a consumer perspective.  And there are both… depending on the specific perspective one wished to use.

  • It can help people that are upside-down if judges can force lenders to write off a portion of the principle balance.
  • For those that aren’t upside-down, it would result in increased borrowing costs as lenders take on more risk.

If you check out the original post, you can see some examples of exactly HOW MUCH the increased costs could be for consumers.

Personally, I think that the bad points out-weigh the good.  In addition to the increased interest rates, commercial borrowers (where Cram-downs are allowed) generally have to provide much higher down payments.  This lowers the risk for lenders.

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