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Tag Archives: investment

USA Today thinks prices are heading up…

Wednesday, 09 May 2012 09:21
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And they very may.

map for us unemployment numbers

map for us unemployment numbers (Photo credit: Wikipedia)

According to the article I ran across this morning, house prices should go up about 4% each year for the next year.  I can see that… especially on the entry level of the market.  On the upper end of the market, though, it isn’t looking like we’ll see recovery for a little while. Between taxes and other policies that aren’t that friendly towards small business, there isn’t a lot of short term optimism with many of the folks that buy more luxurious homes.

So… my take is this.  I see the lower end of the market performing well over the next few years.  The higher end of the market more tricky.  The middle of the market, as well.

On the entry level, investors are scooping up properties.  Prices have stabilized and we will likely see increases regardless of the political or business climate, unless there is a MAJOR reversal.  Many of the investors are buying and holding properties as rentals, and there are simply a lot of people out there that have good income but cannot buy because of foreclosures and short sales.  That will drive the entry level pricing picture.

selfmade image of U.S. Unemployment rate from ...

selfmade image of U.S. Unemployment rate from 1890-2009 (Photo credit: Wikipedia)

At the middle of the market, there are a few competing stories.  Many of the move-up buyers are stuck in their current homes or have been through foreclosures and short sales.  But, there are some that will look at snapping up a deal when they feel comfortable about their employment prospects.  Right now, that simply isn’t the case.  We all hear that the Unemployment Rate is dropping, but what we are NOT seeing is the Employment Rate moving up.  The drop in “unemployment” is mostly tied to people giving up looking for work.  In fact, the Workforce Participation Rate is at a low point.  So, if people in the middle start to feel that the economy is stable, they will buy homes.

On the upper reaches of the market, there are a few different stories as well.  Foreclosures and Short Sales are a factor, but not as often as on the lower segments.  But, comfort is a major factor.  Most of these folks are business owners or senior employees.  Taxes and regulations are playing a major role in their decisions.  Talk from Washington of major tax increases and more difficult regulation are making them hold off… even when they see a bargain.  A more business friendly tone in DC could turn the tide for these buyers.

The big question… Where do YOU think the market is going, and why?

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Prices Up? Prices Down? WTH??

Wednesday, 25 April 2012 08:00
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Case-Shiller Home Price Index

Case-Shiller Home Price Index (Photo credit: planspark)

Just in the last two days I have heard reported on the national news that prices have stabilized (link to the NAR release here) and that prices were declining in 16 of the 20 top metro areas (Case-Shiller link here).

How can these two stories be squared?

Honestly, I don’t think that they can be…  and given experience with past “interpretations” by the NAR, I’m inclined to not believe the NAR numbers.  Actually… I believe the numbers, but not the interpretation.

Case-Shiller looks at actual properties in some of their surveys.  Rather than looking at averages or medians, they sample properties.  By looking at repeat sales of the same address, they can better determine what prices are doing.

Pretty much every other study looks at all of the sales and then breaks it down to average or median prices.  The problem then is that if more expensive homes are selling, it looks like values are going up.  If less expensive homes are selling, it looks like prices are going down.

Of course, nothing is perfect.

The problem is that there are a LOT of ways that data can be sliced and diced.  And EVERYONE that looks at the data has an agenda.  Some may be better at ignoring their personal bias, but it is still there.

My take?  I don’t think we are quite ready to recover.  Yet.  I think that the bottom line is that until there is a recovery in jobs (not the unemployment rate, but the employment rate), there will be no recovery in the hosing market.  And that shakes out to local areas…

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Are We At The Bottom Yet?

Wednesday, 18 April 2012 10:24
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Historic downtown Marietta's town square

Historic downtown Marietta's town square (Photo credit: Wikipedia)

It seems that every time someone figures out I am in real estate, the next question is…

Are we at the market bottom yet?

The answer is… that I don’t know.  And anyone that tells you that they DO know is either lying or from the future.  I’m not banking that they are from the future.

Prices in the Atlanta area are WAY down from the highs of 2006-2008.  In some areas, it is more than 50% down from those highs.  In other areas, we are “only” down 30%.  Day after day, I talk with people that are underwater, or just plain mad that their values have eroded to the extent they have.

Right now, there are a couple of things in favor of calling a “market bottom”… beginning with inventories.  We are at historical lows in inventories.  And at a time when we usually see them increasing (Spring), they are still dropping.  Meanwhile, year over year sales are growing strongly.  Those are both good things for the recovery of the market (unless you are a buyer looking to “wait for it to go lower”).  Supply is decreasing and demand is increasing.  That generally should lead to a strengthening of prices.

But all is not “milk and honey” in the real estate realm.  A large percentage of sales in the Atlanta area, and in Gwinnett County, is tied to distressed property… foreclosures and short sales.  Not just that, but those sales are largely at the bottom of the market… entry level houses.  Under the $200k level, the Absorption Rates are generally well under 6 months.  Some are barely above 3 months of inventory.  At the same time, move-up homes are not doing as well.  Passing $300k, A/Rs are mostly over 12 months.  In effect, there is twice as much inventory are there should be for the level of sales.

The latest reports say that the foreclosure pipeline is about to get filled again, too.  With the settlement of the lawsuit between major lenders and most states, banks are free to continue foreclosing on distressed properties.  While there are a lot of people that aren’t happy about that, it is a needed step for recovery.  BUT, we have been hearing about the “next wave of foreclosures” for more than three years.  It has always been just a few months away.  It is still just a few months away.

Here is the bottom line, in my opinion…

If the next wave of foreclosures breaks on the shore, then there will be a round of price erosion.  There will be an increase in supply, and demand likely won’t be able to keep pace… prices will drop.

If the wave fizzles before hitting the beach, we have already seen the bottom in the entry level market, and that bottom will soon pass at higher price levels.

If the jobs picture brightens, the foreclosure wave won’t matter as much.  Demand will pick up much, if not all of the excess supply.

If the jobs picture dims, the market will continue to slide.  The fizzling of the foreclosure wave will keep us where we are, at best.

As a side note, the unemployment rate is NOT a measure of the jobs picture.  We need to look deeper… like at the employment rate.  We actually still have a decrease in the percentage of employed Americans, despite the unemployment rate dropping.  The unemployment rate does not take into account discouraged workers that have left the job market.

So, how do you feel about the people telling you that they know where the market is going?

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The 2nd Most Important Part of the House…

Wednesday, 11 April 2012 08:00
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Because it is where the food comes from and many of the cold beverages are stored…

We all like a nice kitchen, right?  Even us garage guys…

Gwinnett Market Impressions…

Friday, 06 April 2012 08:00
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Gwinnett County Historic Courthouse, Lawrencev...

Gwinnett County Historic Courthouse, Lawrenceville GA (Photo credit: Wikipedia)

I won’t have the March sales figures for Gwinnett County for a few more days, but I do have a few thoughts on what I have seen from the Listing numbers I pulled down on the 1st of April.

Listings are down.  And that is weird.  VERY weird.  Not just down year over year… that isn’t weird at all.  But they are actually down from month to month.  And in this market, that doesn’t happen (although I can’t really say that now… because it just happened).  Looking back over the last few years, listings tended to bottom out in January… March would be up over February, April over March.  We’ve been going down for the last two months instead.

Of course, I still hear the media and a LOT of other real estate agents telling me about the “coming wave of foreclosures” just waiting for the banks to decide that they should release them.  If they had the “shadow inventory” everyone is talking about, they would be releasing it.  For this market, there wouldn’t be a better time.  Listings are down and this is when sales are generally moving up.

Looking back at the last year only confirms this.  We’ve seen Absorption Rates under 6 months in most of the segments with the dropping inventories.  (Translation: This isn’t a shocker…).

What does all of this mean?

Map of Georgia highlighting Gwinnett County
Map of Georgia highlighting Gwinnett County (Photo credit: Wikipedia)

I think we are seeing a bottom for some segments… specifically homes priced under $200,000 to $400,000 (I don’t know exactly where the line is… but homes under $200k are solid right now… homes over $400k are looking pretty shaky still).  Could prices erode further? Absolutely.  But I think that without a change for the worse in the economy, we are probably at the bottom of those properties here in Gwinnett County.  The higher price ranges might be bottoming or might not… but I have a lot less certainty over $400k.

There is actual competition for properties at the entry level.  Multiple offers and homes selling over list price.  The homes that are priced “right” are getting snapped up.  Over-priced houses are still languishing on the market, though.  But a couple of years ago, there was hardly a “priced right”.

 

Now we just need to get the higher priced segments moving again…

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