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Tag Archives: news

Lane’s Prognostications for 2011…

Real Estate = Big Money
Image by thinkpanama via Flickr

We’ll see how well I peg this.

Lane’s Predictions for 2011…

Looking back over the last year or two in real estate market reports, there are a few things that have been jumping out at me.

  • For over two years I have been hearing about the millions of homes in “Shadow Inventory”.  These are properties in the foreclosure process, or already foreclosed, that the banks are basically sitting on, waiting until “the market improves” before releasing them into the market.  I predict that next year there will STILL be people talking about the coming giant wave of Shadow Inventory. It isn’t that there isn’t a shadow inventory, but that we have dropped from over 10,000 homes on the market in Gwinnett County, GA to around 6,000.  Even for the overall Atlanta Metro area, we have gone from 120,000 homes to under 70,000.
  • The federal government has been borrowing unheard of amounts of money for the last few years.  Much of it has come from China and other foreign investors… but the deficit spending is not coming to an end, while the depth of the investment pool is…  Despite the best attempts of the Fed, Interest Rates ARE going to rise. Currently we are seeing rates under 5%.  I expect that we will be looking at closer to 7% by the end of the year.
  • Looking at the market reports, there are a few things that are VERY obvious.
    • Government Stimulus for the Housing Market only provides a temporary bump… and then it is worse than it was before, but there will be another wave of government intervention I hope I am wrong on this one).
    • The entry level market (under $200k) is well on the way to recovery… and that will continue. We won’t really know it until around September or October because it will be masked by the tax credits in 2010.
    • Meanwhile, it has been a rough ride for the luxury market.  And I don’t think we will see a meaningful recovery in prices for the Luxury Market (above $600k). There is a lot of downward pressure on this segment, and while there are some signs of strength, the best that segment can hope for is stagnation.
    • The “Near Luxury” segment (from $200k-$600k) will be mixed. It is also the market to watch for signs of permanent recovery.  I know that I will be watching the $200k-$400k and $400k-$600k segments to try to glean the health of the overall market.
  • I fully believe that unemployment (or rather employment) is at the center of the struggle in the Housing Market, and not the other way around.  Until the Unemployment rate drops, housing cannot really recover.  I don’t see Unemployment going under 9% during 2011. In fact, unless something changes radically, I don’t think it will even get that close (maybe 9.3%).

I’ll probably have a few more predictions before long…

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Norcross, GA, Market Report, November 2010

This map shows the incorporated and unincorpor...
Image via Wikipedia

Market stats for Norcross, November, 2010 indicate that there were 386 properties on the market. Overall, there is about a 10.3 month supply of properties. October and September sales were down v 2009 (42 v 57 and 43 v 55), but August was way up (52 v 43).  November was a thrashing… 27 v 47 in 2009.

In the sub-$200k arena, there were 215 listings, with about 7.5 month supply.  Sales are down significantly from a year ago in this segment, which is the main driver of sales in this area (25 v 34).  But the segment is still looking pretty strong, despite the weakness in July and September and relative weakness of sales in October and November.

Between $200k and $400k, there were 127 listings for sale, and about 20 months of supply.  Sales have been down and slowing for the last few months.  But October was down (4 v 13 last year).  With the increase in inventory.  November only had 1 sales, v 11 last year.

From $400k to $600k, there were 39 homes on the market. The absorption rate is around 19.5 months. Much of the perception of strong Absorption Rates is from shrinking inventories.  Actual sales have been mostly decelerating.  I expect to see the numbers move the other way in the next few months.

Georgia state route marker. Signs use FHWA typ...
Image via Wikipedia

In the $600k to $800k arena, there were 2 listings on the market.  Inventories have decreased as sales have increased compared to last year.  The absorption rate (6 month average) is at 4 months of inventory… but with only 4 sales this year, obviously it is easy to bump one way or the other. The ONLY reason for the strong looking Absorption Rate is that there are only 2 listings.

The range from $800k to $1m, there were 1 homes listed on the market and no sales… seemingly forever.

Above $1m, there were 2 properties listed.  But because of the smaller numbers of sales, the absorption rate could be significantly impacted by just a couple of sales.  There have been two sales in the last year (Apr 10 and Oct 10).

Norcross, GA is a suburb of Atlanta in Gwinnett County. The population is 2000 was 8,41, but that only included the area inside the city limits, and it has seen tremendous growth since that census. The City of Norcross revamped their old town a long time ago, and it has served as a model for other towns in the area. It is also home to Meadow Creek and Norcross High Schools. One of the things that Norcross is known for locally is the beautiful older homes in the downtown area. They have maintained their historic flair quite successfully.

I have a page dedicated to Norcross Market Data.

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Renovation RoI Revisited…

Sectional-type overhead garage doors in the st...
Image via Wikipedia

Just last week I wrote a post highlighting the results of the Remodeling Magazine’s Cost vs. Value study.  And in this month’s Realtor® Magazine, the newest results are published.  The reason I like this particular study is that it breaks down the results by region.  It would be great to break it down further to metro area… and then maybe ZIP code… and possibly subdivision… or even street… but that isn’t happening.  Region is good.

The numbers for the Southeast are interesting. The Top 5 Renovations for Return on Investment (RoI) are:

  • Mid-range entry door (steel) – 135.5%
  • Mid-range garage door – 91.6%
  • Upscale siding (fiber cement) – 85.4%
  • Mid-range basement remodel – 79.4%
  • Upscale windows (vinyl) – 77.9%

There are a few things to note here…  This is based on average costs and conditions.  Obviously, if there are extenuating circumstances, the RoI could be more or less.  If you are able to do work yourself, the RoI could be much greater.  One of the assumptions here is that a contractor would be hired to do all work.

So, let’s look a little deeper…

Mid-range Entry door (steel) – 135.5% The average cost on this renovation is $1098 and the increase in value is $1488.  It is worth noting that a fiberglass door adds more value ($2117), but because of the significantly higher cost ($3348), yields a poorer result (63.2%).  This goes to show that it may be more prudent to NOT splurge.  Much of this is due to “Neighborhood Norms”.  If most of the neighborhood has steel doors, and you add a high end wooden or fiberglass door, you might not get the same result as going to a nice steel door.  That isn’t to say that using a good grade of steel door wouldn’t be wise… powder-coated and rust resistant units will likely maintain their value better than low-bid doors that aren’t quite as nice.

Old wooden door at our former garage.
Image via Wikipedia

Mid-range garage door – 91.6% This is a tough one.  The article suggests that an uninsulated, single wall door without windows could provide the highest RoI.  However, adding windows doesn’t add tremendously to the cost (maybe $200 on to the stated cost of $1178), but might add a little to the projected RoI ($1079).  Insulation and windows come down to preference and usage.  Those of us that use the garage for more than just a place to park a car really like the additional benefit of an insulated door and windows for natural light.

Upscale siding (fiber cement) – 85.4% The cost of this renovation was averaged at $13,106.  That assumed 1250 square feet of siding, and an average amount of trim.  The Added Value for the fiber cement siding came up to $11,197.  Again, we need to look to what is in the neighborhood, and what is on the house.  Changing out wood siding in good condition won’t yield the same result in a neighborhood with brick homes as getting rid of wood siding in bad shape in a neighborhood with lots of homes already upgraded to fiber cement.

Mid-range basement remodel – 79.4% I almost hate to include this one… In my experience, it is rare that a finished basement adds significantly to the value of a home.  It seems that the buyer is always looking for it to be finished differently that the seller has finished it.  However, the existence of a basement DOES add significantly to the value of a home.  The average cost and return from the article are $57,627 and $45,757… which means that you will still be upside-down by almost $12k after doing the renovation.

Upscale windows (vinyl) – 77.9% I was a little surprised about this…  I don’t normally think of vinyl windows on upscale homes, but there it is.  The cost was $12,878 and it added a value of $10,027.  There wasn’t any additional information regarding style or number of windows for the survey, so I can’t comment on that… however, I would assume that the windows would be wood on the inside (stain-grade) with heavy vinyl on the outside.  This would allow for low maintenance while keeping the style of wood inside.  I would also assume that the windows were low E glass and at least double paned.

A couple of important notes…

  • The White House renovation
    Image via Wikipedia

    If you have the capability of doing the work yourself, it can make doing the work financially worthwhile… depending on how much you value your labor.  If it will take 50 hours for you to complete a renovation, and you are saving $500 by doing it yourself, is it worth it for you to “make” $10/hour for your time?

  • Even more that the numbers bear out nationally, in the South Atlantic Region, the renovations that have the best payback all have to do with “Curb Appeal. Doors, windows, siding, garage doors…  The only one that snuck in there that doesn’t belong seems to be the basement.  This goes to show that buyers want to be ‘wowed’ from the moment they step out of the car.  To get sold quickly and for the highest price, curb appeal is key, now more than ever.  You can get down in the gutter and fight it out with the short sales and foreclosures, but many buyers are looking right past those for homes that are “ready to go” rather than “ready to work on”.
  • The biggest change, and one that didn’t make it anywhere on the list, can be had for little money.  The RoI would be off the charts…  Paint. If your walls are dingy, get out the rollers and paint the interior.  Use modern colors and do the job right.  For just a couple hundred dollars in materials, the value of your home can go up by thousands of dollars.  The impact is HUGE.
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Wayback Wednesday… Looking Ahead to 2009…

Fiat 500 (2007)
Image via Wikipedia

Two years ago this week, I posted up my predictions for the next year.  That year would be 2009.  I got a few right, and got a few wrong.  I was just looking back and I was surprised by them… some were pretty bold.

Here is the original post

Here is a quick rundown of how I did…

  1. Right
  2. Rightish
  3. Hit that one
  4. Kind of right…
  5. Not so good on that one
  6. That one was good
  7. Nailed that one
  8. Not so much
  9. Got that one pretty right
  10. Hit that one out of the park…
Rundown Shack OF
Image via Wikipedia

On my “bonus predictions”…

  • Red Wings, yes.  Bruins, no.
  • Islanders, yes.  Thrashers… pretty close.
  • Chrysler… bought by Fiat.
  • Saturn, closed.  Hummer, sold.
  • Toyota had a loss for the year.
  • How’s that Global Warming working out?
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Buford, GA, Market Report, November 2010

This map shows the incorporated and unincorpor...
Image via Wikipedia

Market stats for Buford, GA, November, 2010 indicate that there were 584 properties on the market. Overall, there was about an 11.2 month supply of properties.  September was slightly below last year (52 v 60 for 2009).  October was back to the pits (60 v 89 in 2009).  November this year had 44 sales v 67 in 2009.  There were 83 sales in June and an Absorption Rate under 8.5 months.

In the sub-$200k arena, there were 318 listings, with a 9.6 month supply.  October sales were down from 51 in 2009 to 37 this year.  May was the best absorption rate of the year, and it has been going downhill since, but actually got better in October.  It is sliding down again.  Sales for November were 29 this year compared to 40 last year.

Between $200k and $400k, there were 206 listings for sale, and about  11.6 months of supply.  Again, July was the dog, with sales down by 75%.  August, September and October were also down, but the absorption rate improved significantly with July dropping off.  November was off by 35% (13 sales v 20 in 2009).

From $400k to $600k, there were 38 homes on the market. The absorption rate is almost 5 years.  This shouldn’t be acting like a high-end luxury segment, but it is.  There have been 2 sales in the last 3 months.  When the market is rolling, there should be 5-7 sales a month during this part of the year.  There were 5 sales in November, 2009… and 1 this year.

DSCN0559
Image by lane.bailey via Flickr

In the $600k to $800k arena, there were 7 listings.  Sales in this range are pretty sporadic, but steady when looking at the long-term.  The drop in inventory over the last few months from 14 homes to 7 homes has made things look less slow… but there have been 3 sales in this segment since last November… but one was this November.

The range from $800k to $1m, there were 5 homes listed. And with only 1 sale in the last year (Feb 10), obviously  trends are hardly definable.  At least listings are down by more than 50% compared to a few months ago (9 listings in June).

Above $1m, there were 11 properties listed.  The last sale in the segment was in April… of 2009… still…

Buford, GA is a suburb of Atlanta in Gwinnett and Hall Counties. The population is 2000 was 10,668, but that only included the area inside the city limits, and it had seen tremendous growth since that census.  Buford is home to Lake Lanier, one of Georgia’s premiere recreational areas, and Lake Lanier Islands.  Recently, the City of Buford has revamped their old town. It is also home to Buford (Buford City Schools aren’t a part of Gwinnett County Schools), Mill Creek, Mountain View and Lanier High School (Lanier will open for the 2010-11 school year).

I have a page dedicated to Buford Market Data.

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