ATLANTA'S REALTY & CONDOMINIUM MARKET

Why The Housing Market Is Three Times Worse Than You Think

2011-04-11T17:53:00.000-07:00

By Carla Fried, CBS MoneyWatch.com Mar 31, 2011 Provided by:

Between the recent report that sales of new homes hit a record low in February and this week's news that 19 of the 20 largest metro areas tracked by the Standard & Poor's/Case-Shiller home price index saw a price slump in January, it hasn't exactly been a stellar few weeks for the housing market. And yet another data dump tracking foreclosed and distressed homes that have yet to hit the markets - what's known as "shadow inventory" - suggests things are not likely to get a whole lot better for a long time.

Supply Sigh Economics

More robust economic growth, a pickup in job creation (and wage growth), and a renewed desire by banks to actually write mortgages are all central pieces of any housing rebound. Job growth last month was indeed stronger than in past months, and a new survey of CEOs finds them increasingly upbeat about hiring. But even if those green shoots emerge, it may take a whole lot longer to see any pickup in home values given the alarming backlog of homes currently on the market, as well as homes that may soon be for sale. Sign of the times in some markets

In terms of homes for sale, we have three inventory tracks to keep an eye on:

* The official inventory: 3.5 million homes. The National Association of Realtors says the current inventory of existing homes that are listed for sale would take 8.6 months to work down at the current sales pace. In "normal" times, the inventory backlog is more in the vicinity of six months.

* The unofficial shadow inventory: 1.8 million homes. According to research firm CoreLogic, there's another 1.8 million homes sitting in shadow inventory. These are homes that don't yet show up in NAR's Multiple Listing Service as being for sale, but that are likely to hit the market at some point. They include homes that banks have already foreclosed on but have yet to put up for sale, homes that are somewhere in the foreclosure process, and homes in which owners are at least 90 days late on their mortgage payments. CoreLogic estimates that those 1.8 million homes represents an additional 9 months of potential supply given the pace of how bank-owned property and pending foreclosures make their way to market.

* The severely underwater inventory: 2 million. CoreLogic uses this category to refer to homeowners that are at least 50 percent underwater on their mortgages. Now there's nothing that says homeowners with negative equity will in fact walk away from their mortgages. But it's reasonable to presume that short of a quick turnaround in home values or a settlement between the state attorneys general and lenders that leads to substantial loan modifications, a significant chunk of these homes will end up on the market in the coming months or years.

Add it all up, and NAR's 8.6 month official backlog triples to about two years or so.

Distress Points

To get a sense of where your housing market stands, take a look at CoreLogic's comparison of each state's tally of mortgages that are at least 90 days late to its current sales rate. The states with the most distressed housing inventory are New Jersey, Illinois, Maryland, and Florida, while those with the least distressed inventory are North Dakota, Alaska, Wyoming, and Montana.

Of course, even state-level data doesn't capture what's going on in your local area. If you're looking to buy or sell, one important step at this juncture is to look beyond the official sales and inventory data, and try to get a sense of local shadow inventory. This is where a solid and straight-up real estate agent is going to be crucial. You don't want sugarcoating; you need an honest assessment of what's in your local pipeline.

The fact that your local market has a large shadow inventory doesn't necessarily mean more steep price declines. But if there is indeed a big backlog of shadow inventory, it's hard to make a case that home values will rebound any time soon given the large supply that needs to come to market and be absorbed.

If you're looking to buy, a high shadow inventory is seemingly an argument to take your time looking, but keep all the moving pieces of this in mind. For example, even if you don't have to worry about rising prices, what about mortgage rates? No one can predict where mortgage rates will be in six months or a year, but we do know that current rates are at historic lows. As for sellers, well, if you really want to sell and you find you are in an area with a lot of shadow inventory, waiting might not be in your best interests. Even if prices stabilize, working through that backlog could make it a while before prices start to climb again.

Are We Turning Into a Renter Nation? What Do You Think?

2010-08-16T07:08:00.000-07:00

Are we turning into a Renter Nation? What do you think? Send your thoughts and responses to atlcondoexpert@yahoo.com and title the subject box Renter Nation. Your thoughts/concerns will be posted for all to see. Kind Regards, Piper N. Harris

Renter Nation
by Gene Epstein

The recession and shifting demographics will swell the ranks of people who will rent, not buy, housing over the next five years.

Back to the '90s: Barron's projects that the share of U.S. households owning their homes will fall to 64% by 2015 —the level in 1993-94.

The American dream of owning a home is still very much alive, but it will be no more than a dream for a growing number of people over the next five years. That's bad news for home builders, who already have big troubles, as June's reports on housing starts, existing-home sales, building permits and unsold-home inventories showed. But it is good news for anyone renting out a home, apartment or condo, or any real-estate investment trust specializing in residential rental properties.

Most U.S. households own the dwelling they live in, and that isn't likely to change. But demographic and economic forces, together with some perversities of government policy, are combining to push the share of ownership back to where it was in the early 1990s. Already, in the wake of the housing bust that brought on the Great Recession, the share of U.S. households owning homes has slid steadily—from 69% at its peak in 2004 to 67.2% in this year's first quarter. And the rate is likely to fall to its 1993-94 level of 64% by 2015.

The flip side of this trend is a rising rental rate, which probably will hit 36% by 2015, versus 32.8% in 2004. Every percentage-point increase represents nearly 1.3 million households, and the average household includes more than two people—so roughly 10 million extra folks could be moving into rentals over the next five years.

Why? From now through 2015, the long slog that will unfortunately characterize the economic expansion will bring slow growth in jobs and wages. That pace of improvement should be just strong enough to permit new households to form, but not robust enough for the members of those households to afford to own homes. In addition, lax lending standards, fraud and predatory lending practices— key factors in the unrealistic bubble in home ownership in the mid-2000s and the subsequent debacle—appear to have become rarer, at least temporarily.

At the same time, the once-exuberant Fannie Mae (OTC BB: FNMA.OB - News) and Freddie Mac (OTC BB: FMCC.OB - News), now wards of the government, could well become more stringent when buying mortgages from banks and other lenders. That's to say nothing of Uncle Sam's latest efforts to protect consumers, which could have the unintended effect of making it even harder for young households to get mortgages.

Demographics also will deal home sellers and builders a clear blow. Not surprisingly, the home-ownership rate tends to rise with age. For example, while the overall U.S. rate is 67.2%, the rate for households headed by someone under 35 is just 38.9%.

Thus, whenever the age distribution of households tilts in favor of younger adults, the overall home-ownership rate declines. That happened in the early 1980s, when young (and numerous) baby boomers began to form households. And, says demographer Peter Francese, former president of American Demographics magazine, a similar tilt is likely over the next half-decade.

Francese projects substantial growth in households formed by people under 35, who mainly rent rather than own. Worsening the shift will be a decline in the number of households led by people 35 to 49 years old—the very ages when there is normally a huge jump in ownership. Francese does expect a rise in households led by people 50 and older, but the boost to ownership from this won't be great. Home-ownership rates tend to level off when Americans reach their late 40s and early 50s.

In the 1960s, as the boomers—people born from 1946 through 1964—began reaching child-bearing years, demographers expected an imminent birth explosion. What happened instead was an extended birth dearth that produced a "baby bust" generation, born from roughly 1965 through 1977. Then, as though to confound the demographers even further, the boomers (along with some early busters), begot the echo-boom generation, through a jump in births from around 1978 through 1994.

Based on the years when the boomers, busters and echo boomers were born, the size of certain age groups will expand and contract as the years pass, creating imbalances that haven't been, and won't be, altered by the net influx of immigrants into the U.S. Through 2015, those imbalances point to a decline in the rate of home ownership.
Largely because the echo boomers are more numerous than the baby busters, there are now more U.S. residents aged 15 to 29 than 30 to 44. So five years from now, the nation will have more 20-to-34-year-olds than 35-to-49-year-olds.

Similarly, largely because the baby busters are less numerous than the baby boomers, there are fewer 30-to-44-year-olds than 45-to-59-year-olds. Thus, five years from now, expect a decline in the ranks of the group that historically has been the most keen to buy homes—the 35-to-49-year-olds.

At the same time, Francese sees the number of households headed by someone under 35—a prime rental group—expanding faster than the overall population.
The key to the housing outlook is household formation. As defined by the Census Bureau, a household is formed when one person takes separate living quarters, or when two or more people do, regardless of whether those people are married or unmarried, and provided that the quarters aren't in an institution, for example, a prison, nursing home or school dormitory.

The great recession of 2007-09 halted the growth in the number of households led by people under 35. The financial stress also led to the dissolution of some households that those in this age group previously had formed. Net result: The number of younger households fell, even though the ranks of younger Americans continued to increase.

Many of the missing young householders were "boomerang kids." As economist Greg Kaplan of the Minneapolis Federal Reserve has found, these individuals tend to move back with their families—thus dissolving their own households—when they lose their jobs. Others never left the family home, often because they simply couldn't afford to do so.

Still others entered college or graduate school. College enrollment jumped by an unusually large 850,000 in the fall of 2008, when the jobless rate among young people already had begun to rise. Regardless of the benefits that more education might bring to young people, there is an undeniable downside: more debt.

According to estimates by Mark Kantrowitz—publisher of FinAid, which guides students about all forms of financial aid—65.6% of bachelor-degree recipients held an average of $23,300 in student debt by 2007-08, with both figures setting records. While the burden of student debt isn't likely to prevent young people from forming households after they graduate and find jobs, it will inhibit their ability to take on mortgages.

Francese sees a 2.8 million rise by 2015 in the number of households headed by people under 35. But he expects this group's home-ownership rate to probably slip to somewhere below its current 38.9%.

Another problem: Ownership rates soar as people move into their late 30s and 40s, so a rise in households in this age group would naturally be expected to boost the overall home-ownership rate. But Francese sees a 600,000 decline in the number of households headed by those aged 35 to 49, simply because the number of folks in that age group will decrease.

The demographer does project a huge increase of seven million in households 50 and older, mainly because of the baby-boomer effect. The residential real-estate market might benefit somewhat, assuming people over 50 buy second homes as investments or vacation properties. But the impact probably won't be great.

The economy, as always, calls the tune in the housing market. The subpar recovery we are experiencing, which is likely to be followed by a subpar expansion, is tailor-made to help spawn a generation of renters.

Young people who need the down payment for a home have often been helped by what jokingly has been called the new "G.I. bill": generous in-laws. That will no doubt continue. But given the economic constraints those in-laws will be facing—imposed by higher taxes and the need to build (or rebuild) retirement savings—their generosity could be severely limited.

The generous in-laws could perhaps afford to retire, but can't sell their home at a decent price—in most of the U.S., housing in general isn't appreciating, or is appreciating more slowly than it was, pre-bust. Or, they might rent out part of it, while continuing to occupy the rest. Or, if they move to a retirement property elsewhere, they might keep a couple of rooms in the old homestead as a place to return to on visits to the kids. And maybe their tenants will be their own adult children—renting, of course, at a reduced rate—even zero.

More likely, however, the new version of the G.I. bill will take the form of, say, providing the adult offspring with the first two months' rent for an apartment, plus security deposit, rather than the much heftier cost of a down payment on a home.

Requirements on that down payment have climbed. According to the Federal Housing Finance Agency, the share of new mortgages requiring a down payment of less than a 10th of the house price was 8% last year, down from 29% in 2007.

Michael Frantantoni, research vice president of the Mortgage Bankers Association, says the early 1990s were the last time the share of new mortgages permitting a down payment of 10% or less ran in the single digits. In fact, the average down payment on all mortgages last year exceeded 25%. The last time it was that high was also the early 1990s.

Adds Frantantoni: "We've moved from a world where most of the effort was on streamlining the mortgage-application process to one where full documentation is the norm. Every data point needs to be checked and rechecked." One of those data points includes higher standards on credit scores.

Some observers, including David C. John, a Heritage Foundation research fellow, would call the current procedures a welcome return to sanity. But John also expects the new Consumer Financial Protection Board, authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act, to make it harder for low- and moderate-income households to get mortgages.

"Last year," observes John, "Congress made a high-minded attempt to fix credit cards, making it more difficult for issuers to change interest rates or to penalize people who misused the cards. The net result was that issuers backed away from higher-risk customers. I see the same scenario playing out with mortgage issuance."
The federal government's now-expired tax credit to spur home buying did help the residential realty market. But even with house prices scraping along the bottom and mortgage interest rates at historic lows, home sales were tepid.

In May, new-home sales, no longer helped by the tax credit, plunged to their lowest level since 1963, the year in which records of such transactions began to be kept. In contrast, the rental-apartment market, without any federal help, has been surprisingly strong.

Dallas-based Axiometrics tracks monthly price and occupancy data on apartments in 305 markets around the country. Its research chief, Jay Denton, reports that, on new leases written through this year's first six months, effective rents—those after all concessions are taken into account—rose a robust 3.2%, after declining through 2009 and much of 2008. And occupancy growth, adds Denton, is close to the best he's seen in the past 13 years.

Given this strength, Axiometrics President Ronald Johnsey believes nationwide job growth must be stronger than official estimates. Otherwise, he finds the rebound in the rental market hard to explain. Johnsey rules out the possibility that any great number of rental apartments were taken by former homeowners with jobs who lost their homes through foreclosure or who walked away because the value fell below the mortgage principal.

For one thing, says Johnsey, anecdotal evidence shows that former homeowners generally rent other single-family homes, rather than apartments, because that's where they're accustomed to living.

Axiometrics' findings auger badly for home builders, especially those that cater to entry-level and first-time buyers. But they auger well for the apartment market. As younger households start to rent, apartments probably will be their housing of choice. The problem for investors is that this probability already has boosted the share prices of real-estate investment trusts specializing in apartments.

Still, Alexander Goldfarb, associate director of investment banker Sandler O'Neill & Partners, does have Buys for three REITs: Colonial Properties Trust (NYSE: CLP - News), specializing in Sunbelt markets; Equity Residential (NYSE: EQR - News), with properties in major cities throughout the U.S., and Essex Property Trust (NYSE: ESS - News), with buildings on the West Coast. Analyst Andrew McCulloch of Green Street Advisors, a research firm specializing in real-estate securities, has a Long-Term Buy on AvalonBay Communities (NYSE: AVB - News). Part of his rationale: "The apartment market has begun to turn the corner."

That turn should last for quite a while.

2009 FEDERAL & STATE TAX CREDITS FOR REAL ESTATE IN ATLANTA GEORGIA

2009-10-27T15:56:00.000-07:00

Both federal and state tax credits are available for 2009, and will serve as strong incentives for potential homebuyers, and hopefully as a catalyst for a market turnaround in the near future. As a REALTOR®, you can position yourself the go-to expert for your clients on the 2009 tax credits. Below are the most common questions related to each tax credit.

Federal Tax Credit's for 2009:

1. What’s the new federal homebuyer tax incentive for 2009?
The 2008 $7,500, repayable credit is increased to $8,000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8,000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7,500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9,500, an $8,000 credit would wipe out all but $1,500 of the tax due. ($9,500 - $8000 = $1,500)

4. So what happens if the purchaser is eligible for an $8,000 credit but their entire income tax liability for the year is only $6,000?
This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6,000, the IRS would send the purchaser a check for $2,000. The refundable amount is the difference between $8,000 credit amount and the amount of tax liability ($8,000 - $6,000 = $2,000). Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.

5. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

6. What’s the definition of “principal residence?”
Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

7. Are there restrictions related to the financing for the mortgage on the property?
In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7,500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

8. Do I have to repay the 2009 tax credit?
NO. There is no repayment for 2009 tax credits.

9. Do 2008 purchasers still have to repay their tax credit?
YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

10. How do I apply for the credit?
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.

State Tax Credit's for 2009:

1. Is this tax credit limited to first time homebuyers?
NO, all purchasers of an eligible single family residence in Georgia that file a Georgia income tax return can claim the credit.

2. Can the Georgia credit be combined with the federal $8,000 first time homebuyer tax credit?
YES, if buyers meet the qualification for each credit they may claim both. Each credit operates independently from the other. One is claimed on your federal income tax return, the other is claimed on your Georgia income tax return.

3. Is it true this credit is limited to the purchase of a single family residence?
YES, the tax credit is limited to the purchase of one single family residence.
Single-family residences (including condominiums) are eligible if they are:
* New residences, residences occupied at the time of sale, or previously occupied residences, if such residences:
- Were for sale prior to the effective date (5/11/09) and were still for sale after the effective date;
* Owner-occupied residences with respect to which the owner’s acquisition debt is in default on or before March 1, 2009; and
* Residences with respect to which a foreclosure event has taken place and which are owned by the mortgagor or the mortgagor’s agent.

4. Is it true that eligible single family residences must have been listed prior to May 11, 2009 in order to qualify for the credit?
YES, the original intent of the bill was aimed at reducing the housing stock that has been on the market for an extended period of time.

5. Is it true that only eligible buyers that close between June 1, 2009 and Nov. 30, 2009 can claim the credit?
YES, the intent of credit is to stimulate the market by encouraging potential buyers to get off the fence and BUY NOW!

6. How do I determine the amount of tax credit for which I am eligible?
The tax credit will be for 1.2% of the purchase price, with a maximum credit of $1,800 (whichever is less). Homes purchased for $150,000 or more will receive a maximum of $1,800.

7. Can I claim all $1,800 on my 2009 income tax returns?
NO, the total amount of your credit must be claimed in one-third increments over a three year period. The maximum credit per year is $600 if you are eligible for the maximum $1,800. Any excess or unused credit may be carried forward to apply to succeeding years’ tax liability.

8. Can I amend my 2008 Georgia income tax return to claim the credit?
NO, the tax credit cannot be applied against prior years’ tax liability.

9. I am looking for investment property or a second home, is the credit available for the purchase of owner-occupied residences only?
NO, all eligible single family residences qualify for the credit. However, each taxpayer can claim the credit one time only.

10. Is there an income limit for buyers who claim the credit?
NO, there are no income limits applicable to this credit.

11. Is there a limit to how long a buyer must own the property to claim the credit?
NO, there is not a limit to how long a buyer must own the property.

12. Does any portion of the credit require repayment for any reason?
NO, if you are awarded the credit there are no penalties that would require you repay any portion of the credit.

FOR MORE INFORMATON ON REAL ESTATE INVENTORY & NEWS PLEASE PHONE PIPER N. HARRIS @ 404-395-4778 OR VISIT HTTP://WWW.ATLCONDOEXPERT.COM TODAY!

Atlanta Luxury Real Estate & Highrises (Buckhead & Midtown)

2009-05-21T14:09:00.000-07:00

10 Terminus
Cousins Properties had created an Assurance Program to assume the majority of the risk for buyers involved with purchasing a condo at 10 Terminus Place in Buckhead. Cousins will provide financing for 3 years of ownership. What better assurance can a Buyer be given especially in our current market. It seems that Tom Bell (CEO of Cousins) gets the big picture and is understanding of peoples concerns in this market. Tom's words exact are "They've seen banks take over entire condo buildings, They've seen condos auctioned off for half their value", "It's not surprising that people aren't buying condos right now - even when they see a quality luxury property like 10 Terminus".

This program will allow you to put down 5% with a 4% interest rate - unbelievable! 10 Terminus Place is a 32 story 5-star luxury condominium nestled in the heart of Buckhead. Prices range from $300K - $4.5 Million. The property also offers Top Floor Penthouses with a 4000 sq.ft. deck. For more information on the assurance program contact Piper N. Harris (404-395-4778) at http://www.atlcondoexpert.com.

Hotel Palomar Atlanta GA.
Hotel Palomar Atlanta is open for business and taking reservations at the corner of 10th and West Peachtree street in Midtown. The 304-room boutique hotel's theme is "Art in Motion," and the decor embraces colorful artwork from a variety of local artists, while offering guests easy access to the Fox Theatre, the High Museum of Art and the Woodruff Arts Center. www.hotelpalomar-atlantamidtown.com.

Sovereign, Regent Partners
The Sovereign condo buildings has been awarded the Best of the Best Award in McGraw-Hill Construction (MHC)national competition, which recognizes design and construction excellence in residential projects. Developed by Atlanta-based Regent Partners, Sovereign, located at 3344 Peachtree Road in Buckhead, is a 50-story mixed-use tower designed by architects Smallwood, Reynolds, Stewart, Stewart & Associates. The 635 foot tower includes more that one-half million square feet of Class "A" office and retail space crowned by the 82 residences of Sovereign. Home start at $1.5 Million to $12 Million and suites start on the 28th floor. Suites range from 1,700 sq. ft. to 10,000 sq. ft. This is the tallest building in Buckhead and offers spectacular skyline views! For more information contact Piper N. Harris (404-395-4778) at http://www.atlcondoexpert.com.

Downtown Atlanta Fairlie Poplar District "The Healey"

2009-05-19T05:13:00.002-07:00

I've lived at The Healey for 2 years now and love the building. It was built in 1913 by Thomas Healey, a brick layer from Savannah GA. Being from Savannah myself and loving history I was naturally drawn to the property. Little did I realize the nightmare I was about to enter. It has nothing to do with the building - I love the building - it's the neighborhood. Since living downtown I've been attacked, mugged, robbed and just yesterday my new car busted into. Wow, what a great neighborhood - don't you want to live here - I think not! What is the city doing? I don't get it nor do I understand. My car was parked in front of the police station when it got broken into. Due to this I walked in the station and informed the police about the matter. The officer quickly let me know that this is not there jurisdiction and I would have to call 911 - my response was "are you serious?" and in fact he was. It amazes me how the city encourages folks to move downtown, then when we do - they (meaning the city) do nothing - absolutely nothing to protect the residents. The police can't help you, the pan handler's harass you, and the thieves run wild. Until the city does something to change the downtown area I can not recommend it to a potential buyer and what a shame for it holds so much potential. I graduated from Georgia State with my degree in Real Estate. I've walked and remapped the downtown area and know it's value. If only the city could realize the importance of protecting homeowners and residents - boy, this area could be a awesome place.

Downtown Atlanta Fairlie Poplar District "

2009-05-19T05:13:00.001-07:00