State of the Union June 2012

OK, so yes, Summer 2012 is here!   Most  segments of intown real estate bottomed out last year. Specifically, intown condo and attached properties up to around $300K have rebounded strongly. Of course, a large percentage of sales in and below the $100K range are cash. In my business, I am seeing most of my lower-tiered sales below $100K are cash. This is very reflective of the market as a whole. In general, properties at these levels are frequently plagued by poor appraisals, HOA/FHA/Building lawsuits, or assessments, so cash is often the only way to get a deal through at those levels since a loan is just not available. I noted the quick and assertive movement of this lower segment at the end of the 3rd quarter in 2011. Anyone who lists foreclosures will tell you that the market at that point for all products (single family and attached) quickly picked up simultaneously as foreclosure new listings started to slow down.

In the $100-300K range, the market started really moving in Q4 last year. Many of the highrise buildings which had distressed one bedrooms consistently in the $120-150K range saw those properties disappear and not come back. With foreclosures continuing to dry up, coupled with an incrementally stronger economy, this trend looks to continue through 2012 and on.  As mentioned last month, well-priced units (often sold by investors, or foreclosures) are now receiving three, four or even eight offers over a weekend, once listed. I have seen this play out in a number of highrise and midrise buildings around town with my clients, as well as in my own real estate holding company’s business. At most of the buildings (think both Twelves, Plaza Midtown, Eclipse, Ovation, Buckhead Grand, Spire, Realm, etc.), the cheapest unit listed is now 25% more expensive than where some of these buildings’ lower floor units were selling for just at the start of last Fall. For those considering purchasing a home, or investment properties, I point to some of the more recent data points that have emerged over the past nine months pertaining to the housing market nationally, in general, and with a more granular interest to Atlanta:

- Location, location, location!   Wall Street Journal Article June 18, 2012 references the value of location, strong schools, and being close to the center of town.   The article actually referenced Atlanta and its market as the basis for its examples.   A must read!    http://online.wsj.com/article/SB10001424052702303768104577460841958115800.html

- National Home builder sentiment hits 5 year high!   This came out June 18, 2012 as well.   Home builder Sentiment is now at a 5 year high.    http://blogs.wsj.com/economics/2012/06/18/home-builder-confidence-hits-five-year-high/

- At the start of summer National Mortgage rates are setting a new all time low.  30 year rates are near 3.5%!  15 year rates are often less than 3%!

- Midtown Atlanta currently has three new highrise renal buildings going up.  These buildings on 10th, 11th and 12th street will continue to add to the urban luster that is Midtown.    It is most certainly exciting to see three sets of cranes raised around town.

- As of Spring 2012, national housing inventory is at a five-year low.  – Pending contracts for sale are now at the highest level since the summer of 2010 during the end of the First Time Home Buyer Tax Credit. Think about this. Normally this number is at its peak during May, June, or July.  To have this number hit a peak in the dead of winter should be ringing bells.

- At the end of 2011, the Barclays Chief Bank Economist described the housing bottom as NOW. Goldman Sachs has proclaimed it to be in the back half of 2012. – All national home builders (that I noted, at least) for Q4 (and Q3) saw a better than expected backlog in contracts signed, and fewer cancellations for the quarter. Most of the builder-housing stocks are up 50-80% since their bottom in Q3 2011.

- A mid-November Wall Street Journal article on average home prices (translating into a monthly mortgage payment) vs. cost of renting showed Atlanta as the cheapest market as per the spread between the high rental costs and the low 30 year mortgage payment.  http://online.wsj.com/article/SB10001424052970203764804577060502694077494.html

- WSJ article late November on the outlandish strength of the Atlanta high end rental market.

- Atlanta is the cheapest big city (a survey out of New Zealand called Atlanta a big city?? I suppose we did have the Olympics) condo market in the world according to a ratio of average income to average condo prices. This data point came out last year, but I figured I would note it.

- The Astoria, a better building in Buckhead which is now 80% sold, recently raised all of their prices across the board for their remaining inventory. – 1010 comp sales are increasing in price. In general, I would say their units are selling about 3-5% more per square foot (floor/height considered) than last year.

- Prices at 1010 have been climbing, albeit, not nearly as fast as the rental rates.  The building’s 1 bedrooms are now almost all entirely over $210,000.     Both resales and the developer owned units.   The developer is now over 60% sold!   As the top selling Buyer’s Agent for this building in 2011 I can now cheer for my Buyers since they have all made out well.

- Viewpoint cleared out their final units for about $235 per square foot. Thus, that building, as I had correctly anticipated, has retained its value well since the Spring prices are now North of $250 a sq foot for most all resales.   Having listed 4 units in the building this year, three have gone under contract, one has now closed and the other two are set to close within the next few weeks.   Many owners have relied on us to List and sell their unit.    We encouraged and excited to be executing these transactions.

- Although foreclosures are less common, one-bedroom short sales (especially in some buildings currently like Spire and Realm) still persist with tapped out buyers that are trying to obtain an approved short sale. They often will promote (read list) a cheaper price out there so that they may then talk to the bank, but on my end, I am finding that the asset managers (people who manage the foreclosures) now see that they are able to command higher values than a year ago in this market. Often times, an inexperienced agent will allow their client’s money and time to be wrapped up in one of these for months on end with no results, only to be told the bank needs a much larger price. I see I am somewhat rambling, as my bullet points are growing. My point with the above is that this is real. If you wait for the headlines, you will have missed it, even if you played it safe. Lower unemployment, which is happening, is the biggest driver for the housing market to the upside.

- For our business here at Atlantic Condo deals, for the first half of this year we will have closed approximately 20 deals.   Mainly condos, with a number of them being cash.    For fiscal 2012 the year is looking bright and we are encouraged at the prospects to build on last year’s volume.

-My clients are having strong returns with our Corporate rental business.  Units are currently leased with minimal vacency at Eclipse, Twelve Centennial Park, Spire, Twelve Atlantic Station, and The Ovation.   This business is booming and everyone involved is enjoying strong returns.