RISMEDIA, February 28, 2011—(MCT)—Sales of new U.S. homes fell in January 2011, almost completely retracing the strong gain seen in December, the Commerce Department recently estimated.
Sales dropped 12.6% last month to a seasonally adjusted annual rate of 284,000. Economists had been expecting a pace of 300,000.
For December, sales were up a revised 15.7% to a 325,000 level, compared with the previous estimate of a 17.5% rise to 329,000.
Economists had been leery of the initially reported surge, attributing much of December’s gain to home buyers who rushed to take advantage of a tax break in California that expired at the end of 2010.
Suburban Office Markets Trail Downtown Rivals
The commute to recovery looks like it is going to take a longer time for suburban-office-building owners than their counterparts in downtown areas.
Fourth-quarter earnings reported by publicly traded real-estate companies over the past few weeks reinforced a trend that has been taking shape since economic recovery began: Vacancies continue to rise in some suburban buildings even as downtown properties fill up.
Mack-Cali Realty Corp., one of New Jersey's largest commercial landlords, for example, saw its occupancy fall to 89.1% at the end of 2010 from 90.1% a year earlier. The occupancy rate of Brandywine Realty Trust, an owner mainly of suburban-office buildings in regions like Philadelphia, metropolitan Washington, and central Virginia, fell to 85.8% at the end of the fourth quarter from 88.5% at the end of 2009. Both Mack-Cali and Brandywine, based in Radnor, Penn., saw slight occupancy improvements between the ends of the third quarter and the fourth quarter.
Meanwhile, the leading downtown-office-building landlords are enjoying occupancy rates well over 90%. Boston Properties Inc.'s occupancy rate in the central business district in greater Boston and Washington was 97.8% and 93.7%, respectively, at the fourth-quarter end.
S.L. Green Realty Trust has experienced both markets. The largest office-building landlord in New York City, its Manhattan occupancy was 94.6% at year end, about the same as a year earlier. Meantime, its suburban-portfolio occupancy rate fell to 87.3% in the fourth quarter from 88.7% at the end of 2009.
The relative strength of major downtown markets contrasts with trends after the last recessions. For decades, the suburbs have outpaced downtowns as companies and their employees sought lower rents, shorter commutes and car-oriented lifestyles.
But this downturn was different. Suburban-office buildings accounted for 70% of the 135 million square feet of occupied space that has gone vacant since the beginning of the recession a little over three years ago, according to Reis Inc.
Downtowns are performing better partly because the suburbs were hit harder by the housing collapse, which caused the closings of mortgage lenders, home builders and other small businesses that tend to be in the suburbs. Also, there was more construction in the suburbs than downtowns during the boom.
Demand in some cities has improved, thanks to their success in revitalizing entertainment districts and attracting new retail and residential development.
Executives at suburban real-estate investment trusts acknowledge that the recovery is slower than they would like. They note that the declines in occupancy are stabilizing and leasing volume is increasing.
Gerard Sweeney, chief executive of Brandywine, said in an email that the company's highest occupancy is Austin, Texas, where it is 94%. Its lowest is central and southern New Jersey, at about 74%, he said. "In general, I feel that Brandywine is well-positioned to handle any demographic shift," he said.
But demand will depend on job growth, and some executives don't expect much anytime soon. "I don't necessarily subscribe to the theory that there will be a rapid V-shape recovery in job growth," said Mitchell Hersh, president and CEO of Mack-Cali, in an interview. "While we continue to see the economy stabilize, it will take some time for significant office-space absorption to occur and corresponding rent increases."
Both suburban- and downtown-office landlords have been forced to cut rents during the downturn. But some of the suburban cuts have been sharper and rates have bounced back faster in some cities. For example, tenants who signed leases in SL Green's Manhattan buildings in the fourth quarter are paying rents that are 3% lower than those of the tenants vacating that space. Brandywine's and Mack-Cali's rents fell 8% and 7.7%, respectively, in that period.
The Atlanta Journal-Constitution
Home sale prices up in January
According to data released Wednesday, the sale price of single-family existing homes rose nearly 2 percent in January 2011, compared to the same month a year before. Sales fell 6.3 percent over the same period, the data shows.
Nationally prices fell nearly 3 percent and sales were up 3.3 percent.
This is the first time since August the metro area has seen an increase in year-over-year prices. It is also the first time in well over a year metro Atlanta has beaten the national statistics and tracked ahead of the other major metro areas surveyed...
Does anyone actually believe that we are out of this mess yet?
Atlanta Business News 4:03 p.m. Tuesday, February 22, 2011
Home prices continue wrong-way trend
The Atlanta Journal-Constitution
The stabilizing housing market many experts saw a year ago seems to have been built on sand.
New data released Tuesday showed another monthly decline in home prices, with values in metro Atlanta and 10 other markets falling to new lows since the housing bubble burst in 2006 and 2007.
Metro Atlanta values were down 8 percent in December from the same month in2009, according to the Standard & Poor’s Case-Shiller Index. The decline continues a trend that began in the summer, following a mild recovery spurred by homebuyer tax credits.
The metro region is now 26.7 percent below its July 2007 index peak...
Foreclosures Up 11% in Atlanta Metro During 2010
Atlanta Business Chronicle - by By Lisa R. Schoolcraft, Staff Writer
Date: Friday, February 18, 2011, 6:00am EST - Last Modified: Thursday, February 17, 2011, 2:07pm EST
The number of home foreclosures in metro Atlanta spiked 11.2 percent in 2010, continuing a wave of distress that has kept the housing market from recovering from the Great Recession.
Lenders in the 11-county metro area took possession of 34,937 houses through foreclosure last year, according to RealValuator.com, an Atlanta company that tracks real estate transactions. That was up from 31,428 houses in 2009.
Read more: Foreclosures up 11% in metro area during 2010 | Atlanta Business Chronicle
Continuing on with the series of posts about SB 346 and changes to Georgia property tax law, here are a few miscellaneous items.
All assessment notices state-wide will all be on a uniform notice called PT 306 by the Department of Revenue. There will also be a uniform appeal form called PT 311 by the revenuers, but it is not mandatory that you use this appeal format. I have not found any links to these forms available for general consumption so I think they are still being finalized.
It used to be that only the owner on January 1 could appeal for that tax year. Now, whoever is the owner as of the last date to appeal is able to appeal the assessment.
If you are not satisfied with the result of your appeal to the Board of Tax Assessors, you can still appeal to the Board of Equalization, Arbitration, or a new Hearing Officer. The Hearing Officer will hear arguments on value and uniformity for non-homestead (not owner-occupied and receiving an exemption) properties with values greater than $1 million.
At any time during the appeal process (prior to circuit court) if you get a written value agreement signed with the assessors it will be subject to 299C of the tax code which means that if you don't sell the property or change it in any way the value will be kept (frozen) for three years.
Georgia Senate Bill 346 included many changes to the property tax law. Last time I addressed this subject I discussed the changes to the fair market value definition. The change discussed was the inclusion of distressed sales as comparable sales that must be considered.
SB 346 also mandates that a recent sale shall be considered the fair market value: The transaction amount of the most recent arm's length., bona fide sale in any year shall be the maximum allowable fair market value for the next taxable year.
So, if you bought your property in 2010 for $500,000 the maximum fair market value estimate the assessor can put on it for tax year 2011 is $500,000 which is a $200,000 assessment (40%).
The transaction amount can be adjusted for the following reasons:
1. Personal property included in the sale price
2. New improvements after the sale date
3. Additions to existing improvements after the sale date
4. Major remodeling/renovation after the sale
5. Land adjustments due to consolidations, zoning changes, etc.
Nothing in SB 346 says the assessors have to appraise your property for the sale price, just not above the sale price. If the assessors put your 100% market value at the sale price start looking at your neighbor's/competitior's assessments. Did they use the sale of your property to adjust the entire market area, or just your property? Equity is a valid argument when appealing your assessment in Georgia.
Instant View: Housing Starts, Producer Prices Rise
Wed Feb 16, 9:11 am ET
NEW YORK (Reuters) – U.S. housing starts rose more than expected in January to their highest rate in four months but permits for future home construction dropped sharply after hefty gains the prior month, according to a government report on Wednesday that showed the housing market still bouncing along the bottom.
South Florida’s office vacancies are still uncomfortably in the double digits, but they ended 2010 headed in the right direction, as leasing rose and corporate downsizing ebbed, according to a new Cushman & Wakefield report.
After peaking at 18.5 percent in the first quarter of 2010, Miami-Dade County’s total vacancy - which measures direct and sublet space available – fell to 17.8 percent in the fourth quarter from 18.1 percent in the third quarter, data showed...
Read more: South Florida Q4 office vacancies fall | South Florida Business Journal
Senate Bill 346 had an impact on what the tax assessors must consider when estimating the fair market value of property. It defines an arm’s length, bona fide sale as:
Transaction carried out by unrelated or unaffiliated parties, as by a willing buyer and a willing seller, each acting is his or her own self-interest, including, but not limited to a distress sale, short sale, bank sale, or sale at public auction.
Here you can clearly see that the Georgia legislature was not happy with the tax assessor’s reaction to falling values. The assessors are now forced to consider distress sales of all variety when estimating market value. If there are many foreclosures in your neighborhood this is good information to include in your appeal.
SB 346 goes on to say that the:
Tax Assessor shall apply the following criteria when determining fair market value of real property:
- Existing zoning of property
- Existing use of property, including any restriction or limitation on the use of property resulting from state or federal law or rules or regulations adopted pursuant to the authority of state or federal law
- Existing covenants or restrictions in deed dedicating the property to a particular use
- Bank sales, other financial institution owned sales, or distressed sales, or any combination thereof, of comparable real property
- Decreased value of the property based on limitations and restriction resulting from the property being in a conservation easement, and
- Any other existing factors provided by law or by rule and regulation of the commissioner deemed pertinent in arriving at fair market value.
So SB 346 has forced the assessors to use what’s “here and now” and not what “could be” when determining fair market value.
More next time….
According to a new report by Colliers International, the U.S. office market entered the year on a relatively strong note after the fourth quarter, with a sharp drop in vacancy and a healthy increase in occupied space.
But rents continue to languish, according to Ross Moore, chief economist at Colliers International and author of the report.
The fourth quarter marked a key turning point toward recovery, he says. “With the economy now posting robust growth, all that is needed for a full recovery is a surge in employment.”
The exclusive National Real Estate Investor/Marcus & Millichap Investor Sentiment Index shows that investor sentiment has surged to a record level of 152 - a huge increase over the 119 rating achieved in third quarter. In fact, the most recent index rating tops the previous all-time high of 148 recorded in 2005.
Jobless rate improves in two-thirds of U.S. metros, but not in Atlanta
Atlanta Business Chronicle - by G. Scott Thomas
Nearly two-thirds of the nation’s 372 metropolitan areas finished 2010 with lower unemployment rates than the posted a year earlier, but Atlanta was not among them.
A total of 238 metros registered improvements in their jobless rates last year, according to a Business First analysis of new data from the U.S. Bureau of Labor Statistics. Nineteen metros were unchanged, while the remaining 115 areas suffered increases in unemployment.
- Albany -- 10.5 percent unemployment, flat
- Athens-Clarke County -- 7.6 percent unemployment, up 0.2 points
- Atlanta -- 10.2 percent unemployment, up 0.1 points
- Augusta -- 8.9 percent unemployment, down 0.4 points
- Brunswick -- 10 percent unemployment, up 0.8 points
- Columbus -- 9.6 percent unemployment, up 0.2 points
- Dalton -- 12.7 percent unemployment, up 0.2 points
- Gainesville -- 9 percent unemployment, down 0.1 points
- Hinesville-Fort Stewart -- 8.5 percent unemployment, up 0.6 points
- Macon -- 10.3 percent unemployment, up 0.4 points
- Rome -- 10.6 percent unemployment, up 0.2 points
- Savannah -- 8.9 percent unemployment, up 0.4 points
- Valdosta -- 8.8 percent unemployment, up 0.2 points
- Warner Robins -- 7.9 percent unemployment, up 0.6 points
TROUBLED AND TROPHY ASSETS CREATE VOLATILE COMMERCIAL REAL ESTATE PRICING
CoStar Commercial Repeat-Sale Indices, January 2011 Release
(With Data through November 2010)
- CoStar’s three national commercial real estate repeat sales indices were down for the month of November despite notable price increases for high-profile core transactions in Washington D.C. and New York City.
- The Investment Grade index was down 4.1% for the month giving back some, but not all of the 8.1% net gains observed over August, September and October. Notwithstanding November’s decline, the Investment Grade index is still up 7.6% since its cyclical low earlier this year.
- While price declines for non-investment grade real estate decelerated, the General Real Estate Index still fell 1.8% for the month. November’s decline puts the index 3.9% below its level 3 months prior, and 11.7% below year-ago levels. It is now at its lowest point since 2004 as smaller and mid-sized regional banks, which normally make up the bulk of lending for smaller, local real estate, continue to struggle with distressed inventory and have yet to significantly open their lending spigots.
- Quarterly market-level indices suggest large gains over the past several quarters in Washington D.C. and moderate gains in the most recent New York data. These markets have been the exception rather than the rule.
Report: Atlanta's tallest building faces ‘imminent default'
The Atlanta Journal-Constitution
11:10 a.m. Thursday, February 10, 2011
Atlanta's tallest building, the 55-story Bank of America Plaza, faces "imminent default," according to a Fitch Ratings report issued Wednesday.
The Fitch report says there is a balance of $363 million on the loan for the building. The report said the loan, held by Wells Fargo, has been transferred to "special servicing." Special servicers are companies with processes to deal with loans that require unusual attention, for example, that currently are in or about to go into default.
Last year the Georgia Legislature based Senate Bill 346 which was signed by the Governor. This sweeping change to property tax law was in response to what was seen as stonewalling on the part of assessors to address the collapse of the real estate market. Today I would like to address the changes to the Taxpayer's Return of Real Property.
The return of real property for taxation is a somewhat antiquated way of collecting data for real estate assessment purposes. The idea is to force property owners to let the assessor know what property attributes have changed over the course of a calendar year so the assessors can update their records and property values. The assessors can penalize you for not returning improvements to real property in a timely manner. However, during my four years working for the Fulton County Tax Assessors I never heard of anyone being penalized for not returning improvements to real property. The assessor's office is supposed to get copies of all building permits, which prompts them to visit the properties and correct the property description.
The Taxpayer's Return of Real Property form (PT-50R) was also used to generate an assessment notice. If you returned a value that the assessors did not agree with, they had to send you an assessment notice at their value that you could appeal. This was important because the way the Georgia property tax law read, you had to receive a notice before you could appeal in any tax year.
Apparently, the legislature considered striking the return of real property out of the tax code, but in the end they left it in. They did require, however, that every property owner receive a Georgia notice of assessment every year starting in 2011. That ends the need to file a real property return just so you can initiate an appeal, but leaves in the requirement that you do the assessor's job and tell them about the changes to your property (that they should already know about).
Commercial Property Recovers in U.S. as `Tsunami of Distress' Fails to Hit
By Brian Louis and David M. Levitt
From Manhattan office towers to apartments in Florida to retail properties in Washington, commercial real estate values are rising, defying predictions of a collapse that would drag the U.S. economy back into recession.
Prices of commercial properties sold by institutional investors surged 19 percent in 2010, the second-biggest gain on record, according to an index developed by the MIT Center for Real Estate. Investments in office properties, the largest part of the market, more than doubled last year to $41.6 billion, according to Real Capital Analytics, Inc. which tracks commercial property sales globally.
Near record-low interest rates are luring buyers with the prospect of cheaper financing and higher returns. Lenders are beginning to sell distressed properties and loans as rising earnings give them a cushion to absorb losses. Investors, convinced the worst is over, have pushed prices on commercial mortgage-backed bonds to the highest level in two years...
'Shadow' real estate inventory may take 4 years to clear
S&P: Slower liquidation rates to blame
By Inman News, Wednesday, February 2, 2011.
It may take more than four years to clear the "shadow inventory" of distressed homes lurking on the sidelines in the U.S., a factor that's likely to undermine real estate prices as the backlog clears, analysts at Standard & Poor's Ratings Services say.
At 49 months, the estimated time needed to clear shadow inventory at the end of the fourth quarter of 2010 was up 11 percent from the previous quarter and 40 percent from a year ago. With the lone exception of Miami, the months' supply of shadow inventory grew in almost all of the nation's 20 largest metro markets.
But much of the increase in the estimated months needed to clear shadow inventory is due to the fact that it's taking longer for lenders to liquidate distressed homes - not because the number of distressed properties is growing, analysts said.
Standard & Poor's defines shadow inventory as properties with borrowers who are 90 days or more delinquent on their mortgage payments, properties currently or recently in foreclosure, or properties that are real estate owned (REOs).
Pent-Up Shopping Demand Fuels Surge In Retail Leasing
With Retail Recovery In Motion, Most Metros See Positive Absorption
By Randyl Drummer
February 2, 2011
Mirroring the rebound in other commercial property sectors, leasing and occupancy of U.S. malls and shopping centers continued to improve across the country in fourth-quarter 2010, and CoStar Group economists expect demand to accelerate for the next two years as shoppers open their wallets and the economy adds jobs, leading to renewed demand for retail space.
With the very low amount of new supply of retail space and a strengthening economy, retail vacancy rates are expected to continue to decline through mid-2013.
Absorption of retail space, which has been positive for six consecutive quarters, should continue to be positive through at least mid-2012, CoStar Group forecast this week in its Year-End 2010 Retail Review and Outlook. CoStar Real Estate Strategist Suzanne Mulvee co-presented the retail market report with Real Estate Strategist Kevin White.
"Retail real estate fundamentals have closely followed retail sales, which are now looking quite positive. Retail sales turned positive in 2009 and between early 2009 and today, have eclipsed their pre-recession high," Mulvee said. "We're moving in the right direction from a fundamentals standpoint. Recovery is in motion."
Commercial Real Estate: Out of Intensive Care, But Still in Recovery
After spending the better part of two years in ICU, the commercial real estate market finally appears to be on the road to recovery. In his latest podcast, mortgage banker John B. Levy points out that while investment sales doubled from 2009 to 2010 and the future of CMBS looks promising, the healing market is not yet out of the woods.
CMBS Delinquencies Hit New High in December
Feb 1, 2011 11:43 AM, By David Bodamer
CMBS delinquency rates reached new highs in December, confirming that a brief improvement in October was an aberration, according to the two firms that track the sector.
As of the end of December, the CMBS delinquency rate stood at 8.29 percent according to Horsham, Pa.-based Realpoint LLC and at 9.20 percent according to New York-city based Trepp LLC. Both firms’ data had shown that the delinquency rate had fallen in October. But it then rose in both November and December and has now eclipsed the previous high point set in September 2010.
At the heart of the jump in both firm's numbers was a marked increase in the delinquency rate on industrial properties. According to Realpoint, the industrial delinquency figure rose from 6.14 percent in November to 8.57 percent in December while Trepp said the figure jumped from 6.64 percent in November to 8.97 percent in December. The reason, according to Trepp, was that "two big loans" went delinquent during the month...
Construction Spending in U.S. Unexpectedly Fell to Decade Low
By Feb 1, 2011 10:00 AM ET
Construction spending in the U.S. unexpectedly fell in December to the lowest level in a decade, signaling the industry will continue to lag behind the economic recovery.
The 2.5 percent drop was the biggest since July and brought the value of all projects down to a $787.9 billion annual rate, the lowest since July 2000, Commerce Department figures showed today in Washington. The median estimate of economists in a Bloomberg survey called for a 0.1 percent gain.
Mounting foreclosures and an unemployment rate that will average more than 9 percent in 2011 indicate homebuilding may take time to rebound. Non-residential projects also will slow as budget-constrained state and local governments restrict funding for public works such as highways...