Atlanta Home Prices Hit New Low in January
Atlanta Business Chronicle
Home prices in most major U.S. cities, including Atlanta, were “dismal” to start in 2011 and a double-dip recession could be beginning, according to the monthly Standard & Poor/Case-Shiller Home Price Indices.
In Atlanta, home prices dropped 7 percent year over year in January 2011 and were down 0.4 percent from December 2010. Atlanta’s average home prices hit a new low in January and are now below their January 2000 levels, the report said.
http://www.bizjournals.com/atlanta/news/2011/03/29/atlanta-home-prices-hit-new-low-in.html
After a one week delay from the originally scheduled date of mailing Gwinnett's assessment notices were sent to the wrong owners on Friday. They are now saying that all commercial notices will be resent next week.
Government Cuts Clip Office Market
By Anton Troianovski
Smaller government means less demand for office space, and that is acting as a drag on the recovery of the commercial-real-estate market.
In Washington and elsewhere, government leasing has helped prop up demand in tough times. But now cash-strapped governments are moving to cut back on office space, even as commercial real estate struggles to recover.
In Washington, which has benefited from a surge in space rented by government agencies, the Securities and Exchange Commission renegotiated a 900,000-square-foot lease for new office space down to about 300,000 square feet because the agency didn't get the congressional funding it had counted on to hire new employees.
"We're starting to see the impact of a very, very difficult fiscal situation in the government trickling down to decisions being made for leasing," said Don Miller, chief executive of national landlord Piedmont Office Realty Trust, which will lose the Office of the Comptroller of the Currency as a tenant in at least one building in the wake of the agency's decision to move into some of the space no longer being leased by the SEC.
The biggest impact is likely to come on state and local levels. The states of Illinois, Missouri and Kansas recently hired brokerage firm Jones Lang LaSalle Inc. to reduce real-estate costs, and other states, from California to Florida to South Carolina, are examining ways to pare back their use of space, brokers said…
http://online.wsj.com/article/SB10001424052748703410604576217010392508874.html
Hotel Borrowers Caught In ‘No Man’s Land’ As Default Looms
By Denise Kalette, NREI Managing Editor
Some hotel borrowers are venting their frustration over special servicers’ unavailability for advice at the same time the hoteliers face the threat of default. “I’m in no-man’s land,” fumed Nitin Shah, president of Imperial Investments Group in Norcross, Ga. at the 23rd annual Hunter Hotel Investment Conference held recently in Atlanta.
Shah was frustrated at the prospect of spending $1 million on hotel improvements such as an upgraded lobby and new flat-screen TVs at his Imperial Hotels while facing a maturing $10 million debt. Falling property values and cash flow concerns over the last three years have affected his ability to repay the maturing debt next year, he said.
It could be helpful to him to talk with a special servicer about ways to restructure or modify his debt, but as panelists at a conference seminar on special servicers pointed out, borrowers are not allowed to talk with the special servicer unless they are actually in default or a default is imminent…
http://nreionline.com/news/hotel_borrowers_caught_0323/
By Tony Downs, NREI Contributing Columnist
Several factors are coming together to limit new construction.
New construction of housing peaked at over 2 million units in 2005, and then collapsed 74% to 529,000 in 2010, as reported by Economic Indicators, a U.S. government publication. The combination of continuing foreclosures and a shortage of construction financing will block much new housing construction.
Yet some observers predict that there will be a building boom in rental apartment units in the near future in order to accommodate a rising population. A closer look convinces me that no such boom will appear in 2011, and even new apartment construction in 2012 and 2013 will not reach very high levels.
From 1997 to 2006, multifamily housing construction clustered around 342,000 new units per year, but then plunged by 66% to only 112,000 units in 2010. The Congressional Budget Office estimates that the U.S. will need 1.6 million additional housing units annually to keep up with population growth. That is three times as much as the number of all new housing units built in 2010.
Single-family construction is stuck at about 530,000 units per year due to massive foreclosures and high unemployment, both likely to persist for two to three more years. Consequently, optimistic apartment builders see a need for construction of many more rental units to meet basic housing needs.
Not so fast
This rosy view ignores several factors that will constrain new apartment construction in the next two to three years...
http://nreionline.com/news/real_estate_no_apartment_building/
According to Gwinnett County most of the commercial tax assessment notices were mailed on Friday, March 25th. As such, the deadline to appeal your property tax assessment is May 9. Please contact us for further details/assistance.
The Georgia Legislature is a little drunk on the passage of last year's sweeping property tax changes so they are bellying up to the bar for another round:
HB 381: Property tax moratorium
HB 381 extends the moratorium on increasing the assessed value of real property for tax purposes through the end of 2012
Heard in House Ways & Means committee on 3/10
HR 1: Property Tax Abolition
HR 1 would abolish property taxes in favor of a local-option sales-and-use tax or a flat rate household tax; it would alter how local taxes are used for public education
Assigned to the House Ways & Means committee on 1/24
HB 31: Property Tax
HB 31 would comprehensively revise the property tax system, including valuation procedures, alter mill limitations, and determine discontinuation procedures
Assigned to the House Ways & Means committee on 2/3
HR 10: Property Tax
HR 10 is a companion resolution to HB 31 and would revise the ad valorem property tax system by allowing each county (by local referendum) to determine valuation increases; it would also allow new values be assessed for homestead exemptions
Assigned to the House Ways & Means committee on 2/3
Apparently they aren't going to stop until the Georgia property tax has been replaced by higher rates in the other state and local taxes of our lives, OR until Georgia has an inequitable, dysfunctional property tax system.
Average Metro Home Prices Fall in February
By Michelle E. Shaw
The Atlanta Journal-Constitution
The average sale price of existing single-family homes in metro Atlanta tumbled 13.6 percent in February from a year earlier, dashing hopes for the first upward pricing trend since last summer.
According to data released Monday, metro Atlanta’s average price was $95,100, down from $110,100 in February 2010. That was the lowest average price among 17 metro areas in the National Association of Realtors’ monthly report
According to data released Monday, metro Atlanta’s average price was $95,100, down from $110,100 in February 2010. That was the lowest average price among 17 metro areas in the National Association of Realtors’ monthly report.
Sales fell 4 percent over the same period, the data shows.
Nationwide, prices fell 4.2 percent, to $156,100, and sales declined 2.7 percent.
Local residential real estate experts were encouraged last month when the NAR report showed average metro area prices rose nearly 2 percent in January 2011 from a year earlier.
Monday’s data dampened the optimism...
http://www.ajc.com/business/average-metro-home-prices-880652.html
The Recovery Will Be Bifurcated
These are the best of times for cash-rich borrowers and lenders, but they continue to be tough times for less well-funded borrowers and lenders. Just as the investment markets are bifurcated with top-notch properties in top-tier cities commanding escalating prices and lower tier properties and cities still fighting uphill climbs, so too does it appear that the capital markets are split between the haves and have-nots.
"There seems to be a dam that is keeping the flood of capital provided by the Federal Reserve from flowing to smaller real estate borrowers and properties," said Chris Macke, senior real estate strategist for CoStar Group. "Expanding the recovery in commercial real estate hinges on breaking this dam."
The split between cash-rich businesses and those in need of capital has set the stage for a bifurcated economy, with growing challenges for small- and medium-sized companies.
"Depending on where you stand, the debt maturity crunch ahead could either look like a crack in the pavement or the entrance to the Grand Canyon," Deloitte LLP reported in a new paper this week entitled: A Tale of Two Capital Markets...
http://www.costar.com/News/Article/The-Recovery-Will-Be-Bifurcated/127225
Will Electronic Commerce Kill Brick-and-Mortar Retail?
With a larger share of retail sales migrating to online channels, what fate awaits traditional physical retail centers? Supply and vacancy patterns for retail properties across the nation hint at a rocky future for retail landlords.
Data from the U.S. Census Bureau over the last decade quantifies what shoppers have known for some time — a growing number of consumers are shopping on the Internet. Close to $165 billion of transactions occurred on the Internet in 2010, a 14.9% jump from 2009. Total retail sales grew by just 7% during the same period.
On average, total retail sales have grown by 2.9% year-over-year from 2001 to 2010. E-commerce sales eclipsed that by several orders of magnitude, clocking in at an average year-over-year growth rate of 20.2% during the same time period...
http://retailtrafficmag.com/news/electronic_commerce_kill_retail_03082011/
A great time to be a real estate investor, not such a great time to be an owner-occupant.
Real Estate Price Declines Overshooting Fundamentals?
Home prices have fallen below fundamental values in more than half of U.S. states, overcorrecting from bubbles in some markets and dragged down by the recession in others.
That's the conclusion of analysts at mortgage insurer PMI Mortgage Insurance Co., who warn home prices during the next few years will vary "far more by location than usual."
PMI’s monthly analysis of economic, housing and mortgage market conditions attempts to tackle the question, "Have house prices fallen by enough to be affordable again?" The answer to that question depends on where you live, PMI analysts said.
PMI looked at home prices relative to income at the state level, using 1995 as a baseline. Because of home-price declines during the bust, growth in per capita income has outstripped home prices in 35 states over that time frame. Home prices are trailing income growth by double-digit rates in 30 states, PMI said.
States that saw significant price appreciation during the boom but which have now seen prices overcorrect include Alabama, Georgia, Idaho, Illinois, Michigan, Missouri, Montana, Nevada, New Mexico and West Virginia, PMI said.
http://www.inman.com/news/2011/03/17/real-estate-price-declines-overshooting-fundamentals
Repost: Gwinnett commercial notices won't go out until late next week, approximately 3/24/11.
Gwinnett County Tax Assessor's website shows commercial notices will be mailed this Friday, March 18th. I called their front office and they verified that this is correct. If your notice is dated March 18 you have until May 2nd to file your appeal.
They are also saying residential assessment notices will be mailed on April 15th. If your notice is dated April 15th you will have until May 30th to appeal.
US housing construction plunges
WASHINGTON (AFP) – Construction of new homes in the United States plunged in February to near record lows and building permits hit bottom, official data showed Wednesday in a dismal report on the ailing housing market.
http://news.yahoo.com/s/afp/20110316/ts_alt_afp/useconomyconstructionhousing
All the talk about a commercial real estate recovery or claims that “the other shoe” isn’t going to drop are focused on a narrow slice of the commercial real estate market.
Two Views of Commercial Real Estate
By
A.D. PRUITT
Two closely watched indexes on commercial real estate draw much different pictures of the market recovery.
Commercial-property valuations are up nearly 35% since hitting bottom in May 2009 and are 15% to 20% below their 2007 peak, according to Green Street Advisers' Commercial Property Price Index for February.
Valuations dropped 42.1% from their peak in October 2007 and recovered 5.5% from their low in August 2010, according to the Moody's/Real All Property Type Aggregate Index through December.
A big reason for the disparity: The two indexes track different sets of property.
The Green Street CPPI, which tracks properties owned by 47 real-estate investment trusts with roughly $400 billion in assets, is tilted toward sales of high-end and trophy buildings. Its index reflects the valuations assigned to the REIT portfolios formed by input from brokers, economists and company executives. The index uses various metrics that include the price of property deals currently being negotiated, under contract or recently closed.
Moody's index tracks all property sales of $2.5 million and more, looking only at transactions that have closed and that are repeat sales. As such, this index measures a greater pool of smaller and distressed properties than does the Green Street index.
http://online.wsj.com/article/SB10001424052748703883504576187093725992666.html
There is little doubt in my mind that unless the unemployment rate plunges to “normal” levels soon prices will drift lower from here. How deep are investor’s pockets? If they stop buying how many months of inventory will there ultimately be?
Underwater mortgages rise as home prices fall
By DEREK KRAVITZ, AP Real Estate Writer Derek Kravitz, Ap Real Estate Writer – Tue Mar 8, 1:40 pm ET
WASHINGTON – The number of Americans who owe more on their mortgages than their homes are worth rose at the end of last year, preventing many people from selling their homes in an already weak housing market.
About 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter, according to report released Tuesday by housing data firm CoreLogic. That's up from 22.5 percent, or 10.8 million households, in the July-September quarter.
The number of underwater mortgages had fallen in the previous three quarters. But that was mostly because more homes had fallen into foreclosure.
Underwater mortgages typically rise when home prices fall. Home prices in December hit their lowest point since the housing bust in 11 of 20 major U.S. metro areas. In a healthy housing market, about 5 percent of homeowners are underwater.
http://news.yahoo.com/s/ap/20110308/ap_on_bi_ge/us_underwater_mortgages
I am reposting this to supplement the double dip talk.
As Whitney Tilson and Glenn Tongue of T2 Partners LLC showed in their excellent analysis and 2009 book "More Mortgage Meltdown" the foreclosure crisis is far from over. The problem loans yet to peak are the Alt-A loans, also referred to as "liar loans" because of the lack of documentation of income and assets (73 percent of securitized Alt-A loans). The Alt-A market is estimated to be 50 to 100% larger than the subprime market. The problems with subprime loans occurred first because their interest rates typically reset after only two years. Alt-A loans typically had five year resets. Alt-A resets began to surge in 2010 and they will continue to rise into 2012.
http://www.moremortgagemeltdown.com/
Home Prices: The Double-Dip is Near
By Les Christie, staff writer March 6, 2011: 5:02 PM ET
NEW YORK (CNN Money) -- That big sucking sound you heard last week? That was the air being taken out of the housing market by a slew of bad reports followed by some dire predictions by an industry bubble-spotter.
On Tuesday, we found out that home prices were near their post-bust lows. Two days later the government reported that January saw a double-digit dip in the number of new homes sold.
Then Robert Shiller, the Yale economist and co-founder of the S&P/Case-Shiller home price indexes, dropped this bomb: "There's a substantial risk of home prices falling another 15%, 20% or 25%," he said.
That's a stunning enough pronouncement to make house hunters consider putting purchases on hold. And that may not be a dumb move: If prices are near a double dip -- meaning they fell after the bust, rose a bit during recovery and are now heading back down -- there may be better deals ahead.
"There will be differences by market, but generally, you may get a big discount by waiting a year [to buy]," said Dean Baker, co-director of the Center for Economic and Policy Research, who thinks the price drop will be closer to 10% or 15%...
http://money.cnn.com/2011/03/03/real_estate/housing_buy_or_not/index.htm
Suburban office owners! Rents are not rising and vacancy rates are not falling. Sales are less than replacement cost in most cases. Capitalization rates have dropped slightly but this is no time to sit on your hands. Appeal your tax assessment.
In a recent survey just as many national investors called office building property a "buy" as those calling office a "hold" (44% each). This probably has a lot to do with the dichotomy of suburban office product versus central business district (CBD) office product. The difference between the two locations is a departure from previous recoveries, however. In the past, due to the desire for lower rents and shorter commutes the suburban office properties typically lead the office market coming out of recession.
Due to the large amount of vacant suburban office space at this time (70%) of total, suburban property is lagging CBD property this time around. With job creation continuing on a sluggish pace suburban office vacancies are stable to increasing, even as CBD properties are experiencing lower vacancy rates. Rents that were cut during the great recession don't stand much of a chance of rising in the suburbs until the job picture turns around and all that vacant space is absorbed.
National CBD office market overall capitalization rates declined during the most recent quarter over quarter comparisons (per PWC/Korpacz) to 7.53%. National suburban cap rates also declined to 8.17%. Atlanta office market cap rates declined slightly to 8.84% from 8.95% the previous quarter and 9.03% a year ago. Office leasing activity was up 27.5% over the first three quarters of 2010 versus the same period in 2009. Free rent is prevalent however, with up to 20 months free on a ten year lease. The outlook for rent levels remains negative for the near term.
The Atlanta office market vacancy rate was averaging approximately 10% in the fourth quarter. Tenant retention is averaging approximately 63% just slightly below the year ago 65%. Rents are flat to declining -0.25% while operating expenses are rising approximately 2.32%. The Wall Street Journal recently reported that the delinquency rate on commercial mortgage backed securities reached a record 9.39% in February and one of the largest jumps was office CMBS delinquencies which rose to 7.1% from 6.88%.
Leading, downtown, trophy office buildings are the only office properties selling for premium prices and suburban office is lagging. Continued pressure on rents coupled with high vacancy rates will continue to adversely affect pricing. Overall Atlanta office properties are selling for 50% to 100% of replacement cost with an average price of 80% of replacement cost. 2011 is a good time to appeal your property tax assessment.
The delinquency rate for commercial mortgage-backed securities reached record levels in February, as commercial real-estate deals made in the market's peak continue to struggle despite rising values in some parts of the country.
According to research firm Trepp, 9.39% of all CMBS loans were delinquent in February, a modest increase from 9.34% in January.
The bulk of troubled CMBS loans, mortgages bundled together and sold to investors as bonds, were made in 2006 and 2007. At least $22 billion of those loans are expected to mature in 2011, according to Fitch Ratings.
Of property types, one of the larger jumps was in the office sector, with 7.1% of office loans delinquent, up from 6.88% in January. Multifamily apartments were the worst performing, with 16.61% of loans delinquent in February, although that rate was down from a peak of 16.85% in January.
The increase in delinquencies comes even as the volume of delinquent loans sitting on banks' balance sheets is on the decline.
For the last three months of 2010, banks and thrifts reported that 7.8% of commercial real-estate loans were more than 30 days past due, according to data from the Federal Deposit Insurance Corp. and Trepp, down from a peak of 9.1% in the first quarter of 2010...
http://online.wsj.com/article/SB10001424052748703409904576174652993921360.html
Commercial Vacancy Rates to Decline A stabilization trend is taking place in commercial real estate sectors, but in most markets rent will remain soft except for multifamily rentals, according to the National Association of REALTORS. Lawrence Yun, NAR chief economist, said a pullback in construction is helping stabilize the market. “Very limited construction of new commercial real estate over the past few years has essentially fixed the supply of available space,” he said. “This means vacancy rates could fall quickly from any increase in demand for commercial space.” From the first quarter of this year to the first quarter of 2012, NAR expects vacancy rates to decline 0.5 percentage point in the office sector, 1.3 points in industrial real estate, 0.1 point in the retail sector and 0.9 percentage point in the multifamily rental market. “Even with declining vacancy rates, rents are not likely to turn positive in most markets until next year, outside of multifamily rental properties,” Yun said. For example, office rents are forecast to fall 1.8 percent this year before turning higher by 4.0 percent in 2012...
http://www.realtor.org/rmodaily.nsf/pages/News2011022803
Commercial Property Deals May Double in U.S. as Blackstone Bets on Rebound
U.S. commercial property purchases may double this year as confidence builds among investors with access to credit and equity that values will rebound.
Blackstone Group LP’s planned $9.4 billion purchase of U.S. shopping centers and Ventas Inc.’s proposed $5.7 billion buyout of a health-care real estate investment trust, one of two multi- billion dollar health care REIT deals announced yesterday, may mean a wave of commercial real estate acquisitions is coming as buyers regain confidence in the market.
“Both these deals are a great signal that liquidity has returned to the commercial real estate space,” Dan Fasulo, managing director of Real Capital Analytics Inc., said in a telephone interview. “It certainly will have ripple effects on the entire industry.”
Transactions surged over the past year as the economy began to recover and low interest rates made it cheaper for REITs and private-equity buyers to acquire office, retail, industrial, apartment and health-care properties. Completed acquisitions by U.S. REITs more than tripled to $24 billion in the 12 months through the end of February compared with the previous year, according to data compiled by Bloomberg. Fasulo said he “wouldn’t be surprised” if U.S. commercial property purchases double in 2011 from almost $140 billion in 2010...
http://www.bloomberg.com/news/2011-03-01/commercial-property-deals-may-double-in-u-s-as-blackstone-bets-on-rebound.html