The nation's top three home-builders have posted bigger losses in this year's first quarter than in last year's first quarter. Potential buyers of new homes are avoiding them for fear that they will continue to lose value and are purchasing low-priced foreclosures instead. This is the time of year when new-home sales are supposed to pick up but so far it has been worse than most expected.
This morning John Malone, head of Liberty Media, was interviewed on CNBC. He said that there is a disconnect between what is going on in New York and Washington DC and middle America. He said, and as reported in the media, that banks are claiming there is a little loan demand, but these claims are coming from the monster banks like Bank of America and Citibank. He pointed out, however, that small business people and potential entrepreneurs and job creators cannot get loans to start up or expand. The nation's community banking sector that is the lifeblood of small business is for the most part upside down. Their existing loan portfolios are in such bad shape that they are unwilling to place any new loans. He also said that, in his opinion, that the housing crisis has another 3 to 5 years to play out.
A couple of weeks ago I went to a affordable housing Summit here in Atlanta. This was primarily for real estate agents but Fannie Mae and Freddie Mac representatives were there and I wanted to hear what they had to say. The speakers were primarily addressing various programs in place to help agents sell the large numbers of foreclosures that are currently on the market such as Housing and Urban Development's new website, and new programs to speed up the short sale process. I asked the Fannie Mae and Freddie Mac representatives how their current foreclosure inventory compares to six months ago, and what their forecasters are predicting for six months from now and a year from now. They didn't have any figures with them but they were able to say that the current foreclosure inventory they have on the market is smaller than what was on the market six months ago because of the foreclosure processing debacle that came to light last fall. Now that that problem is getting straightened out they think that the number of foreclosures coming onto the market will increase as this year goes on.
In February the Case-Shiller home price index dropped four the eighth month in a row. Year over year prices were up in only one of the markets covered, Washington DC. Home prices in Atlanta are at their lowest point since the recession began. Atlanta house prices are down 5.8% from a year ago. Atlanta prices are down 26.3% from the national peak in July of 2006. Values in Atlanta are now 5.6% below the previous national recession low in April of 2009.
National real estate investor online reports that interest only loans are back in a big way. 24% of all loans that were securitized during the first quarter had some sort of interest only period. As they say, what goes around comes around.
The Commerce Department reported that March new home sales were up 11% over February sales. The pace of new home sales however, continues to be well below the pace at which economists consider healthy. Builders continue to struggle and compete with the large numbers of foreclosures.
Fannie Mae released their new economic outlook. They indicated that United States economic data continues to indicate a slowdown in activity. Consumer spending is down and business investment and commercial real estate construction have also slowed markedly. Consumer confidence is down as a result of high gasoline prices. Fannie Mae noted that single-family and multifamily starts fell sharply in February. In addition Fannie Mae noted that consumer’s home price expectations for this year have deteriorated materially during the last several months. Only about 44% of survey respondents expect home prices to rise during 2011.
Costar reported that first quarter office sales are up strongly but, not surprisingly, not all markets are benefiting. They reported that the highest sale prices per foot are located in New York, Washington DC, San Francisco, Los Angeles and Boston. These five cities have average sale prices of over $300 per foot. Other cities, including Atlanta, have average sale prices under $100 per foot.
In Georgia the effective date of appraisal for property tax purposes is January 1. The County assessors will only be considering market data from dates prior to January 1. The first quarter data which is now coming out will be called unusable by the assessors. However, what happened in the first quarter was somewhat influenced by consumer and investor expectations on January 1. As such, it may be useful to include some of this information during your appeal, especially when presenting before the Board of Equalization.
Okay, hodgepodge or potpourri of market data today. As reported by the Associated Press today investors drove home sales up 3.7% in March. This was primarily due to investors purchasing foreclosed properties with cash. The number of first-time home buyers actually fell. Foreclosures or short sales are making up 40% of the market currently. The 3.7% March uptick represents an annualized 5.1 million sale rate however this is significantly lower than the 6 million sale rate that economists say represents a healthy market.
Separately the National Association of Home Builders/Wells Fargo housing market index showed builder confidence is still at depression levels. The index is at 16 and has been for five out of the last six months. An index level of 50 indicates that as many builders see the outlook as good as do poor.
Fannie Mae apartment building foreclosures are piling up. This is unusual because apartments were supposed to be doing so well given that everyone is losing their homes. Many of the multifamily loans that Fannie Mae purchased were created at the top of the market. During 2010 Fannie Mae foreclosed on twice as many apartment properties as they did in 2009 and there were twice as many delinquent apartment loans at the end of 2010 as were foreclosed in 2010.
Real estate research firm Reis reported that the vacancy rates at regional malls has spiked to 9.1% the highest level since they began tracking the sector in 2000. Neighborhood and community center vacancy rates have remained stable at 10.9%. Because there was little new product coming on the market recently they said that the stable vacancy rate was a result of little or no demand for retail space.
Whistling Thru the Graveyard: Could CRE Follow Housing Into Another Trough?
By Mark Heschmeyer
..."I am questioning the recovery in commercial real estate. The recovery has been very bifurcated," Klassen said. "Trophy properties in prime markets are fetching bubblicious prices because large institutional investors have cash burning a hole in their pockets. But from the folks we speak to, the secondary markets are still very dead."
"The risks we face in 2011 are greater than 2010," Klassen added. "The most significant risk is the end of fiscal and monetary stimulus in the first half of this year. It will take a lot of steam out of the economy. To me, prudence would dictate waiting until the end of summer to see how things pan out. By then, we will also know the extent of state and local government job losses, which may be significant according to what we are hearing in Texas. I wouldn’t want to be signing pricey contracts before then..."
Gwinnett residential notices are going out April 15, happy tax day! Let's hope the printer/mailing service gets it right this time. If all goes well the deadline to appeal will be May 30. As most other metro area counties will have the notices on the street by May 30 please contact us regarding your appeal well before this deadline. Thank you! www.fair-assessments.com
I have received assessment notices from commercial clients in Gwinnett County and Cobb County. Both have an appeal deadline of May 23, 2011. Please contact us well before this date if you would like our professional assistance with your property tax appeal www.fair-assessments.com
Many real estate market participants have criticized lenders for failing to foreclose on problem loans. Allowing property owners to fall behind on payments, or reduce payments, because the lender was already overwhelmed with problem loans became knows as "extend and pretend." The practice of ignoring the problem seems to be coming to an end however.
A year ago lenders had 80% of problem loans in loan modification programs. In an about face lenders are now foreclosing on approximately 71% of these loans and modifying only 29%. According to Moody's, approximately 7,000 commercial mortgage backed securities loans were in some form of default at the end of 2010.
We have successfully made it passed April 1 and all of the nonsense and misinformation being put out there by part-time and less than qualified property tax advisors. Can there be any doubt that the Georgia Taxpayer Return of Real Property has lost its usefulness when Gwinnett County sends out commercial assessment notices BEFORE April 1?
Gwinnett knows that the majority, if not all, of the returns filed are simply filed to generate an assessment notice that can be appealed. So why wait for returns? And for those of you who think that filing a return is the same thing as appealing your assessment, think again. Filing a return gives you no rights. Rights are only associated with an appeal of an assessment notice. Contact us if you have any questions.
Delinquency Rate Hits Record for Mortgage-Backed Commercial Loans
Loans tied to commercial mortgage-backed securities hit a record delinquency rate in March, with 9.42% of all such loans having missed payments, loan research-service firm Trepp LLC said.
The rate has been on an upward climb since the real-estate market began to turn in late 2007. Facing significantly lower values than when loans were taken out during the peak years of 2005-2007, a number of landlords have been unable to pay off loans as they come due.
The worst-performing sector is multifamily, with 16.2% of loans delinquent…
Mall Vacancies Climb to Highest in Decade as U.S. Retailers Close Stores
By Hui-yong Yu
Vacancies at U.S. regional malls rose to the highest level in at least a decade in the first quarter, a sign that landlords are struggling to keep tenants after the recession even as retail sales rise, Reis Inc. said.
The vacancy rate climbed to 9.1 percent from 8.9 percent a year earlier and 8.7 percent in the fourth quarter, the New York-based research firm said in a report today. It was the highest since Reis began publishing data on regional malls in the beginning of 2000…
55 Allen Plaza Bought by Lincoln Property for Pension Fund
The Atlanta Journal-Constitution
The end of the Atlanta real estate development scene's heyday has been well chronicled in stories of sparsely occupied office buildings, vacant lots and near empty condominiums. The latest sobering chapter was written Tuesday morning in the shadowy chill on the Fulton County Courthouse steps.
Auctioned was 55 Allen Plaza, one part of a dream mega-project envisioned by prominent local developer Hal Barry. There were no takers, save for the Teachers Retirement System of the State of Illinois, the pension fund that acquired the debt on the project last month from Bank of America.
Lincoln Property, a Dallas-based commercial real estate firm, acting on behalf of the teachers' fund, acquired the prime property for $57 million. That represents an eye-popping discount from the original $83 million loan, and stacks up as a bargain.
The four-year-old, 350,000-square-foot Class A office tower counts prime tenants...http://www.ajc.com/business/55-allen-plaza-bought-899383.html
The world's largest bond fund is opening a new mortgage real estate investment trust (REIT) to invest in, and issue debt secured by commercial real estate. With nearly $2 trillion in commercial real estate debt maturing in the next five years, and lenders increasingly unwilling to issue loans secured by commercial real estate, they see an opportunity to issue and purchase debt secured by good quality commercial RE assets. They also made note of the fact that most money is chasing trophy properties in New York City and Washington, D.C. and there is a need for liquidity in other markets.