Property Tax Appeal Blog | Daniel Jones (61)

Daniel Jones

A Wintery, Slippery Slope

Fitch Ratings service recently indicated that increasing numbers of foreclosures will add to the distressed housing inventory and will put further pressure on housing prices over the near-term. Of the huge number of delinquent home loans out there approximately 10% are moving into foreclosure now every month. Fitch went on to predict that housing prices will decline another 10% before they stabilize.

At the same time CoreLogic released data that showed that the year-over-year decline in residential real estate values in September was 4.1%. Of course, that number includes a lot of distressed sales but when you take out the distressed sales there was still a year over year decline in value of 1.1%. Due to the large number of delinquent residential mortgages that have not been processed because of the robo-signing scandal, the number of foreclosure properties coming to market will continue to stay high for months to come.

Separately, Clear Capital, which has their own housing price index reported that their year-over-year October reading was a -2.8% and they indicated that all data indicates a further negative path in home prices through this winter. If your County assessor is sitting on his or her hands and not doing anything with the values in your neighborhood, you should seriously consider a property tax appeal. If you need assistance with a property tax appeal or additional information please contact us.

Architectural Woes

The American Institute of Architects released a report where they concluded that the major issue which is preventing job growth in this country is a lack of debt financing for commercial real estate projects. I know this sounds kind of self-serving but they did note that one in five stalled projects are a direct result of financing issues and they did it knowledge that financing problems account for a higher share of stalled projects in the education and multifamily sector.

Separately, Trepp, LLC said that of the 11 banks that failed in October 65% of the non-performing loans were commercial real estate loans. The number of bank failures is up from September when there were six failures and August when there were seven failures. They noted that the slowing of the US economy seems to be having a negative impact on the banks as delinquency rates and the volume of troubled commercial loans has increased recently.

Here it Fair Assessments LLC we are saving our clients an average of 21% on their property tax assessments in 2011. If you would like help with your property tax appeal in 2012, please contact us. We are here to assist in will be happy to answer any questions you might have about our service.

Here Comes the Commercial Property

Everyone thinks that the residential real estate market is in the dumps and the commercial real estate market is in recovery mode. There have been commercial foreclosures over the last couple of years but most of those commercial mortgage sales came from a few banks and the Federal Deposit Insurance Corporation. Now more troubled loans are being worked by other lenders and servicers. Next year around $400 billion of commercial real estate loans mature. That is up from $375 billion this year and $250 billion in 2010 according to Deutsche Bank.

Each month billions of dollars of commercial real estate properties are falling into default. The delinquency rate for commercial mortgage-backed securities has remained high for much of this year and was 9.8% in October, one of the highest percentages ever. Many people think that we're going to see a lot more loans going into default over the next few years.

This is problematic for the property owners that are current on their mortgages as the investors buying distressed commercial loans and foreclosed properties are able to rent them at much lower rates and service the debt. That puts the owners that are still holding on to their old debt financing at a disadvantage. The pressure on rents has the potential of sending commercial property owners that are current into default. Commercial bond investors are suffering an average loan loss of 38% on property sold this year according to Deutsche Bank.

For more information on commercial property values and ammunition for property tax appeals please visit us at www.fair-assessments.com and for assistance with your property tax appeal, please contact us.

Apartments’ Silver Lining

The good times are rolling for apartment building owners, due to the millions of homeowners that are being displaced by the foreclosure tsunami. After being burned by declining home values many people are just choosing to rent rather than buy a smaller, cheaper home. Strong rent growth and high occupancy levels are pushing some apartment community values to record levels. Occupancy is now at its highest level since 2006. Third-quarter vacancy was 5.6%, down from 5.9% in the second quarter.

Retail Property Tax Appeals

The economy is roaring back if the October stock market has anything to say about it. Just two short months ago the economy was slowing, Europe was (and is) on the ropes, and we were just a shock away from recession. Now everyone seems to be convinced that we are (my Halloween analogy) whistling past the graveyard.

Consumer confidence is still residing in the basement however, and the number of pending home sales has been trending downward for the last three months. The savings rate has been trending down for three months also, and this has been somewhat evident in retail sales figures. Apparently the draw-down of savings has not gone toward house purchases.

Although the holiday season should give a boost to retailers and their landlords the retail real estate sector faces serious headwinds. According to CoStar, vacancy rates declined for the general retail, shopping center and specialty center property types. The vacancy rate rose for malls and power centers. The total retail vacancy rate dropped 10 basis points from 7.2 percent to 7.1%. The drop in vacancy for some property types appears to come at the expense of rental rates. The rental rates for all property types fell in the third quarter.

Commercial Property Tax Appeals 2012

It looks like 2012 will be another good year to be proactive and save money. A forecast released by PriceWaterhouseCoopers and the Urban Land Institute indicates that the commercial real estate market will see an increased supply of properties for sale during 2012, but diminished buyer interest. The absence of job growth will have a major impact on this issue. Job creation is essential for a sustained recovery in the commercial real estate market.

How many mortgages are delinquent???

6,373,000
According to Lender Processing Services (LPS)

That is an insanely large number. I never would have guessed a number this high. This is not good news heading into the traditionally slow house sales period of winter months. Of this insanely large number, 2,172,000 are foreclosure pre-sale inventory (ready to flood the market). Of the remaining 4,202,000 that are more than 30 days delinquent, 1,844,000 are more than 90 days delinquent. The Case Shiller 20 city home price index for August is due out tomorrow. It will be interesting to see what has happened since the economic slowdown began this summer.

Meanwhile, federal regulators are rolling out an "upgrade" to the government's Home Affordable Refinance Program (HARP). The goal is to allow underwater homeowners that are current on their mortgage payments to refinance at lower interest rates. Many homeowners that are current on their mortgage payments cannot refinance because they would have to put more money into the deal to create enough equity to refinance and that is not possible.

The new HARP will waive appraisal requirements and other fees that increase closing costs to make refinancing more affordable as well. HARP will allow homeowners to refinance regardless of how far their values have fallen. It is estimated that 1.6 million refinancings will take place by 2013 if the restrictions are relaxed.

Some think that this will be a shot of adrenaline for the economy. I agree that some people that refinance will have more disposable income after refinancing, but aren't we going through a deleveraging process? Aren't people refinancing into 15 year mortgages from 30 year mortgages to take advantage of the low rates and interest savings? Aren't saving rates rising and revolving debt falling?

Given the large 6,373,000 number above, representing the homeowners that are not eligible for HARP, I don't see anything approaching a panacea in this approach. I think the reason behind HARP is to prevent strategic default. The regulators know that once a homeowner's loan balance is 120% of the house value, default rates rise, even if the homeowner can afford the payments. They are hoping that if they help the people that are current on their homes they will stem the tide of foreclosures.

Commercial Property Tax Appeals

The commercial real estate sector slowed last quarter as the economy grew sluggish and debt financing began to dry up. According to Real Capital Analytics, Inc. (RCA) the dollar volume of commercial real estate transactions fell 15% in the third quarter vs. the second quarter. RCA only includes property transaction with values above 2.5 million dollars. CoStar Group, Inc. which includes all commercial transactions showed a drop in transaction volume of 29%. There is increasing concern that the European debt crisis will surge onto the U.S.A.'s weak economic shores and cause major damage.

The PwC Real Estate Investor Survey shows that capitalization rates on the majority of property types were down slightly in the third quarter vs. the second quarter, with only power centers and regional malls ticking up slightly. Atlanta has the distinction of being the only city included that shows an increase in office property capitalization rates. The Atlanta office market cap rate is essentially unchanged this calendar year, however.

Fair Assessments, LLC was formed in 2010 to produce outstanding commercial property tax reduction services for property owners throughout the Southeast. In our first full year of service our clients are enjoying an average property tax assessment reduction of 21%. If you would like to be a satisfied 2012 property tax reduction client please contact us at Fair Assessments.

Still More Mortgage Meltdown

As Whitney Tilson and Glenn Tongue pointed out in their 2009 book More Mortgage Meltdown, the mortgage loans that actually brought Fannie and Freddie down were Alt-A loans, not sub-prime loans. Alt-A loans, were issued with a lack of income documentation and were later dubbed "liar loans." As Tilson and Tongue showed, interest rate resets on Alt-A's that were issued at low "teaser" rates are still resetting, and the resets won't peak until late in 2012.

Thanks to the Federal Reserve, this large volume of interest rate resets shouldn't prove too painful, due to the historically low level of interest rates. However analysis and opinion continues to predict a poor housing market for the foreseeable future.

Housingwire.com recently reported that sales of foreclosures may not peak until 2013. They report that half of all bank sales of foreclosed properties, or REO sales (real estate owned), this year have been from private banks. They predict that in the coming years it will be Fannie, Freddie, and HUD that dominate the supply of REOs for sale. Bank of America Merrill Lynch predict that total REO sales won't drop below one million a year until 2015.

Analysts at Barclays Capital say a "triple-dip" in housing prices will likely appear early in 2012. They warn that housing prices could fall another 6 to 7 percent during this downturn. They say close to 4 million houses are seriously delinquent or in foreclosure. A supply-demand imbalance could remain well into 2013 or 2014.

They say that nothing is certain but death and taxes, but they don't say high taxes. As long as local tax revenues are down, there is a risk that property tax rates will rise. Don't get caught with a declining asset (your house?) value and a rising tax bill. Contact us for Atlanta property tax appeal help.

Atlanta Property Tax Assessment News

Realtor.com recently reported that the number of housing units listed for sale is 20% lower than last year and is at the lowest level they have recorded since starting in 2007. At first this may seem like a positive development. If the number of listings is down, then demand must be increasing relative to supply. But it ain't necessarily so.

Many realtors report that their clients are pulling their houses off of the market because they are unwilling to lower their price to a level that generates interest. In addition, the number of foreclosures is down. This is temporary because the foreclosure processing debacle has slowed the foreclosure process. The banks and attorneys general are trying to negotiate a settlement in the tens of billions of dollars and when this is settled the pace of foreclosures should increase.

The foreclosure "shadow inventory" is estimated to be a million or more houses, nationwide. I am doubting that the residential real estate market has legs from here. Continued value pressure from distressed properties will plague the market for a couple more years. The Atlanta real estate market is bouncing along the bottom, at best, and is at risk for another decline if the economy slips back into recession next year.

If you need property tax relief, contact us, we have been saving our clients an average of 21% on their property tax assessments in 2011.

Daniel Jones

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