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8-2-08 Housing Slump, Land Values, Tax Assessments, Water rates etc – Quite a Mix

Oconee and Walton taxpayers and water customers have reason to be concerned with the size and uncertainties of the Hard Labor Creek Reservoir Project ($ 342 Million!). Those bonds will have to be paid, fewer customers and slowdown notwithstanding. The “architects” of that project missed on other projections…..

AVOC

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August 1, 2008

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Housing Slump, Land Values, Tax Assessments, Water rates etc – Quite a Mix

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By Wendell Dawson, Editor, AVOC, Inc

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Most of us are aware of the downturn in the Housing Market.  However, our tax assessors can tell us that someone recently sold a house higher than its assessed value.   It does not seem to matter that there is a surplus of homes and lots for sale.   A large number of unsold houses do not impact the Fair Market Value according to tax assessors.    Most in the business world know that opinion is a little detached from reality.

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Fire Sale at Coldwater 5.8.08

Oconee has surplus of residential Units

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In a recent conversation with an area experienced appraiser, we were discussing valuing a vacant lot in a lower priced home area.   He commented that there are no lots selling in Oconee County.   There are no comparison values.   The realtor and I both felt this lot was overvalued on the tax books.   The owners live out of state and are not familiar with the local market conditions.   It will be interesting to see what the appraisal determines.

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Oconee County has hundreds of developed, vacant lots with committed utilities but no paying customers!

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Parkside Subdivision on Mars Hill Road and GA 53 on 12.20.07

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Westland Fence on U S 78 on 4.6.08

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Many folks familiar with the market have a consensus opinion that Oconee County is overbuilt and has a large surplus of developed but vacant lots.  It will take many months, if not years, to trim down this excess.   Builders, sub-contractors, suppliers, realtors, mortgage lenders, banks, closing attorneys etc are feeling the downturn.   Some realtors have sought other means of income.  

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Local banks have shown less profit margins than they experienced in recent years.   The inventory of non-performing loans has increased.   Some stockholder correspondence has discussed the matter.   At the present time stockholders can probably expect less for their stock - if they can find buyers.   See GA DEPT OF BANKS AND FINANCE:

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To find information about bank assets, underperforming loans, etc, go to the following link: Georgia Department of Banking and Finance https://dbfweb.dbf.state.ga.us/WebBkData.html

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For an in depth report and analysis on the Northeast Georgia housing and real estate market, see Norton Native Intelligence Report # 230 dated August 1, 2008, EXCERPTS BELOW.   While it does not cover Oconee, it does cover some adjoining counties and describes conditions relevant to Oconee County.

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Check the inventory of houses and lots in Barrow, Jackson and Walton Counties.    There are several years of supply in some cases.

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Total Months of Inventory in Residential Market

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COUNTY

Re-sales

New Houses

Lots

Barrow

7.8

9

50

Jackson

16.6

11.4

124

Walton

12.67

11.4

106

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Will the slowdown result in not only higher taxes for many of us but also higher water bills to meet the debt service incurred based on projections of revenue that are not materializing?

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Oconee and Walton taxpayers and water customers have cause to be concerned with the size and uncertainties of the Hard Labor Creek Reservoir Project ($ 342 Million!).  Those bonds will have to be paid, fewer customers and slowdown notwithstanding.   The “architects” of that project missed on other projections.


6-29-08 Georgia banks feeling housing loan pinch

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The Atlanta Journal-Constitution

http://www.ajc.com/search/content/business/stories/2008/06/29/bankslump.html

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June 29, 2008

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Georgia banks feel the pinch

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Many took big risks as real estate rocketed; now mortgage crisis comes to haunt them.
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By Russell Grantham
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Published on: 06/29/08

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Georgia's banks have built up the nation's heaviest concentration of loans to now-struggling home builders and real estate developers.

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That is putting several banks in the state —- and perhaps significantly more if economic conditions deteriorate —- at greater risk of failing or being pushed into takeovers by healthier banks, some people in the industry say.

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Nearly $ 1 out of every $ 5 on Georgia banks' loan books bankrolled homebuilders and real estate developers —- by far the highest proportion in the state in at least 30 years, according to federal regulators' data.

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Even during the savings-and-loan crisis of the 1980s and 1990s, when thousands of banks and thrifts across the nation failed, Georgia banks were far less exposed to these higher-risk loans. Today, the banks have double the concentration of those loans, according to federal data on banks.

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7-13-08 GA Banks Having Trouble

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The Atlanta Journal-Constitution

http://www.ajc.com/business/content/printedition/2008/07/13/banktrouble.html

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July 13, 2008

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A Texas warning for Georgia banks

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By Russell Grantham

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A ratio developed to predict failures during the Lone Star State's savings and loan crisis suggests several Peach State banks are in trouble.

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Several Georgia banks dominate a recent ranking of the nation's riskiest financial institutions based on a measure known as the "Texas ratio," which attempts to gauge how likely they will run into deep financial trouble.

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A number of them have recently made moves aimed at sidestepping potential failures, such as raising capital or selling assets to shore up cash reserves, according to company filings and interviews with executives.

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Such moves could buy time for banks that are struggling to recover from big bets on home builders and real estate developers that went sour. After years of bankrolling the once-booming metro Atlanta real estate market, Georgia's banks have the highest proportion of developer loans in the nation.

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But while some of those bankers said they're optimistic that the Atlanta economy will eventually rebound and ease the strains on the region's banks, they see more tough days ahead.

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6-14-08 Real Estate Agents decline with sales

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The Atlanta Journal-Constitution

http://www.ajc.com/business/content/business/stories/2008/06/13/real_estate_agents_quit.html?cxntlid=homepage_tab_newstab

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June 14, 2008

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As real estate declines, agents flee

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By David Pendered

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The party's over, and thousands of Georgia's real estate sales agents are going home.

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The decline of agents is the largest since the sales force hit a record high in 2007. The number of active agents has fallen by 6,131, or 5.9 percent, according to the Georgia Real Estate Commission, which licenses agents.

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Their departure is expected as the days of easy sales — and commissions — fade into history.

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"A lot of people weren't having to work real hard to make really good incomes," said Bob Hamilton, chief executive of the Georgia Association of Realtors, a professional organization.

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In Georgia, at least some of the decline appears to be among part-time sales agents. The state doesn't analyze the data it collects, said Jeff Ledford, the state real estate commissioner…………..

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"The people leaving are primarily part-time agents who have their license as a secondary income — schoolteachers, firefighters, people who drive a school bus, stay-at-home moms," Babcock said. "I'm not aware of anyone who is an active, full-time, successful real estate agent who has dropped out of the business."

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The dip in Georgia follows a national pattern………………………………


8-2-08 Excerpts from Norton Intelligence Market Watch # 230

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NORTON NATIVE INTELLIGENCE MARKET WATCH
   Issue 230

'North Georgia's Intelligence Market Watch'
        The Norton Agency

434 Green Street

Gainesville, GA 30501

http://www.nortoncommercial.com/

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MID-YEAR 2008 MARKET REPORT AND FORECAST

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Total Months of Inventory in Residential Market

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COUNTY

Re-sales

New Houses

Lots

Barrow

7.8

9

50

Jackson

16.6

11.4

124

Walton

12.67

11.4

106

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For the first time in 22 years of collecting and writing on the North Georgia real estate market, Norton Native Intelligence is publishing a Mid -Year Report and Forecast.

 For the last 18 months the regional real estate market has moved with such downward velocity that it makes even the strongest person’s head spin. While there are great opportunities amidst the hubris and rubble, the soundings are at best confusing and sobering as Realityis taking hold of the marketplace. The clear picture as the dust of foreclosures, banking stress and declining consumer confidence levels settle is that:

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           The development engines produced too much residential product in the wrong price ranges using misguided proforma economics for sustained housing demand.

          The reality of too much money flowing into the market 2001 to 2005 has set in. The fundamentals of lot cost to construction cost ratios, supply and demand, absorption rates,     rates of return, equity ratios and credit scoring were largely ignored in the midst of reported exorbitant profits.

           Banks have moved from a “state of denial” to a “state of shell shock” as the developers interest reserves dwindle and the buyer interest slow down, lengthens.

          With inventory peaking in late 2007 and new construction starts plummeting, the appetite at the development buffet will start to return to normal in the second half of 2008 and continuing through 2009.  The bouncing-along bottom experienced so far in 2008 will see a slight lift-off over the next 2 quarters.

      Despite reports to the contrary, houses are selling every day. Mortgage companies have

money to lend and are anxious to qualify prospective buyers. Small industry is still producing strong

goods and services and North Georgia comparatively, is weathering the storm better than most

communities.

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Single Family Resales

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Inventory (FMLS/MLS) peaked for resale homes in November 2007 and statistically has been in a

decline ever since. At Mid Year some 19,995 resale homes are for sale throughout the Atlanta and The

North Georgia service area or a 10.8 month supply.

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Only the most motivated of sellers have their homes for sale (those that have needs of relocation, family size changes, financial stress or health issues). Asking prices are for the most part the most realistic in decades, cutting through the hope and prayer, winning the lottery attitudes and cashing- in euphoria, now to the core of real value. Buyers of homes in the last 6 months have taken advantage of price concessions and capitalized on motivated sellers to stretch their home-buying dollar. More house, more value than perhaps in the last 5 years. Resale sellers must price their product against the competing developer inventory or bank foreclosure down the street.

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New Single Family Construction

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Inventory peaked in October of 2007 and builders have been strategically dumping inventory overboard to reduce the load on their sagging life boat. Concessions on new product (depending on original offering price points) range from $ 17,000 to as high as $ 70,000. The inventory of major institutional builders, for example (Centex KB Homes, Pulte, and DR Horton) is surprisingly low at 3 to 4 months of inventory. It’s the midsize builder that overshot the mark on supply and price points. Norton Native Intelligence January 2008 prediction of a lot and housing shortage is now fulfilled. New homes under $ 250,000 have moved briskly, lot inventories for the same workforce housing are moving to critically short levels. With very few signs of development life out there, the engine for this market segment has been shut off and shortages starting in August, may last 24 to 30 months……………….

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Developed Available Lots

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The inventory of completed lots peaked in the first quarter of 2008 as those developments with financing in place completed their pipeline of construction. With few exceptions (Village of Deaton’s Creek in Hall County) the new lot development process has come to a grinding halt. While shortages are already appearing (homes under $ 200,000) Norton Native Intelligence does not for see any uptick in development of new lots or the completion of 2nd and 3rd phases of standstill developments for 18 to 24 months.

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No right- minded small bank board would approve an A & D (acquisition and development) loan while continuing to face the fundamental struggles, stresses and foreclosures of some of their oldest, most loyal developer borrowers. Mind you, Norton Native Intelligence thinks this posture is short-sided. Work force housing, not row after row of petite McMansions is the true market for North Georgia. Our demographics are solid; the deepest part of the housing pool is under $ 250,000 contains as strong a current of buyers as the Mississippi.

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 Raw but Entitled Property (Zoning)

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During the last days of the 2000’s real estate boom, developers worked feverishly to entitle/zone property in advance of new impending government regulations. Fast forward only 18 to 24 months and those same holdings sit languishing on the sidelines, a common casualty of the market’s overestimation of needed supply. Mostly located in outlining areas (see above), they have some value, Just not right now. The existing lot inventory must be absorbed in good order before values return. Unless these have hope: economics, zoning for work force housing, it is best that these are placed in suspended animation for now.

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Raw Land Unzoned

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For the most part, we must readjust our thinking on raw land holdings. Without immediate speculative value and in the face of mountains of lots piling up, raw land is no longer an ATM machine, 401K or a pot of gold at the end of the rainbow. Strategic holdings in the direct line of growth will rebound swiftly, but the raw land properties stuck in the nooks and crannies of North Georgia hinterlands will return to pre-2000 values. Land for agriculture, recreational use, aesthetic and enjoyment is always in demand. Rolling gentlemen farm property will always have intrinsic value but the rest of the landed gentry will have to wait for their windfall.

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Condo Market

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Attached zero lot line or stacked unit condo product has not fared well in North Georgia. Developers need to remember that Americans moving out to the Hinterlands (that’s us) want space. The product is right on target for some small part of the buyer market (2 to 7%), those wanting zero maintenance to lock and go or affordable luxury at a small price (look at isolated lake condos). The last half of 2008 and 2009 will see major stress in the overbuilt National and Atlanta condo market but will have little if any effect on our market since the problems and noise will be focused to our south.

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Lake Lanier

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What goes down must come up. We hope and pray. Well absolutely, cycles come and go as we have seen for 50 years now, El Nina vs. El Nino. The pain continues. We project that with moderate rainfall, Lake Lanier could fill up by spring of 2010, but that the fall of 2009 will set month by month new lows. This, of course, has greatly affected the velocity of home sales on Lake Lanier for the first 6 months of 2008. ………… But while the unit count is off by 44% the per house average sale price was only off 2%. $ 634,000 in 2008 to $ 645,000  in 2007. This points to the resiliency of the Lake Lanier market’s ability to weather most any storm (or lack thereof). By year end 2008, we project lake sales will register at the same level as those sold in 2003. For those wanting to buy in on Lake Lanier this is THE TIME to buy the most house possible.

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Market Rap Up

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 Norton Native Intelligence sees the bottom and in fact believes we’ve been bouncing up and down on bottom for several months now. Housing led us into this credit crisis and this downturn. It is likely to lead us out and that process is underway, right now. Our market is on a solid firm foundation, our recovery will be faster because of our demographics and the strength of our fundamentals.

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Yes, pain is everywhere, but so is OPPORTUNITY. We must lift ourselves up, clear our way through the smoke and fog and seek a clear path to capitalize on those opportunities. “When everyone is being greedy, be fearful. When everyone is being fearful, be greedy”. Warren Buffet. We are prepared to make lemonade out of lemons.   ARE YOU?


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