Expect Housing Prices to Continue to Rise

by Keith McCullough, July 28, 2009



According to data released by the U.S. Department of Housing and Urban Development, sales of newly constructed single-family homes spiked 11% in June to an annualized rate of 384,000 homes. Consensus had forecast seasonally adjusted sales of 352,000.

While the rate of improvement is consistent with our 2Q09 housing bottom call, the rate of sales is still 21% below the year ago levels. For reference, four years ago (during the height of the housing boom), the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month.

This report is impressive given what is going on with existing home sales and all of the foreclosure activity, which is sending home prices significantly lower.

I think most people would agree that Obama's $8,000 tax credit for first-time homebuyers is having a positive impact, but what will happen when it goes away in December?

Importantly, the June inventory of new homes dropped to 281,000, an 8.8 month supply at current rates of sale; in May, supply stood at 10.2 months. Most of the excess inventories tend to be concentrated in just a few markets, such as California, southern Florida, Las Vegas and Arizona.

As we look forward, "the construction-put-in-place” data next month will likely suggest that housing will be an additive to GDP versus being a drag as it has been more recently.

11% jump in new-home sales is biggest since 2000

If you let superstition be your guide, the third-straight month of rising new-home sales could be the sign we've all been waiting for.



Posted by Mai Ling at MSN Real Estate on Monday, July 27, 2009 12:03 PM

They say everything come in threes, so I'll take the third-straight month of rising new-home sales as a good sign for the housing industry, especially on the heels of last week's report that existing-home sales also were up for the third month in a row.

We are on a roll, and it's a definitely a winning streak.

The Department of Commerce reports that the seasonally adjusted annual rate of new-home sales for June was 384,000, which at an 11% rise from May's rate of 346,000 makes it the biggest jump since December 2000. That number is below the 488,000 from June of last year, but it's still the highest rate since November.

The supply of new homes also is down significantly from the all-time high of 12.4 months in January. The Commerce Department reports the estimate of new houses for sale was at 281,000 at the end of June, an 8.8-month supply.

What this all means in normal-people terms is that the benefits are beginning to outweigh the risks for homebuyers who were thinking about taking the plunge. Between the government's $8,000 first-time homebuyer tax credit and the high number of foreclosures on the market, all you renters pondering the biggest purchase of your lives so far probably thought you had it really good.

But now you need to look no further than June's median sales price of $206,200 for new homes to know that the new-homes market is vying for your hard-earned money just as badly. The median price is down not only from $234,000 in June 2008, but also from May's median of $219,000. Compare that with the median price of $181,000 for existing homes in June.

Let's just put it this way: My mom always says buy new if you can, otherwise you're just buying other people's problems. So if you could spend just $20,000 more (I never thought I'd say "just $20,000"!), my mom would say it's definitely worth it.

Besides, the median price of existing-home sales already is on its way back up, so I can't imagine it'll take long for new-home prices to follow suit. Unfortunately, there are a couple of major factors that could stand in the way of a full-on rebound for the housing market: a predicted wave of even more foreclosures could simply put way too many homes on the market, and rising unemployment isn't doing anybody -- or any industry -- any favors.

Just like any big purchase or investment, it's a gamble. I'd like to say prices realistically can't go down much further, but it still has a lot to do with where you are hoping to live. Take a look at this graph from The Wall Street Journal that looks at housing inventory, home prices, joblessness and loan defaults.

Yes, it has a lot to do with location. But I still like the way things look on a national scale.

Nashville's economic diversity offers better shield from recession

Nashville's economic diversity offers better shield from recession
By Wendy Lee • THE TENNESSEAN • June 30, 2009



Nashville's economy is faring better than many other major cities', based on a review of recent jobs data, wages and home prices by The Brookings Institution.

Some experts see the Brookings' study released earlier this month as evidence that Music City will bounce back from recession faster than some other areas thanks to its diverse economy.

"Nashville has industries that are probably more vulnerable to the recession and probably some that made it less vulnerable," said Howard Wial, a fellow at The Brookings Institution, a Washington, D.C.-based public policy group. "The balance of those put it pretty much in the middle."

Overall, Greater Nashville beat at least 40 other metro areas in most categories of the study, which took into account local job markets, real estate sales, gross metropolitan product and wages during the first quarter of this year compared with a year earlier.

The Nashville area fared best on housing prices, which haven't been battered nearly as badly as some other harder-hit regions or states, particularly Florida, California and a swath in the Northeast. Nashville finished 25th of 100 cities on home price stability, the Brookings report concluded.

Cities that ranked lowest in the study included Detroit, an automobile industry hub that's been devastated by the bankruptcies of General Motors and Chrysler; as well as Los Angeles and Stockton, Calif., which soared with rising home prices earlier this decade only to collapse when the mortgage industry imploded last year.

'Stability Factor' Better

Wial said because Nashville ranks in the middle of the pack overall, it's probably true it will get out of the recession sooner. One of the benefits for Nashville is that it never had a big housing boom, and therefore never suffered a big housing bust, Wial said.

"I think our stability factor to begin with was better," said Mike Nichols, president of the Greater Nashville Association of Realtors, and managing broker for Zeitlin & Co., Realtors' InTown office. Nichols said it appears the local housing market is stabilizing.

Still, home sales remain significantly behind 2008 levels, according to the most recent data from the Realtors group. In May, there were 1,783 residential closings, down nearly 29 percent from the same month a year earlier, the association said. The median price of a single-family home here was $169,900, officials said, down 10.6 percent from May 2008.

One lingering challenge is the local job market. The state's unemployment rate for May was 10.7 percent, worse than the national jobless rate of 9.4 percent for the same period.

Bill Ingram, a Lipscomb University professor of economics and finance, said it's hard to say when the job market will get better. Ingram said he expects to see more signs of consumer spending improving by fall.

"The Christmas season this year will be a whole lot better than it was last year," Ingram said. "There will be less fear."

Housing starts jump unexpectedly

Monday, July 20, 2009, 1:48pm CDT
Housing starts jump unexpectedly
Nashville Business Journal


New residential construction in the United States rose 3.6 percent last month to an annual adjusted rate of 582,000 homes.

That’s up from the revised May estimate of 562,000 but still well below the June 2008 level, when the rate was a little more than 1 million.

The gain came in single-family construction, which rose 14.4 percent. Multifamily starts, however, fell 25.8 percent, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

“Why are the single- and multifamily construction markets headed in different directions?” asks Patrick Newport, an economist with IHS Global Insight. “Funding to finance commercial real estate projects, including new apartment units, has nearly dried up. Funding to buy homes, however, while tight, is available for those with good credit and a hefty down payment.”

Building permits rose to a seasonally adjusted rate of 563,000 in June, up 8.7 percent from 518,000 in May. However, building permits were down 52 percent last month from 1.1 million in June 2008.

Hot Hood - The Gulch, Nashville

Courtesy of MarketStreet Enterprises

Hot Hood | The Gulch, Nashville
By Jeffries Blackerby

Nashville is a city I’ve known and tried to loved for many years. But it sprawls, it loves football, it drives big trucks. Lately, though, Music City has become almost unrecognizable to me, in a good way. The old insular country music industry has opened up enough to include some truly interesting artists (more on that here), the restaurant scene has exploded (see here), and the recently elected mayor, Karl Dean, won on a platform of green initiatives.

One of the more noteworthy developments is the Gulch, a revitalized area of early-20th-century brownfield between downtown and midtown that has now become the first LEED-certified neighborhood in the South. The area has been 10 years in the making — a collaboration between private developers and the city, which invested $7 million — with a master plan that incorporates a bikeable and walkable street grid, renovation of more than 80 percent of the existing buildings and eco-minded new towers. At the moment there are 900 condos and a handful of shops and restaurants ranging from a burrito-and-margarita place to the serious foodie magnet Watermark. Within five or six blocks of most of the neighborhood are dozens of city bus lines and bike and pedestrian paths. “All along, we’ve strived to get people to move closer to downtown,” says Jay Turner, managing director of Marketstreet Enterprises, the Gulch’s chief developer. “Nashville was really going in the direction of the hole-in-the-doughnut syndrome, if not already there. We wanted to help make sure it didn’t become like Atlanta.”


NOW: The Gulch is the first LEED-certified neighborhood in the South.
The Gulch seems to be having an impact. The flagship condo building, the Icon, is 75 percent sold, and the neighborhood’s 48 rental units all have a waiting list. When I was there recently, the restaurants were packed, with an hour’s wait for a table and a definite buzz on the lively corner of 12th Avenue and Division Street. If there was one moment of deflation for me, it was that I had hoped to see not a new Urban Outfitters there, or an outpost of the Dallas-based restaurant chain Sambuca, but a few more home-grown businesses.

Now, it’s probably true that for anyone monitoring the Brooklynization of other midsize cities, from Baltimore to Minneapolis to Seattle, the Gulch in this early stage may seem like small beer. But for a city that, like many others, gave way long ago to corporate parks and spaghetti junctions, it’s a noteworthy thing for the New South to give up even one block to New Urbanism. As Turner explains: “We understand the importance for the world in trying to do everything in a lasting, sustainable manner. If the average new housing development in Nashville takes one acre per house, that’s 900 acres that didn’t have to be torn up in this beautiful country.”

Brentwood's Whetstone falls in foreclosure

Tuesday, July 14, 2009, 7:00am CDT | Modified: Tuesday, July 14, 2009, 7:22am
Brentwood's Whetstone falls in foreclosure
Nashville Business Journal - by Jenny Burns Staff Writer

A Brentwood housing development with million-dollar homes, Whetstone, is in foreclosure.

Developers say this is the first major development in Brentwood to go into foreclosure during the current recession, and the property owners had been trying to sell the project.

Developer Sedona Investments LLC bought the 157-acre property in August 2005 for $9.4 million. James Cross, who is listed as the developer of Whetstone who took out the loans, did not immediately return calls Monday.

Homes in Whetstone, which is located off Edmondson Pike in Brentwood, start at $900,000.

The 141-lot development was appointed to a successor trustee in June, according to Williamson County records.

The development was sold on the Williamson County courthouse steps on Thursday to Fifth Third Bank for $7 million, says Tony Marble, a real estate agent and builder who is selling a home in Whetstone and attended the courthouse sale Thursday.

The Whetstone foreclosure has not yet been recorded in county records.

Fifth Third was the property’s lender, making at least two loans to Sedona for $6.1 million and $4.5 million, according to Williamson County records.

Four homes have been built in Whetstone. One of them is occupied, and the remaining three are for sale, Marble says.

Williamson and Davidson County - Residential Homes June Sales Report

Williamson County Association of Realtors and the Greater Nashville Association of Realtors released their home sales numbers for June, 2009. The real estate market is still slow, but there are a few encouraging signs.

In Williamson Country, residential home sales decreased 11% compared to June, 2008, but more importantly, the median price for residential homes increased by less than 1%. Williamson County condo (Franklin, Brentwood) closings decreased 16% compared to a year ago, with the average sales price declining by 30%. In Davidson County, sales have dropped by almost 20% from June 2009 to June 2008. However, the median home price for a single family home in June, 2009 was $177,700, down just 3% from the $183,615 in June, 2008. The median price for Nashville condominuims was $152,870 in June, 2009, compared with $185,500 in 2008.

Caveat: I have always warned people not to read too much into these monthly numbers. For example, the May 2009 sales figures in Davidson and Williamson County saw a drop in prices of residential homes, while condo sales maintained relatively stable.

If you would like to see the actual sales reports, just click on either of the following links:Williamson County Association of Realtors June Sales Report
Greater Nashville Association of Realtors

The Williamson County report includes graphs with the number of sales and prices from 2005 to present. While the quantity of sales has clearly declined since 2005, median prices have held steady.


If you have any questions, feel free to contact me at 545-8611 or at jefffulmer@comcast.net.

Best of a Bad Situation?

Best of a bad situation?
By E. Thomas Wood

Posted on July 7, 2009 at 1:56 pm

Among large metro areas, Nashville has one of the most stable housing markets in the country. That’s the word from PMI Mortgage Insurance Co., which has just put out its latest quarterly Economic and Real Estate Trends Report.

PMI’s risk index, projecting the likelihood that housing prices will be lower in two years, gives the 13-county Nashville metropolitan statistical area a score of 16.6 out of 100, versus ratings of 99.9 each for the Miami, Los Angeles, Las Vegas and Phoenix MSAs, among others at the bleak end of the scale. Mighty Cleveland scored the lowest risk rating at 1.5 — go figure — with several Texas cities also posting robust scores. Charlotte came in just ahead of Nashville with a rating of 15.

The national picture:

As many as 324 - approximately 85 percent - of the nation’s 381 MSAs are now facing increased risk of lower home prices in 2011. Florida, California, Nevada and Arizona continue to have the highest risk scores - 36 of the most risky MSAs are located in these four states - but an increased risk of lower future prices is now spreading across all regions of the nation, due to the significant increases in unemployment and foreclosure rates.

Condos: few buyers, plenty of renters

Friday, July 3, 2009 | Modified: Monday, July 6, 2009, 5:00am CDT
Condos: few buyers, plenty of renters
Waiting lists are common for prime downtown units
Nashville Business Journal - by Jenny Burns Staff Writer


Musician Jim Sweetwater wants to rent a condo in the Icon or the Encore buildings with a great view of downtown.

With the stymied condo market, he thought he’d have lots of options. But he’s been on a waiting list for two months.

“It turns out that everything is full,” Sweetwater says.

While people aren’t lining up to buy condos, they are hungry to rent them.

In the past couple of years, 2,175 condos have been added to downtown and Midtown; 63 percent of those have sold. Hundreds more remain unsold, but many sold units have been put on the rental market by their new owners.

Still, property management companies have had to resort to waiting lists for renters who want to live in specific buildings or want downtown views. Demand has grown despite premium rental prices for downtown units, which average about $1,400 for one bedroom and $2,100 for two bedrooms.

Outside of apartments, no one tracks scattered site rentals — a market that has ballooned downtown as new condo buildings have risen out of the ground.

Summit Property Management lists what renters are clamoring for on its Web site. There’s “desperate need” for one-bedroom condos in the downtown Encore and the Icon in Gulch, as well as one- and two-bedroom condos in The Adelicia in Midtown.

Property managers say most of the would-be renters are young professionals who can afford the monthly rent, but either don’t want to buy because of fear of prices falling further or can’t buy because they don’t have the steep downpayments — often 20 percent — required to get a mortgage for a condo today.

“Most of the buildings built in the last five years have waiting lists,” says Grant Hammond, one of three founding partners of Summit Property Management, a large renter of downtown condos. “Some of the waiting lists are as many as 40 people. Most potential renters know what they want.”

Sweetwater, 31, knew he wanted to be up high and face downtown. He doesn’t want to buy because he doesn’t think the real estate market has hit bottom yet.

In the meantime, he’s renting with a month-to-month lease in Cool Springs while he waits for his perfect downtown spot. One unit came available, but he didn’t like the view, so he passed.

Jenn Garrett, an agent with Village Property Management, which also handles downtown rentals, says many of today’s renters are the would-be buyers who can’t get financing.

“With the mortgage situation, I would guess that we’ve doubled the rental market in terms of those who would have bought, but can’t,” she says. “But they still want to live in the hippest, coolest places and have great views.”

Summit currently leases 275 properties, with 75 percent of those in the downtown/West End markets. The agency saw rental rates plummet 27.5 percent from Jan. 1, 2008, to Jan. 1, 2009, Hammond says. Those rates have generally stopped their fall in 2009.

By comparison, rents for Summit’s properties in Brentwood dropped 8.5 percent in 2008 and are down about 2.5 percent so far this year, he says.

Growing inventory and competition among owners in search of tenants in 2008 meant some renters got sweet deals. Hammond said many tenants were able to cut their rents by several hundred dollars through bidding wars from owners with similar units.

Doctors, entertainers and video producers who come to Nashville for a few months or a few years also are turning to renting instead of buying.

Hammond filled 20 furnished downtown condos with Nashville Star staff, paying an average of $3,400 a month with utilities. He’s also been getting calls from other reality shows needing rooms.

Garrett has three doctors as clients who are coming to Vanderbilt University for three years. They otherwise might have bought, but have chosen to rent downtown condos because they’re skeptical that they’ll get a good return on a property in that time.

Hammond says it’s surprising that with the wealth of condos, the rental demand is so hot.

“We’re down to begging at this point. Part of it is seasonal, but we just don’t have anything to rent,” he says.

The downtown condo buildings, and their respective homeowners’ associations, have mixed policies on how many renters can fill the units.

Encore and Viridian have a 25 percent rental limit. Adelicia allows only 20 percent of its units to be rented. Terrazzo allows investors to rent only 10 percent of the units, and Rhythm allows renters for about 30 percent of its building.

That’s about 239 rental units, if all owners choose to rent them out. Developers add these rules to ensure a certain number of owner-occupied units.

But Icon in the Gulch and soon-to-open Velocity don’t have rental limitations, says Bristol Development Group CEO Charles Carlisle. Those two buildings could potentially offer 683 units for rent, depending on if owners chose to rent them or not. Bristol plans to sell all the units and has no plans to rent them, Carlisle says.

In many buildings, owners generally have two to three months under homeowners’ association rules to find a renter, which can contribute to owners dropping their rents, Hammond says. Leases also have to be approved by building managers.

Dena Nance, owner of What’s in Store in Franklin, was able to get a lease quickly in the Rhythm after looking at six buildings. Nance needed to move from Franklin to downtown because she’s expanding her business into Edgehill Village. For her the location close to the highway was key, as well as the smaller size and artsy feel of Rhythm.

“It’s still contemporary, but has a little more artistic vibe and a more intimate nature. It’s less overwhelming and within walking distance to Demonbreun restaurants,” she says.

Pending home sales inch up in U.S., South

Thursday, July 2, 2009, 2:44pm CDT
Pending home sales inch up in U.S., South
Nashville Business Journal - by Adam Kress Contributing Writer

Pending home sales both in the South and across the nation posted a modest increase in May.

New figures from the National Association of Realtors show its Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 in April. That reading is 6.7 percent higher than in May 2008 when it was 85.

The last time there were four consecutive monthly gains was in October 2004, a promising sign for a still deeply depressed housing sector.

A sale is listed as pending when the contract has been signed but the transaction has not closed, which usually takes another one or two months. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined as well as the first of five consecutive record years for existing-home sales.

The Pending Home Sales Index in the South declined 1.7 percent to 92.6 in May, but rose 7.9 percent higher than a year ago.

From the Department of Look What $38M Will Buy You These Days

From the Department of Look What $38M Will Buy You These Daysby Geert De Lombaerde



Posted on June 30, 2009 at 4:38 pm

Alan Jackson has put his 135-acre Williamson County estate on the market. Among the features you’ll get: A stocked and aerated lake, a log cabin overlooking the Harpeth and a 20-car garage.
Check out many more photos here.