Upside-down rate goes inside out

By J.R. Lind

Posted on November 24, 2009 at 12:43 pm

First American CoreLogic released its quarterly negative-equity report today, saying 22.6 percent of the nation’s mortgages as underwater — far lower than the second quarter. An encouraging sign on its face, except First American revised its methodology for determining when a mortgage does upside down.

[The new] proprietary model … factors in loan amortization and utilization rates for home equity lines of credit (HELOC), providing a more precise view of “underwater borrowers.”

Under the older methodology — which didn’t use amortization or lines-of-credit data — the underwater rate would have been 33.8 percent.

In Tennessee, things are much better by comparison. The report shows 13.2 percent of Tennesseans in a negative-equity situation. That is, however, higher than most of the eight states bordering Tennessee; only Georgia and Virginia were higher, both hovering near 24 percent (no data was available for Mississippi).

The change in method paid big dividends for the Nashville area, too. First American reported 9.84 percent of area mortgages as underwater. Had the old method been used, the number jumps to 26.9 percent, up from the second-quarter’s 25.4 percent.

Nashville's Terrazzo lowers prices on 30 condo units

Wednesday, November 25, 2009
Nashville Business Journal - by Eric Snyder Nashville Business Journal

Saturday's auction of Terrazzo condo units was billed as a way for the public to decide what fair market value is for its units.

Leading up to the auction, Crosland Tennessee President Bill Barkley, Terrazzo's developer, didn't offer specifics on how rates set at auction would influence prices going forward. True to billing, however, they appear to have set the condo tower's new fair market value — prices for an additional 30 units inside Terrazzo have been reset to fall neatly in line with those set at auction.

The 30 units represent about 40 percent of the condo's unsold stock, including Saturday's sales figures. The building features a total of 117 units.

Before bidding was halted Saturday, 21 units were sold at rates between $213 per square foot and $269 per square foot (six additional units were sold Saturday using auction rates).

The post-auction pricing rates range from $213 per square foot to $266 per square foot, keeping with the roughly 33 percent average discount from list price established at auction.

One of those who bought a unit at Saturday’s auction was Ray Hensler, president of Market Realty Advisors and developer of The Adelicia condo in Midtown, who said sticking with the pricing set at auction is a smart move for Terrazzo.

“They’re being very realistic about the current plight of the market and capitalizing on the success and momentum of the auction. After this next batch they’ll be approaching 70 percent closed and I think that changes everything for them,” he said.

Keeping the prices at auction rates — as opposed to tacking on a several extra bucks per square footage — is also a smart move, Hensler said.

“Momentum is everything. Right now they have it and nobody else does. Why risk it?” he said.

Hensler said he bought a unit Saturday as an investment.

“They were our main competitor so I know their product and I know their upscale buyer,” Hensler said. “The building is gorgeous ... the only drawback they ever had was pricing. Now they've made that their strongest feature.”

For the revised units, prices now range from $199,000 for an 891-square-foot one-bedroom, one-bath unit to $399,000 for a 1,654-square-foot two-bedroom, two-bath unit.

Though it may be awhile before prices at Terrazzo return to levels over $300 per square foot, Hensler said that day will come.

“Once they push past 70 percent, even more buyers will jump in, especially as other buildings sit at or below 50 percent,” he said. “And although it'll be a few years before they see the original pricing again I think they'll jump back to at least $300 a foot as soon as they sellout ... probably a year from now.”

Terrazzo buyers get deal at auction

Prices could set tone for market
By Naomi Snyder • THE TENNESSEAN • November 22, 2009


Buyers at an auction for the $68 million luxury Nashville condo building Terrazzo walked away with 27 units Saturday at prices about one-third lower than previous buyers in the development have paid.

The sale had been much anticipated as a way to reset prices in the future for the nearly stalled condo market downtown.

The 117-unit, glass-walled Terrazzo building in the Gulch had sold just 15 units since sales started in March.

"I thought the auction was good because of the economy. We got good prices,'' said Nanda Kemkar, who is married to a Cookeville doctor and bought a one-bedroom condo for $243,000 on Saturday.

The sale had been much anticipated as a way to reset prices in the future for the nearly stalled condo market downtown.

The 117-unit, glass-walled Terrazzo building in the Gulch had sold just 15 units since sales started in March.

"I thought the auction was good because of the economy. We got good prices,'' said Nanda Kemkar, who is married to a Cookeville doctor and bought a one-bedroom condo for $243,000 on Saturday.

She said they intend to rent out the condo until they retire in a few years, at which point the couple plans to move into the Terrazzo. "When we retire, we need a nice city,'' she explained.

The developers plied the crowd at the Renaissance Nashville Hotel with Jack Daniel's glazed ham and jumbo shrimp in a room decorated with a glass sculpture of the Terrazzo.

Six sales negotiated

The room erupted in applause after the first winning bid. But after a few more sales, the prices began to fall and auctioneers halted the bidding after the 21st sale, a one-bedroom that went for $190,000, almost half off its asking price.

Then, auctioneers negotiated another six sales on the auction floor with individual buyers. The developers had put 35 condos up for sale. The average sale price Saturday was $233 per square foot.

"I think we had a great turnout,'' said Bill Barkley, president of Crosland's Tennessee division, which is Terrazzo's developer. "It's a real indication that the momentum is back in the market. That's what we wanted to see.

"This market is not overbuilt. We are in a rebuilding climate with our economy, and it's only going to get better."

Crosland had hired auctioneers Accelerated Marketing Partners, a firm with offices in Boston and San Francisco, which has conducted similar sales across the country to jump-start stalled condo purchases


"The bidders got a good price, '' said Jon Gollinger, the chief executive officer of Accelerated Marketing Partners. "But we can live with it."

Betsy McIness, who bought a one-bedroom condo in the Terrazzo in April with her daughter for roughly $373,000, said she was initially fearful of what the auction would do to the value of her condo.

But she said Saturday she was happy that more people will be moving into the building, and she thinks condo values eventually will go back up.

"It's a shame we had to do it like that,'' she said. "I'm happy they didn't go for half off. I'm thinking my daughter is going to be able to hold onto it for a few more years."

Several people said they showed up at the auction just to see how it went. Even former Sen. Bill Frist of Nashville showed up for the auction, although he said he was just curious and didn't bid.

Auction has impact

Appraiser Richard Exton said the auction probably will affect prices for condos going forward.

"Obviously, the market is showing some declines, and this is probably further evidence," he said.

The West End Luxury Condominiums, another condo project where sales have been coming in at a trickle, is due for its own auction of up to 45 units in two weeks, on Dec. 5.
The Terrazzo has an outdoor pool, a 24-hour concierge and has environmentally friendly LEED-Silver certification from the U.S. Green Building Council.

Developers had lined up financing for the auction with SunTrust Mortgage, MetLife Home Loans, CityLife Lending Group and Bank of America. The lenders were offering loans for as little as 3 percent down for owner-occupied units.

West End Condos Auction

Because of the upcoming auction (see blog below and/or link), I stopped by the West End condos today to see them for myself. I have to say, I was impressed. The quality of the construction seemed top notch.

Fireplaces and whirlpool baths make these condos very comfortable living spaces. Many have long entry ways with travertine floors. The two and three bedrooms are actually big enough to get turned around in. Big square patios and floor to ceilings windows help make the space feel even bigger. About half of the units have views of the downtown. From the 6th and 7th floors to the 3rd floor, all views are unobstructed.

The various floorplans are named after French impressionist painters (at least the ones I recognize). The units right on top of each other will match, so 605, 505, 405,305, and 205 will all have the floorplan ("Chagall"). However, each unit is unique with distinctive granite, cabinets, and flooring combinations.

These are expensive units, with asking prices for 2 bedrooms ranging from $525,000 (or $279 a square foot) to $760,000 ($354 a sq. foot) and 3 bedrooms going for $695,000 ($299 square foot) to $948,000 ($375 a sq. foot). One bedroom units are available on the 8th floor for $385,000 ($263 square foot) to $595,000 ($383 a square foot).

Less than 10 units have sold, which is why they are going to auction....What prices the auction will bring on December 5th is anyone's guess. This is not an "absolute" auctions so the developer can decide not to sell them if the prices don't meet minimums. However, they do plan to sell all 45 units, so this could be a rare opportunity to get a great deal on a beautiful condo on West End.

To participate in the auction, you must be pre-registered in advance. Bring a cashier's check for $5,000 and be prepared to put 5% down. Closings will be by the middle of January. If you have any questions or would like to look at the condos, feel free to contact me at 615-545-8611 or jeff@jefffulmer.com. You can also find me through my web-site, http://www.jefffulmer.com/.

West End luxury condo tower to auction 45 units

Thursday, November 12, 2009
Nashville Business Journal - by Eric Snyder Staff Writer



Even more condo units will soon be sold at auction.

Forty-five units at John Coleman Hayes' The West End Luxury Condominiums will be sold at auction Dec. 5.

The condo tower, located at West End and 31st Avenue, features 72 units. Since opening in April 2008, five have sold.

Current list prices for the units range from $385,000 to $948,000. The auction will include five one-bedroom units, 25 two-bedroom units and 15 three-bedroom units.

The average square footage of offered units is 2,100 square feet.

Units at The West End evoke single-family homes, featuring tall ceilings with crown molding, fireplaces, oversized bathrooms and large closets.

“This is an unprecedented opportunity to purchase superior, quality condominiums in one of the most desirable, hard-to-acquire locations in Nashville,” John Coleman Hayes said in a news release.

“We believe the Vanderbilt/West End area provides the highest potential for increased property values over the next few years of any location in town.”

The “unprecedented” claim may be suspect. Thirty units at Terrazzo in the Gulch will be sold at auction Nov. 21, which will be the first auction of this type in Nashville. Minimum asking prices at the Terrazzo auction hover around 50 percent of original list prices.

Some of the West End units will be sold with no minimum bids required, Hayes said. How many, as well as minimum pricing on other units, is still being finalized, he said.

However, Hayes said he sees only “limited” overlap between interested buyers at The West End and Terrazzo.

“It's just a totally different product,” he said. “We encourage and invite any interested buyers to compare our product with any other condo in town, whether it's for sale now, whether it's for auction now or whether it's now sold out.”

Dwight O'Neal, president and managing partner of RealtyTrust Auctioneers, agreed that The West End and Terrazzo offer different products. However, he said he would not try to sell 45 units in one day, as finding 75 new condo buyers in a matter of weeks may be a tough sell currently.

“My personal opinion is, you've got a market that up until this point has not been able to sustain itself” or close sales at a high rate.

O'Neal said he would dole out The West End units ten at a time for several months, allowing time to market the properties to potential consumers. Such a method, he said, would allow the owners to back away if the units were not fetching desired prices.

Hayes said he was working to organize the auction before Terrazzo's was announced.

“We would've liked to have been first,” he said. “We were working on bank approval, and apparently we got beaten out.”

Jerrold Pedigo Realty, of Murfreesboro, will run the auction.

O'Neal said he saw neither Terrazzo nor The West End having an advantage for being first or second; however, he said they may have an edge over future condos that go to auction.

“The first people in will get to take advantage of the small pond out there,” he said.

Jerrold Pedigo said the format of the auction is still being determined. For instance, while the condos could be auctioned off unit-by-unit, the auction can also be structured on a square-footage basis. In that model, every bidder bids their maximum rate per square foot each round, with the winning bidder selecting their preferred unit.

“Each time there’s a round of bidding, it encourages you to bid the best you can, because your unit is up for sale right now,” Pedigo said.

Realtors: Housing, economy outlook hopeful

Monday, November 16, 2009
Nashville Business Journal

The housing industry and the overall economy appear headed for a sustainable recovery, according to the National Association of Realtors.

The organization says housing has been boosted by the expansion of the federal tax-credit for home buyers through the middle of next year.

“In fact, the credit is working better than first projected — it now looks like we’ll have 2.3 million to 2.4 million first-time buyers this year,” says Lawrence Yun, NAR chief economist.

NAR says first-time buyers accounted for a record 47 percent share of home sales during the past year, up from 41 percent in a 2008 survey. The share has risen steadily from 36 percent in 2006.

Existing-home sales are expected to total 5 million in 2009, a gain of 2 percent from last year. NAR forecasts such sales to rise 13.6 percent to 5.69 million in 2010.

“A steady drawdown of inventory will help home values to turn positive in 2010, but risks such as unemployment remain in the economy,” Yun says.

New-home sales are projected at 397,000 this year and 549,000 in 2010. Housing starts, including multifamily units, should total 564,000 in 2009 and grow to 752,000 in 2010.

The 30-year, fixed-rate mortgage will probably average 5.3 percent in the fourth quarter, rising gradually to 5.8 percent by the end of next year, NAR predicts.

Nashville home sales rise for first time in 3 years

Nashville home sales rise for first time in 3 years
Incentives push Nashville-area market to first gains in 3 years
By Naomi Snyder • THE TENNESSEAN • November 10, 2009



Nashville-area real estate agents applauded last week when Congress extended a series of tax incentives designed to boost home sales, and on Monday, the latest monthly numbers showed the area has already seen sharp gains in sales — particularly among first-time home buyers.

In fact, the Nashville real estate market saw its first increase in home sales in three years in October, when the number of completed deals jumped 23 percent compared with a year earlier as a result of the federal government's aid.

Agents attributed the double-digit increase to more first-time buyers scrambling to take advantage of what had been an expiring $8,000 tax credit, which Congress has now extended into next summer. Congress also added a new $6,500 tax credit for others who have lived in their current residence at least five consecutive years in the past eight. If they buy a new home before June 30, they get the smaller tax break. Real estate sales professionals hope the new incentives keep sales rolling and prop up the market over the winter, when the pace of sales normally slows.

"The phone calls I'm receiving, the open houses, I just feel like there is so much more positive energy right now than a year ago,'' said Christie Wilson, president of Wilson Group Real Estate Services in Nashville. "A year ago, it was unnerving how scared the marketplace was. Right now, everyone is cautiously optimistic. That wasn't true a year ago."

The Greater Nashville Association of Realtors also reported that the median sales price for a single-family home in October stayed the same as the past three months — $160,000 — or a 6 percent decline from a year ago. Realtors said that was a sign that first-time home buyers, who tend to buy less expensive homes, are continuing to affect prices. The median price for a condominium sold was $144,000, down 5.6 percent from the same month a year earlier.

Tax credit is popular

Tennesseans in particular seem to love the federal tax credits.
The U.S. Government Accountability Office said last month that Tennessee had the fifth-highest rate per capita of people taking advantage of the first-time home buyer credit, with 35,836 people taking $256 million worth of tax breaks as of Aug. 22.

"That obviously is the driving catalyst" for home sales, said Mike Nichols, president of the Greater Nashville Association of Realtors. "We don't know where the bottom is for first-time home buyers."

People such as Julia Crownover, a 23-year-old public school teacher, said they wanted to buy a house, but the tax credit pushed them to act sooner.
Crownover signed a contract on a new three-bedroom cottage to be built in Sylvan Park for less than $300,000. She didn't want to disclose the exact purchase price on the home in West End Station, which is being developed by Village Real Estate Services. Homes in that neighborhood start at $249,500.

"This is the time to buy, when the market is down,'' she said, adding that she planned to get roommates to help her pay the mortgage. She now lives with her parents.

The foreclosure rate in the Nashville area also continues to edge up, and statewide unemployment remains high at 10.5 percent. "In Nashville, (a recovery) is really going to be dependent on the recovery of the job market,'' said David Stiff, chief economist at Fiserv, a financial data consulting firm that monitors home prices in 384 cities.

The company forecasts that average home prices in the Nashville area will continue to fall 4.3 percent in the year ending in the second quarter of 2010, compared with an 11.3 percent drop for the nation as a whole.

see whole Tennessean article by clicking here.

$8,000 homebuyers tax credit extended

$8,000 homebuyers tax credit extended
President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes.
CNNMoney.com RSS FEEDS (close) By Les Christie, CNNMoney.com staff writer
November 6, 2009: 3:18 PM ET

NEW YORK (CNNMoney.com) -- President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.

The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June. Homebuyers must sign a contract before April 30 and close by June 30. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.

The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers -- those who have not owned a home in the past three years -- still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.

"The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules," said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Who qualifies?
Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:

• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.

• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.

• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.

• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.

How it helps the economy
Legislators and industry experts expect that the credit will encourage buyers such as Jane and Sue to move up their purchase plans.

"This bill will shift demand from the second half of 2010 into the first half," said Pat Newport, a real estate analyst with IHS Global Research. "As a result, home sales and prices will get a boost in the first half of 2010, with payback in the second."

That's not a bad thing, according to Bill Kilmer, vice president of advocacy for the National Association of Home Builders. It's important to stabilize real estate markets quickly to help bring the economy out of its tailspin.

The original $8,000 tax credit appears to have helped accomplish that goal: Home prices have inched up the past few months, according to the S&P/Case-Shiller Home Price Index.

Would it have happened anyway?
But critics still see the program as being ineffectual because it rewards buyers who would have purchased a home anyway. Newport estimates that fewer than 400,000 of the 2 million who have claimed the original credit made their purchases solely because of the tax advantages.

Furthermore, buyers do not, in reality, receive the entire benefit. "The credit helped prices stabilize," said Newport. "So the credit has been split between seller and buyer. The sellers are getting higher prices and buyers paying more than they would have without it."

The housing industry, however, is pleased with the extension, although the credit has not been quite as effective as they hoped.

The industry thought the credit would provide a ripple effect, with sales to first timers triggering as many three additional "move-up" sales.

That did not happen, according to Lawrence Yun, NAR's chief economist.

"It did not have the chain reaction impact it was supposed to," he said. "Instead, many first-timers turned to vacant, foreclosed or other distressed properties the sellers of which were unlikely to be move-up buyers."

So, the tax credit helped prop up the low end of the market without having much impact on the rest of the spectrum. Expanding the benefit to existing homeowners should boost those segments. That should produce additional benefits, according to Yun.

"Preventing further price decline or even nudging prices up a bit stabilizes housing wealth, which makes homeowners more comfortable in their spending," said Yun. "They're more likely to go out to the stores or buy a new car. That provides a boost to the overall economy."

Deals in the Gulch

A difficult downtown Nashville condo market is providing opportunities to potential buyers who are looking for a great deal. The Gulch is the latest area to get aggressive with price reductions and incentives.

The Terrazzo is offering up 30 of its units at an auction to be held on Saturday, November 21st. The starting bid will be at around 50% of their most recent asking prices. That means 1 bedroom/1 bath (891 square feet) that was $332,700 will start bidding at $159,000. A 2 bedroom/2 bath (1,320 square feet) that was $534,900 will start the bidding at $250,000. Of course, where the prices go from there is any one's guess.

The Terrazzo is the highest-end, "green" building in the up-and-coming Gulch. The units themselves have state of the art appliances and upgrades that you would expect from a luxury high rise. From the bamboo floors, wall windows, and high ceilings (although some are unfinished concrete), these units are very industrial chic. If there's a knock, it's that the views are often of the Icon (the next building over) or overlook I-40. I just previewed some of the auction units today and found a few units that have a nice downtown or Music Row view. The price has obviously been an issue, but that is changing.

Just down the street is the Velocity, which is having its grand opening party tonight (Thursday - November 5th). Velocity offers smaller, less expensive units than its Gulch counterparts (Icon and Terrazzo). This mid-rise condo development has 50% of its units under contract, and while they aren't drastically dropping their prices, they are offering incentives to encourage more buyers to the closing table. Whether it's a trip to Atlanta, Ikea furniture, or cash toward closing costs, Velocity is ready to deal.

Velocity units with 420 square feet start at around $140,000, 550 square feet - $160,000, 620 square feet - $170,000... moving up to the 2 bedroom/2 bath units - 1000 to 1250 square feet would be in the $260,000 to $340,000 price range. 1st floor units have 15 foot ceilings, patios, and access to walk out courtyards. Velocity also has some good gathering spaces, like a nice lounge area, fitness facility and rooftop deck.

If you couple the deals being offered with the $8,000 first time home buyers credit (which looks to be extended through April 2010), there are some tremendous opportunities in the condo market. The Gulch is on its way to becoming a vibrant downtown area. In the next few years, I believe we'll look back at this as the time to have bought in.

If you would like more information or help with any of these or other Nashville condos in the Nashville area, feel free to give me a call or write me jeff@jefffulmer.com. You can also visit my web-site at www.jefffulmer.com.

Velocity condo opens doors in Gulch

Monday, October 26, 2009
Nashville Business Journal - by Eric Snyder Staff Writer


More than two years after putting some of its 263-units up for sale, developers cut the ribbon Monday on The Gulch’s Velocity condominium.

Velocity, featuring one- and two-bedroom units and 21,000-square-feet of retail space, was originally to open in April.

Ground was broke on the project in October 2007, with the units first being made available for sale in May 2007. Developers of the project, a partnership between Bristol Development Group and Marketstreet Enterprises, announced the sale of 85 units on the first day of sales.

However, 17 contracts have actually closed since. According to a spokesperson for the developers, 50 percent of the units are under contract.

After Monday’s ceremony, Jay Turner, managing director for MarketStreet, said having a completely finished project will help close some of those and future contracts. Turner said developers hope to have the building at 320 11th Ave. S. sold out in about two years.

In his remarks, Bristol CEO Charles Carlisle lauded average sales price of Velocity units, which he placed “just over $200,000.” He said 50-units have been designated as affordable work force housing, with some units starting at $135,000.

Carlisle said he was struck by progress in The Gulch, standing in what he said was once “an industrial wasteland.”

“Today just marks one more step in the progress of The Gulch,” Carlisle said.

Bristol and MarketStreet also partnered on the neighboring Icon condominium, which Turner said opened one year ago Monday.

Nashville Mayor Karl Dean helped cut the ribbon, tying his remarks into the need for a new downtown convention center.

“Very few downtowns are as exciting as ours, and The Gulch is a big part of that excitement,” Dean said.