Heery Herald :: Summer 2010

Click on the image to access the Summer 2010 Heery Herald. Don’t miss the back page (thumbnail image below).

A friend asked that I do some analysis to show how house prices corrected in Atlanta.  This graph was the result:

Click here for article related to Case-Shiller Index in Atlanta

The peak of the Case-Shiller Index for Atlanta was about 136 in April 2007. It is now about 107. An index reading of 107 was last seen in January and February of 2001.  We have said before this market was about a 10 year reset – this shows we were almost right.

So for the average $1,000,000 house purchased on spring 2007, what might it be worth? Again, this is an index and not entirely applicable.  But the numbers show a 25% correct.  In today’s dollars, that investment might be worth about $750,000.

285 Lafayette Way

275 Lafayette Way

Heery Brothers is pleased to present another short sale development opportunity at a central Chastain Park location.  Located between Buckhead and Sandy Springs, these two houses at 275 Lafayette Way and 285 Lafayette Way offer significant upside.  Bring All Offers. Click on the below image for additional detail on each property.

Each house is being sold “as is.”

Weird things indeed are happening in worldwide markets.  Spending, austerity, liquidity and other market pressures are tearing at each other to create an age of volatility that the most bullish of economists had not predicted.  Underscoring all of this is one clear trend – a flight to quality.  The flight to quality is pervasive across all asset classes.  In fact, investors are only all too eager to sacrifice yield in their pursuit of quality.  People pay for quality.

Real estate has a clear flight to quality.  Try getting a Class C investment property at a tertiary location financed.  There is hardly financing available for investment property that does not have a main-and-main location and a blue-chip stream of income.  Financing for housing is much more available.  Excellent rates abound for FHA loans (maximum of $350,000) or conforming non-jumbo loans (maximum of $417,000).  Under a variety of programs, regrettably high leverage is available.  With cheap money available, the question is what are people buying? Commodity condos (no), 30,000 square foot energy monsters (no), sprawl developed houses 20 miles outside the urban core (no), vacant lots (no), $900,000 houses at nice Buckhead locations that needs some work (yes)  … Stop the presses.

The good stuff is selling, the bad or mediocre stuff is not.  In fact, there are many buyers in the in-town Atlanta market that are having problems finding suitable alternatives.  Buckhead’s single family rental market has actually firmed up because people want nice houses, but cannot buy them.  There are several bread and butter market segments that have strength and even upward pricing pressure.  For example, high quality new construction in Chastain Park around the $1.5 million mark was once a staple for Heery Brothers …  We only have one such listing now and it is just getting started.

Alas you cannot buy if you cannot sell.  What is it that you need to sell?  Does it need work or is it rough around the edges?  Perhaps over leverage is a problem.  In many situations people must stay put.  However, in many other situations people are pleasantly surprised. Over the last year we have found fixing, staging and presentation to be more important than ever.

Lastly, we will reiterate a central point about real estate that we do not foresee changing.  Real estate is the most commonly used tax shelter.  The use of interest deductibility, cost recovery (aka depreciation) and the deductibility of loan points often lowers effective tax rates.  Therefore, if you are disappointed with cash/short term yield and have consternation about where to invest in major equity market – real estate beckons as a safe haven.

Ice cream melts when things heat up.  Enjoy your two scoops while you can.  Let us hope that bankers do not add a third scoop by dumping inventory.

Heery Brothers wishes all a Happy 4th of July

Happy 4th of July from Heery Brothers

Sparklers = Summertime

We like this very simple but good photo.

Today Heery Brothers posted our first virtually staged property photographs.  We used Virtually Staging Properties in Atlanta.  In the photo captions, listing comments and other locations we made this disclosure;

“Photos of furnished rooms created by Virtually Staging Properties. The rooms shown in these photos are not furnished.  The furniture is shown in this modified photograph for illustrative reasons only.”

By the way, we also reduced to price on this listing at 279 Lakeview Avenue to $825,000.  

Let us know what you think by comments here.  You can also find us at info@heerybrothers.com, facebook, twitter, etc.

The pig is progressing through the python – the pig being the shadow inventory of foreclosures, the python being the market. According to Barclays Capital, there are currently 2.4 million loans in 90-plus day delinquency and another 2.1 million in foreclosure, totaling 4.5 million in shadow inventory. Barclays says that this inventory should reach the high-point this summer and then fall off, as the market absorbs an estimated 130,000 distressed properties per month. New foreclosures shouldn’t distend the market much further. Foreclosure filings dropped year-over-year for the first time since Realty Trac began measuring such statistics, in January 2005. Granted, we are dropping from monumental levels, but it is good news nonetheless. The aggregated numbers remain a little daunting, but it’s worth noting how foreclosure activity is measured. Realty Trac adds notices of default, notices of foreclosure sale, and actual foreclosures(so if a property goes all the way to REO, it will be counted three times) to arrive at activity. REOs are still at record levels, but the initial stages have declined substantially, which bodes well for the shadow inventory; hence, Barclays’ optimistic prediction that the worst, if not yet over, is close to being over.

All these bits and pieces of housing data eventually work their way into home prices, which continue to stabilize, as demand for higher-priced homes (driven by improving job prospects) picks up and the sale of distressed properties cease changing hands at deeply discounted prices. On that front, the number of metropolitan areas where median prices are rising grew for the fourth consecutive time. In the latest quarter, prices gained in 91 of the 152 metropolitan areas tracked by the NAR compared to 67 in the fourth quarter of 2009 and 30 in the third quarter of 2009. In short, we’re on the right path. But the farther we go down that path, the fewer deals we’ll encounter. A year ago, buyers were keeping to the sidelines because they were concerned with catching a falling knife – buying a home at $250,000 only to see a comparable property fetch $230,000 three months later. We believe those days are over,which is one reason we continue to implore those on the sidelines to get in the game. Mortgage rates are the other reason. Yes, the 30-year fixed-rate  continues to bob around 5 percent while the 15-year fixed rate loan continues to bob around 4.5 percent, but they’re not sinking, and they won’t. Therefore, we see no reason for someone inclined to refinance or to buy a home not to, especially given the optimistic outlook on jobs and the economy and the continued expectation for higher mortgage rates.

Heery Herald February 2010

Please click on this image to access a copy of the new Heery Herald.  This February 2010 edition addresses current market conditions and the role of banks.

Downtown Atlanta's Flatiron Building

February 17, 2010
By Leon Stafford
The Atlanta Journal-Constitution

The historic Flatiron, the iconic triangular-shaped building near Woodruff Park in downtown Atlanta, can be yours for $4.27 million.

The 11-story structure, built five years before its more famous cousin in New York City in 1897, was put up for sale earlier this month. It remains one of the oldest buildings in the city and the oldest steel-framed high rise in Atlanta.

Owned by James Cumming and Historic Urban Equities since 1978, the building is listed for sale by CB Richard Ellis and Sotheby’s International Realty for $4.27 million.

“This is a collectible really,” said Lee Asher, a first vice president at CB Richard Ellis. “This is an opportunity to own one of Atlanta’s best properties.”

Asher declined to say why Cumming put the building on the market.

Located at 84 Peachtree Street, the Flatiron helps to shape the wedged-shaped block between Peachtree, Poplar and Broad streets. The building is easily identifiable in historic photos for its distinctive shape.

Current tenants in the 45,000-square-foot building include professional services firms and a location of the Tin Drum restaurant. It’s also been eyed by hoteliers for possible lodging.

Asher said the building would be attractive to potential investors, even in today’s commercial real estate malaise.

“When you’re buying an historic icon like this, there is no reason to time the market,” he said.

Central Atlanta Progress President A.J. Robinson said Cumming restored the building and praised him for keeping it in great shape. He said the building’s configuration and size require an owner to have imagination.

“It’s probably not what a traditional buyer is looking for,” he said. “I hope someone will step forward to care for it for the next 25 years in a very creative way.”

Click here for orginal article