Tennessee Realtors Look For Another Job

Tennessee Realtors are getting out of the real estate business

The number of Realtors and Associate members of the Tennessee Association of Realtors dropped by 1,854 in one month, between the end of 2008 and the end of January of 2009 …from 25,161 to 23,307, a one-month drop of over 7%.

One year ago, the number of Realtors and Associate members in the Tennessee Association of Realtors totaled 26,226.

In related news, Investors Business Daily, a national newspaper, reports that the “mortgage brokerage business has shrunk from 54,000 firms in 2005 to just under 30,000 today.”

I suppose it’s not just Tennessee Realtors looking for a new job!

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Tennessee Has Two Real Estate “Safe Havens”!

A recent article on Kiplinger’s website profiles six cities across the U.S., described as “safe havens in real estate” – pockets where the damage from foreclosures and a sagging real estate economy “has been minimal – if nonexistent.”

Two of the six cities profiled are Tennessee’s own Clarksville and Johnson City! (Other cities completing the list are: Pittsburgh, PA; Burlington, VT; Albuquerque, NM; and Lancaster, PA.)

“We found six cities with slow, steady growth, using data from Fiserv Lending Solutions, a home-price research company. These cities’ local economies have kept unemployment and foreclosure rates below average. Plus, their affordability index – a measure of home prices versus family income – is low.”

The source is Kiplinger.com online.

In case you were wondering, we do not believe that these cities will have any positive or negative effect on the Nashville real estate market.

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The Best Places To Buy Foreclosed Property

Last week, Forbes.com published a news story identifying the 10 “Best Places To Buy Foreclosed Homes.” The nation’s 100 largest metro areas were studied in the process of selecting the Top 10. Basing their analysis on recent data from RealtyTrac, the report identifies markets where properties in foreclosure may, in fact, be a good investment because the markets in those areas are stabilizing and “foreclosures aren’t symptomatic of local economic ruin.”

In other words, making the list is great news for those who live and work in these markets and two Tennessee cities made the Top 10 List:

1. Charlotte, NC
2. Raleigh, NC
3. Nashville, TN
4. Oklahoma City, OK
5. San Antonio, TX
6. Albuquerque, NM
7. Knoxville, TN
8. Seattle, WA
9. Indianapolis, IN
10. Washington-Arlington-Alexandria

foreclosed homes in Nashville, TN
Investing in Nashville homes and maybe even condos is a savvy investment in a nationally depressed real estate market. With the stock markets in a free for all, why not purchase a stable investment in a growing and dynamic city?

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The Icon In The Gulch – Nashville, TN

The Icon

There is a new massive 400+ unit condo building rising from the ground in the area of Nashville know as “The Gulch” that might become the symbol of national real estate investment greed. The Icon was pre-sold almost 2 years ago in a cloud of heavy speculation and an atmosphere of such frenzy that I felt like a New York Stock Exchange floor trader that day. Literally hundreds of investors and Realtors crammed themselves into the relatively small sales center on 11th Avenue South in Nashville and jockeyed for the best condos. At one point the Icon representatives would simply yell out a condo’s unit number and the first person to yell back or physically grab the contract from the representative was the lucky buyer. Condo prices were shooting up every 30 minutes and the fever pitch lasted until the last condo was sold in the tower portion of the building.

Fast forward 2 years and now we are facing a national recession (maybe), oil prices over $110/barrel which will surely lead to $4.00/gallon at the pump, and domestic real estate investors have fled every market in the United Stated. So here is the question: When the Icon begins to close condos in the next 3 months, will the buyers buy or will they flee? The answer to that question is more complicated than usual for the following reasons:

•1) The condo deposits were unusually low; only $5,000 for a 1 bedroom and only $7,500 for a 2 bedroom
•2) The concentration of out-of-state investors was unusually high – some estimate about 25%
•3) The developer has already sent out letters that slyly mention “specific performance”
•4) This is the largest condo project in Nashville’s young history and it delivers at the worst possible time

Many of you who are reading this are astounded by the super low condo deposits, many condo investors in the United States are used to a minimum of 10% deposits. In this case, the $5,000 deposit was equivalent to around 2%…yes 2%! So if you were a half-way savvy investor who did not see the economic downtown coming, you would have jumped this thing like a mugger on a moonless night…and that is what happened. Before many of you jump to the conclusion that this is a paper thin development with no redeeming factors, let me say this: The Icon is a very, very cool 22-story building located in a very cool area of Nashville called The Gulch. Many of the condos have panoramic views of the city, the finishes are very modern, and the amenities will be counted among the best in the city when built. The building itself is not the problem, it’s the timing.

The reason I mentioned specific performance in the “unusual” category above is that Nashville has never heard of a developer threaten to sue their buyers until now. By sending out a welcome letter that included those simple words, they put all of their buyers on notice that Tennessee is a specific performance state and that they have the law as a tool to force you to close. Will they have to use it? Well, that is the real questions isn’t it?

Some solutions: The developer is going to offer a 1 year free property management and leasing service to all of those who do complete their purchase. This program will be limited to some undefined number of participants, but it definitive helps. The only other real solutions are out of the developer’ hands. Mortgage interest rates need to come down and consumer confidence needs to stabilize.

Let me add one gripe to this story. Wells Fargo is the only lender who has condo approval for this project and hence is the preferred lender on this building. Wells Fargo is a good lender, but the guys in charge here have a long history of passing the buck, meaning they will offer you closing discounts and incentives, but then raise the rate on you so they can make that money back. There are not giving you market rates. So if you look at the loan over a period of time, you didn’t save anything. I would like to see a second or even a third lender obtain project approval in order to create an atmosphere of true lending competition and not monopoly. In order for that to happen a couple of lenders have to step up and absorb the cost of obtaining project approval and the developer has to step up and remove their head from the sand…one lender is not the best solution in a down market! Think of it from the buyer’s perspective: The buyer is going to be closing on an investment they really don’t want right now because of the economy and now they are force feed a loan that is not quoted at market rates…come on, even I want to slap someone. I would feel much better talking with
2 or 3 lenders to see who really wanted to give me the best deal and that would make me feel a little better about having to buy an investment that I really don’t want.

In conclusion, I think that The Icon in the Gulch is a really great condo building that is located in a really great area. What I don’t like is the line that is being drawn in the sand. I certainly understand that the economy has a lot to do with what is happening, but I feel that there are better solutions and ways to get to those solutions than what I currently see being done. 2-3 years from now we will all look back on this and laugh, but right now it feels a little like us versus them.

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HUD Releases New FHA, Conforming Loan Limits – Home Sales Stable

HUD

Last week, HUD published new FHA and conforming loan limits, based on median home prices as mandated by the Economic Stimulus Act signed by President Bush in February. The new loan limits for FHA, Fannie Mae, and Freddie Mac are now calculated at 125% of the HUD published median prices, with a floor of $271,050 and $417,000, respectively, not to exceed $729,750.

The Nashville MSA (Davidson, Williamson and five surrounding counties) now has a loan limit for single-family homes of $432,500 for FHA, Fannie Mae, and Freddie Mac. Most other areas in Tennessee have a FHA loan limit of $271,050 for single family homes.

The National Association of Realtors expects the impact on the housing market to be significant because of the infusion of capital into the mortgage market, which should result in lower interest rates across the board.

The volume of existing-home sales is also expected to remain stable through late spring, with a gradual recovery during the second half of the year as the mortgage situation improves in high-cost areas, according to the latest forecast by NAR.

Lawrence Yun, NAR chief economist, says many buyers have been waiting for these higher mortgage loan limits. “The higher loan limits for both FHA and conventional loans will increase consumer choice and provide greater access to lower interest rate mortgages in high-cost regions,” he says. “Therefore, a notable rise in home sales can be anticipated in the second half of the year.”

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, held at a stable level of 85.9, unchanged from December, but was 19.6% below the January 2007 reading of 106.8.

“This additional sign of a stabilizing market is encouraging, and our members are telling us there’s been a pickup in shopping activity,” Yun says. “Our hope is that the increased traffic of buyers looking at homes will translate into more contract offers.”

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Signature Tower Luxury Condo Update

Signature Tower

Giarratana Development’s Signature Tower is not the latest casualty of the subprime financial market debacle, but for the first time I have to admit that the March 31st deadline looms heavy on my conscious. The Signature Tower is developer Tony Giarratana’s dream building, a 70 story luxury Tower that only the boldest developer in the Southeast would even attempt to tackle in a mid-major market like Nashville and he’s down to his last 4 weeks. The casual reader might assume that buyers and investors have fled the real estate market to seek higher ground, but that is not the case in booming Nashville, TN. Tony has been able to presale just about 50% of his building (the most expensive half), which would have been enough last year, but financial institutions’ concerns over the looming commercial market fallout have driven construction loans through the roof. As a result, construction financing has become a major hurdle to leap in the high-rise world.

The 70 story Signature Tower would be the tallest building in the United States outside of New York and Chicago and would offer 400 luxury residences with an exclusive address. The building’s amenities, interior finishes, and resident services are absolutely unparalleled in Tennessee, let alone in the southeastern US. Think of it this way: imagine living on Park Avenue in New York City with panoramic views of Central Park…now simply imagine that building being twice as tall and looking down on over 1.5 million residents in tourist-rich Nashville. The building will also contain a five star hotel operated by the Kempton Hotel Group that will occupy the fist 17 floors of the building. Strangely enough, it is just this hotel group that can save the Signature Tower…

Nashville has the distinct privilege of having one of the lowest hotel vacancy rates in the United States and all of the large hotel chains have noticed. Within the last 12 months, no less than 42 new hotel permits have been pulled in Middle Tennessee. These hotel brands include: Intercontinental, W Hotels, Palamar, Westin, and a host of other business class brands like Hilton and Marriot. With such a low vacancy rate and Giarratana’s need for a fuller building, it appears that the Kempton Hotel Group and Tony are trying to hash out a plan that would be mutually beneficial. Rumors are swirling and speculation is rampant, but I have to believe that if the Hotel Palamar would agree to occupy another 5-7 floors, the Signature Tower would breeze through the new, tougher construction loan guidelines.

In addition to the hotel rumors, other stranger rumors have also come to light. At one point many people thought that the FAA was going to nix the project entirely due to commercial flight path concerns over downtown Nashville. It has since been discovered that the FAA only acts as a advisory council to the city of Nashville and cannot mandate the glass ceiling over Nashville’s central business district. The fact remains, that the city of Nashville has fully approved the construction plan for the Signature Tower and indeed, a building permit has already been issued.

It is my opinion that the construction of the Signature Tower will do nothing short of give Nashville a needed cardiac shock that will usher in the most profitable period of downtown development in the history of the city. Retail, office, commercial, and residential construction will find a new niche by 2010 and the new convention center will grow Nashville to Atlanta’s size by 2030 (whether you like it or not).

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