Greg Lyles

The Southeastern economy showed signs of stabilization in August, according to the latest Federal Rerserve Beige Book report, released September 9. Reports from real estate contacts indicated that the pace of decline in home sales continued to moderate in most areas compared with the same time a year earlier. The inventory of unsold homes remains elevated, in part because of the continuing supply of foreclosed properties, and this is said to be keeping downward pressure on home prices.

Reports from most District homebuilder and Realtor contacts indicated that the pace of decline in home sales continued to moderate in July and early August from a year earlier. Both Realtors and homebuilders noted that increases in supply because of foreclosures and short-sales were partially responsible for the price declines even as sales increased. Georgia homebuilders also cited difficulty competing with foreclosed home prices. Demand for starter homes remained relatively strong across the region and a pickup in sales of mid-market homes was also noted in some areas. The majority of homebuilders and contractors reported that new home construction remained at very low levels. The outlook among both builders and Realtors continued to rebound, with the majority anticipating positive year-over-year sales growth over the next several months.

Banking contacts continued to remark that credit availability remained tight. Several reports mentioned that the commercial real estate market continued to be affected by tighter lending standards. Banks were cited as remaining cautious on loan approvals, subjecting borrowers to increased equity requirements, continued scrutiny of appraisals, and generally applying stricter credit standards.

Conrad Lyles Realtors is a full service boutique firm specializing in Atlanta's most desirable neighborhoods, including Brookhaven, Buckhead, Sandy Springs and Vinings. For more information, visit http://www.conradlyles.com

CNBC announced today that more than one in four U.S. homes for sale on September 1st had their prices cut at least once since landing on the market. They further reported that several cities, including Atlanta, have seen month-over-month increases in the percentage of listings with price reductions.

What many home sellers don't realize is how detrimental repeated price cuts are to selling quickly - and for top dollar. The best opportunity for you to sell your home for the maximum price is during the first few weeks it is on the market. For ultra-luxury homes, this may be the first few months. This is when the listing is new and generates the most interest from agents and buyers who may have seen everything else on the market at a comparable price. If your home is priced properly, it will attract maximum interest. If your home is overpriced, you may get showings but no offers and certainly no repeat visitors. The longer your home sits on the market, the more difficult it will be to obtain your desired price.

The chart below shows twenty-four sales of homes in Buckhead and Sandy Springs since August 1st, 2009. The green symbols represent homes that were priced appropriately and sold quickly. The red symbols reflect properties that had at least one price reduction - and took much longer than average to sell!

To avoid delaying the sale of your home while maximizing your selling price, price your home based on the competition - and be honest and objective. Buyers today are looking for deals. By pricing your home accurately, you attract the attention of serious buyers and dramatically increase the likelihood of a prompt sale.

Conrad Lyles Realtors is a full service, boutique firm serving Atlanta's most desirable intown neighborhoods, including Buckhead, Brookhaven, Sandy Springs and Vinings. For more information, please visit http://www.conradlyles.com

It's no secret that Atlanta luxury real estate prices, as well as elsewhere in the nation, have been hit hard. The bigger question is how much actual wealth have Americans lost from the real estate crash and can that wealth be regained?

The Standard & Poors Case-Shiller 20 city composite is down about 32% from its high almost three years ago. While the Case-Shiller Index is weighted heavily towards major cities, including Atlanta, others feel the overall decrease is more modest.

The Federal Reserve Bank publishes its own estimate of real estate values. Drawing from a variety of sources, it publishes its findings quarterly. From the end of 2006 to March 31, 2009, the Fed estimates that the total market value of U.S. household real estate fell from $22 trillion to $18 trillion - or about 18%. During the same period, total outstanding mortgate lending rose from $9.9 trillion to $10.5 trillion. The result? Homeowners equity has collapsed. Using the Fed's numbers, that equity has declined roughly 40% from its peak.

The chart above tells the story - based on Fed data, it reflects the equity homeowners have left in their homes. As of March 31st, owners' equity stood at just 41.4% of real estate values, the lowest on record. To illustrate the situation, even if a miricle occured and home prices rose to their highs of 2006, the average equity rate would only be 52%.

Zillow.com, the real estate data company, estimates that 13.5 million single-family homes are now worth less than the outstanding mortgages. That equates to 23% of those homes with mortgages. Other sources, including Moody's Economy.com put the numbers even higher at around 16 million.

What does this mean to homeowners? Well, the jury is still out on whether home prices have stopped falling. But the outlook for home equity is another reason to be doubtful of a big, sustained increase in home values. Many sellers are at the mercy of the limited number of available buyers - and many buyers cannot extract sufficient equity from their current homes to trade up.

In my last blog post, I mentioned that resales of existing home had increased by 7.2% on the national level - the largest increase in two years. It's good to see buyers are coming back into the market, but they're only coming back at certain price points. Just like in retail, where the big bargain stores are showing gains, only the low end of the housing market is moving.

As shown in the chart below, sales activity for Buckhead and Sandy Springs has only seen an increase in sales at the lower end. For those sales above $500,000, approximately 10% were foreclosed or bank-owned properties. As more foreclosed properties hit the market, you can only expect more downward pressure on prices. In addition to the foreclosed properties, many other homes sold only after deep discounts. So, while we are obviously glad to see the increased activity at the lower end, this does not mean we're in recovery mode. That will only occur when we see a dramatic slowdown in the number of foreclosures and price reductions, coupled with a sustainable increase in sales at all price levels.

We've all heard the old adage, "I've got some good news, and I've got some bad news". That certainly applies to this months' report for the Atlanta luxury real estate market. First the good news; while inventory levels are uniformly up across the Jackson, Smith, Brandon, Garden Hills, E. Rivers, High Point and Heards Ferry school districts, increased sales activity has dramatically shortened the number of months supply of available housing. As of the end of July 2009, these school districts reported an average of 18 months of available inventory, down from 52 months of inventory at the beginning of the year. Leading the way was the Morris Brandon school district with a 78% decline in the number of months of available inventory. There were 14 sales in the Morris Brandon district in July, tying with the Warren T. Jackson district.

Each price range saw an increase in the number of homes in July with the exception of the $1 million to $2 million range. Currently, there are a total of 1,435 homes available in these school districts with the majority being in the $500k to $1 million price range. Surprisingly, there are still 40 homes priced over $5 million on the market in Buckhead and Sandy Springs, although there were no sales at this price point.

The average sales price for July 2009 was $701,540 - up from $594,668 in January. This does not mean, however, that we have seen the bottom of the market and prices are on the rise. (Remember the bad news part?) Homes in July sold at an average of 18% less than the original asking price. This is consistent with the latest Standard & Poor's Case-Shiller Index findings that home prices are down approximately 17% from a year earlier. Another bit of good news is that the average Days on Market for the Atlanta luxury real estate market has decreased from 206 in January to 186 in July, meaning homes are selling faster. The increased sales activity can be assigned, in part, to buyers taking advantage of greatly reduced prices, especially where conforming loans and first-time homebuyer credits apply. Mortgage rates at 50-year lows have also spurred many to buy, although the lack of jumbo mortgage financing is certainly impacting the high-end.

But don't take this to mean the real estate market is headed for sunnier days. Foreclosures, once due in large part to exotic mortgages, are now resulting from the mounting job losses. As long as we have foreclosures and distress sales, we'll have continued downward pressure on real estate prices. Robert Shiller, the Yale University economist who helped create the Case-Shiller Index, recently stated that he expects prices to remain near current levels for the next five years.

For more information on buying and selling in Atlanta please contact Greg Lyles at (404) 841-9634 or visit conradlyles.com