Ron Barnes

I loved my mother, but she was not the most optimistic person in my life. From the time she was 52 years old, she proclaimed every year that this would be her last Christmas. Well, by the time she was 83 she was finally right about her prediction. Being a little theatrical might have played into her performance as well.

For the most, I think I took after dad, who was not a wild-eyed optimist, but tended to see the proverbial glass as half-full. For the last four years, like most other real estate practitioners, I’ve been trying to see the silver lining in the economy and the real estate market. During that period, I was praised for my good attitude, accused of whistling in the dark, and classified as plain crazy. Most people are probably getting sick of real estate agents babbling “now is the time to buy, ask me why”. It was not bad advice, unless you were trying to time the market to buy at the absolute bottom of the cycle. Many people who do that never pull the trigger on anything. Virtually everyone who bought real estate over the last few years will make good money.

However, there is hard evidence that times are getting a little better. We currently have 403 active listings in Pickens County. I don’t know when we had fewer listings because the service I use for statistics only goes back to early 2004, and we’re below the lowest mark for that time period. Although there is a slight trickle of new construction, there has not been any significant building taking place since 2007. According to Bloomberg, there were up to one million new households formed in 2011, which was up from a record low 357,000 in the 2010 national census. Many of those were from children who had moved back with mom and dad moving back out. Those people have to live somewhere, and they may rent instead of buy, but they’re going to occupy space. True, some people have grown frustrated and simply withdrawn from the market, but there is a rule of dwindling supply and increasing demand that will start kicking in at some point.

The national average for home prices in 2011 declined 2.1%, but the south only declined 1.3%. Most gurus are predicting modest increases in 2012. The recent announcement about nationwide job growth has more effect on my thinking than anything else. In Georgia there were 600 new construction jobs in December, the first time construction has gained jobs in December since 2003. Manufacturing grew by 400 jobs, the first December growth since 2005. Job gains also came in information services, trade and transportation.

Then there are the traditional benefits of home ownership that are still important:

• Appreciation – Buying a home now (at the current rates) can almost ensure your home’s appreciation in the future. Mortgage rates are near historic lows and home prices in many parts of the country are down. This is the perfect recipe for home appreciation. Additionally, many foreclosed homes are available for a fraction of the original cost. This can translate to a higher profit if you decide to sell once the market rebounds.

• Property Tax Deductions – For income tax purposes, real estate property taxes for a vacation home and first home are fully deductible. The IRS (Publication 530) provides detailed tax information for first-time buyers that may answer many questions about what deductions homeowners are eligible for.

• Preferential Tax Treatment – If you own your home for more than a year and receive more profit than the allowable exclusion after the sale of your home, the profit will be considered a capital asset. Capital assets are given preferential tax treatment.

• Equity Building – Many factors such as credit qualification, loan flexibility, and annual percentage rate (APR) contribute to the final decision of what type of mortgage loan best fits your goals. Yet, a new trend being used by some homeowners is to actually add money to their monthly payment to decrease the principal balance of their loans at a much faster pace.

Pickens may be a little slower to recover than some areas, but we’ll get there. If you snooze, you lose. That’s not whistling in the dark, my friends.

Chilly weather in North Georgia is here, and cold weather is just around the corner. Perform the following maintenance tips each fall to protect your property's value and prevent major repairs.

Roof, Gutters and Downspouts

Rain, ice, snow and wind can all cause damage to your roof and gutters. Now’s the time to trim back all tree limbs and vegetation away from the roof. You also should remove debris, such as leaves and sticks from your gutters and downspouts. Clogged gutters don’t allow water to properly drain away from the home, which can cause seepage in your ceilings and walls. You can also invest in gutter guards, a screen that prevents debris from entering the gutter and directs the flow of water away from the house and into the ground.

Water Heater

You don’t want to find out that your water heater isn’t operating properly when you need it most. So use this time to perform an annual inspection, which includes having your tank’s pressure and temperature relief valve checked. In addition, remove sediment from the bottom of the tank by draining two gallons of water to improve heat transfer and the efficiency of your heater.

Heating and Cooling System

If you have a forced warm-air heating system, you should check the exhaust vent and air shutter openings for dirt and dust. Clean any lint and dirt from the blower blades, motor and burner (if you have a gas heater). Vacuum air passages and check and replace, if necessary, fan belts. To prevent airborne dirt from circulating throughout your home, wash out your reusable filter or replace it if it’s disposable.

Doors and Windows

To help control heating costs, make sure your doors and windows are properly sealed. Now is the time to repair or replace weather stripping around door bottoms and jambs and window frames. Check for loose or missing glazing putty and caulking for deterioration. If you have storm windows, install them.

Water Pipes

Frozen or burst pipes can cause major damage to your home and be expensive to remedy. Before frigid weather hits, protect your pipes in unheated areas from freezing by adding insulation, which reduces heat loss from hot-water pipes and condensation on cold water pipes. This can be accomplished by wrapping the pipes with heating tape or blanket insulation and duct tape or by encasing the pipes with preformed plastic foam. In addition, examine your pipes for cracks and leaks.

Fireplace

Before you light the logs and get ready to settle in front of a cozy fire, make sure that your fireplace is in good working order. Clean the chimney flue and, if needed, have it inspected and repaired. Check the seal on your flue, which is designed to keep out drafts. Replace the seal if it is loose or damaged.

If you decide to perform the fall maintenance yourself, disconnect the power for any electrical or gas systems. In addition, before inspecting, cleaning or making any repairs refer to your owner’s manual for all equipment for proper instructions, which should be the final authority on any maintenance.

Outdoor Surfaces and Landscaping

Fall is also a great time to seal your driveways, wood patios and other hardscape surfaces. In addition, prune tree branches away from your home and electrical wires. Plant spring flower bulbs and move sensitive potted plants indoors.

Although this list is merely a guide, it can help you keep your home in good shape and have a winter free of major repairs.

In my ongoing search to satisfy my curiosity about how real estate is “doing” in Pickens County, I came across some interesting information. It loosely falls in line with the latest forecast by the National Association of Realtors.

I remember reading in 2007 that someone had predicted home prices would have to return to the levels we had prior to 2005 before we would see what the “new normal” would be in the marketplace. That seemed preposterous at the time, since it would be a roll back of something like 25-30% at the time. I’m not really sure if the person who came up with that prediction actually did any research, or if someone said it and the talking heads picked up on it like the “double-dip housing market” last year. (How can you have a double-dip in real estate when there hasn’t been a recovery yet?) In either case, it turned out to be pretty realistic.

I recently showed readers a chart that graphically illustrated the housing market spiraling out of control beginning in the late ‘90’s and really firing up between 2002 and 2004. That’s when the government started artificially stimulating the market with bad loans that increased buyers and demand for homes. When I read the results for real estate in Pickens for November, I saw that we only had 429 active listings, down from highs well into the 600’s over the last several years. I decided to go back to see how long it had been since we had fewer homes for sale in the county, and the answer is May of 2004 when there were 427 active listings. That is well over six years!

Furthermore, in May 2004 we sold 34 homes, wrote contracts on 32 more, had almost 14 months of inventory based on sales, and the average sale price was $155,000.

In November 2011 we sold 29 homes, wrote contracts on 37 more, had 14.8 months of inventory based on sales, and the average price was $222,000. Admittedly, the sale price can fluctuate from month to month, but sales and pending contracts are what they are.

We thought times were pretty good in May 2004, so why does it not feel so good right now? Unemployment is higher, and there are still too many foreclosure sales in our current numbers to say our market is good. However, because the number of homes for sale is obviously shrinking, and there is little happening in the construction of new homes, it would appear that the worst is behind us and the market might be poised to make some positive movement.

So for those of you looking for the bottom of the market, this might be it. If you snooze, you lose!

It has become a cliche' at this point. "Now is the time to buy!" Turn on any financial news program and at some point you’ll hear the experts extolling the virtues of diversification. Real estate, even through the market downturn, has long been considered a conservative, long-term strategy to growing wealth.

In fact, that very downturn has created a historic buying opportunity for potential homebuyers and investors alike. The combination of lower home prices across American and historically low mortgage rates, two essential factors that usually don’t trend in the same direction, have triggered a buyer’s market in many areas of the country. For real estate investors who want to rent their properties, this can make the difference in achieving positive cash flow sooner or right off the bat.

While some seasoned real estate investors make it look easy, to be successful, beginners should follow some basic principles.

· Learn all you can. You can take a course online at my website www.RonBarnesRealEstate.com at no cost. Before committing your cash, you should have a fundamental understanding of real estate. For example, be aware that, in general, investment properties are not liquid investments. Barring exceptional circumstances, real estate does not sell at a moment’s notice. It could take days or months to sell a property, depending on the strength of the market in a particular region.

· Consider cash flow. You’ll need to have enough capital on hand to cover any short-term losses due to vacancies between tenants.

· Start small. Look into buying a condominium, single-family home or a duplex. Leave large apartment buildings and commercial properties to the pros.

· Inquire at the local Chamber of Commerce about companies relocating into or out of the area. Company movement is one indicator of demand for rental and/or office space.

· Find a property that will be in demand. Look for a moderately priced home with three or four bedrooms, two bathrooms, and a garage that sits on a quiet street.

· Research the property. The most common way first-time investors lose is by failing to investigate a property thoroughly. Look beyond the front door. Investigate the reputation of the school district, the crime rate, and plans for expanding a nearby highway or developing vacant land. Ask a local real estate professional about the area, its history, and how fast (or slow) properties are moving.

· Inspect the home you’re considering for signs of water damage, such as stains on the ceiling and crinkling or gathering wallpaper; open and close every door and window; and check all electrical sockets by plugging in an appliance. Get an independent home inspection, roof inspection and termite inspection. Unexpected repair costs can eat away your cash flow. Because even the best inspection can’t always predict problems, try to set aside some of the rental income for unexpected repairs.

· Spend time driving the streets of the neighborhood noting the condition of other properties. Are lawns maintained? Are roofs in good shape? Are homes kept up?

· Be ready to make fixes quickly and respond to the renter’s needs. If you’re not prepared to be a hands-on landlord, consider hiring a property management firm.

· See your tax advisor for related planning and laws that can affect your investment decisions.

Remember, investing in a property is much different than living in one, and while emotion and attachment can be prime motivators when it comes to homes, it is return on investment that counts when investing in real estate.

For those who claim real estate is a bad investment, I respectfully ask that you please pay attention to this.

Let us make a few simple assumptions. Everyone has to live someplace. They are not creating any more real estate on this planet. Supply and demand determine value.

I ran across some interesting information regarding 2008 population movements in the US. This is the most current version of what is available on the subject, but I think we would all agree that the last several years have been pretty similar concerning the economy. The chart below represents population movement from the various counties in Georgia to and from Pickens. These counties represent the only movement to or from Pickens County during that year.

It is interesting to note that there were no “long distance” moves. All the moves were between North Georgia and metro Atlanta. We gained 246 residents net for the year, and the per capita income of those moving in was over $12,000 higher than those moving out. Those figures would seem to indicate that fundamentally Pickens County is a positive market for real estate, because the population is growing and the income is improving. The fact that the real estate market is making an adjustment only affects home values temporarily. Demand will continue to increase over time as the previous overbuilding bubble is consumed. We are fortunate that we are not faced with more people moving out than in, or the people moving in have lower incomes. That is what areas like Detroit, MI are facing on a much larger scale. The increases in population and income may also help explain our continued rise in sales tax collections. Also, we have the advantage of vacation homes, so in addition to full time residents, we have part time residents that would increase demand even further. IF YOU SNOOZE YOU LOSE. Now is the time to buy.