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Category: News

Recently Built Homes the New, New-Built

By Geoff Smith

It should be no secret that homebuilders are having trouble keeping up with the demand in the market right now. So it appears that homebuyers thirsty for newly built homes are finding what they want in recently built homes.

A new chart released by Atlanta’s own Smart Real Estate Data shows that 33% of all Metro Atlanta resales(homes sold that are not new construction) in 2017 were homes built between 2000 and 2007. That’s pretty significant when you think about the fact that we’ve been building new homes in the metro area since the 1960’s with the attitude that we can’t build them fast enough.

Mitchell Palm with Smart Data says homebuyers are attracted to homes from this area for several reasons.

“These 10-15 year old homes offer decent layouts, a lot of home for the price, and larger lots than what most homebuilders are providing today,” he said. “Update some flooring, counters, appliances, and a fresh coat of paint, and you have practically a brand-new house.”

Housing designs have gone through many iterations throughout the years, but a relatively new tool to builders became mainstream in the late 1990’s: the engineered beam. This improvement made it cost-effective for builders to start offering more open floor plans. Before this, if a builder wanted to have an opening from one room to the next of more than, say, 10-16 feet, they probably had to use a custom-built steel beam. Today, you can go to any professional supply store and pick up an engineered beam and cut it to size.

That’s why houses built in the 80’s and 90’s all have those similar layouts – you walk into the foyer with a dining room on one side, a formal living room on the other, and the kitchen and den in the back. The engineered beam made is so that you didn’t have to walk through a small doorway to get from one to the other. And we seem to like that.

In fact, when I had my remodeling company 10 years ago, we went into several homes built in the 1980’s and 1990’s and used engineered beams to remove walls and open up floor plans. It certainly made the house feel bigger. Brenda and I used engineered beams to open up the floor plan in our first home – an 1,100-square-foot cabin originally built in the 1920s. The difference there was night and day.

But there are a lot of things people want out of a new home. Just the fact that it’s new is attractive to a lot of homebuyers. I have people come to me all the time interested in getting a construction loan so they can build a house themselves. They love the idea of picking out all the finishes and the layout and making the home that much more personal to them. Few actually have the stomach for it though. Building a home today is no joke. Homebuilders in our area have this down to a science, and even they are having trouble keeping costs down. It’s a pricey market to build in right now. First of all, there is nowhere near enough labor to build the demand, and builders are having to lure subcontractors away from other builders by paying them more. Regulations have made building more expensive. And wood prices are through the roof – pun intended.

Most of those that come to me wanting to build themselves either end up buying new construction, or doing what Palm from Smart Numbers said and buy a recently-built house and upgrade all the finishes.

It’s an interesting market right now. But with home values and interest rates going up like they are, there’s no time to buy like the present.


A Story for Your House Please

by Geoff Smith

For at least three years now, inventory in the under $400,000-market here in Atlanta has been at record lows and buyers have been fighting each other for good deals. The result is a sharpened artform that many agents have crafted to be ‘the one’ chosen from the many.

I was reading a great article in the Wall Street Journal titled The Strangely Effective (and Easy) Way to Win a Bidding War. It details several methods agents and buyers used to win deals, and showed data collected by Seattle-based realty firm Redfin.

With inventory so low and competition so high, a listing agent’s job is to really find the buyer who can close with the best offer and with the least amount of fuss. I’ve heard of houses that have gone under contract the first day on the market and had more than 10 offers to sort through. I’ve been told of showings where the buyer had to wait for an hour outside the house while people before her were shown the house. If you are trying to by one of these houses, you have to make yourself stand out.

According to the article, the best way to stand out is to use cash. I would be a bad mortgage lender if I didn’t remind people that an average retirement account earns more than 7%, while mortgage interest rates are still in the mid-4% range. That said, using all cash nearly doubles your chances of being able to beat out the other offers. If you are using cash, that means you typically can close much quicker and without a bank having a say in your purchase. Listing agents like that.

Another method that appears to be highly effective, and one that I personally do not like at all, is waiving the financing contingency. This contingency basically gives the buyer in a contract a certain amount of time to get approved on their loan. If they don’t get approved in that time, they can walk away from their deal with the earnest money check(a deposit of sorts that is written and held in escrow just after signing a contract). This makes a listing agent comfortable because if there is no financing contingency, the buyer would have to kiss goodbye that check if they decide to walk away from the deal. This puts a lot of pressure on the lender to do a very thorough pre-qualification. Earnest money is typically 1% or more of the purchase price. But waiving contingencies apparently increases a buyer’s odds of winning the deal by 57.9%. So as an agent, you might earn their praise by initially winning the deal by waiving the contingencies. But if your lender doesn’t get the loan approved and they lose their earnest money, their perspective will very quickly change.

The method that came in third is actually my favorite: writing a personal letter. Having buyers write a personal letter to the sellers actually was a very close third, boosting your odds to win the deal by 52.2%. Selling a home can and should be an emotional endeavor. We live there and leave behind a lot of memories. Writing a letter telling the seller how you will live there, how you will maintain the house and what you love about the house seems to go a long way. The letter adds a personality to the offer and it also seems to let the seller know that the buyer is serious, according to the article. I have seen this method work on several occasions.

As a lender, my agents always make sure to let the listing agent know they can and should call me. This has proved to be a huge advantage. Our industry is a little wild-west and there are a lot of very inexperienced lenders out there. Giving the listing agent the opportunity to talk to me and, at the very least, find out that I am competent, experienced and that I did a thorough prequalification, goes a long way. Once the deal goes binding, everyone is to some degree at the mercy of the lender to get the money approved and bring the deal to close. So it is also important to make the listing agent comfortable with your lender.

With 90,000 people a year moving to the metro Atlanta area, it is hard to imagine that inventory will increase anytime soon. So sharpen your pencils and start writing some good stories.

Rates Push Further Up

Mortgage interest rates continued their steady march upwards this week. Economists are grappling with an economy that has no visible downside right now. As such, they are investing, the stock market is going up and so are mortgage interest rates.

What this Means to You:
According to Mortgage News Daily’s Rate Survey, best execution rates for a conventional 30-year fixed are at 4.28%.


Smile. You’re Branded.

by Geoff Smith

Fork in his eyeThe quote-master, Mark Twain, once said: “Sometimes I wonder whether the world is being run by smart people who are putting us on, or by imbeciles who really mean it.” I’m often amazed at how thin the line really is between the two.

I just read an article by Maria Saporta in the Atlanta Business Chronicle about how the Georgia Chamber of Commerce is going to ask our congressmen to take a pledge. It will ask them to promise to “do no harm” to our state’s image. If you did not know, Georgia is now one of the most admired states in the union for the economy we have created here. If you don’t believe me, go to Lansing, Michigan, hang out at the bar Tavern and Tap across from the state capital and wait for session to get out. It will fill up with congressmen that will gush over how great our state is.

It has taken decades for Georgia to position itself as an economic powerhouse that has been named the best state to do business in. With a few state races, some candidates are finding success in telling rural voters that they may sign a religious freedom bill. According to the article, the Georgia Chamber seems to fear that a backlash from such a signing would be similar to what happened to North Carolina. And that’s a big deal – especially with Amazon now looking between us and 20 other cities as the location for their HQ2.

Apart from state politics, the article got me to thinking about branding. While our state has spent decades building an admired economy, one mistake could tarnish our reputation overnight. You don’t believe me? Just ask Harvey Weinstein, Matt Lauer, or – and it truly kills me to say this, Charlie Rose.

I knew a guy who coaches in the same basketball league I coach in. Everyone used to know him as the nicest, most put-together guy – kind of quiet, but always to the point. Then we saw him on the court coaching a 5th-grade basketball game. He was way more Bobby Knight at Indiana than Mark Richt at Georgia. All of you Hoosiers fans might point out that Knight won three NCAA championships. While that’s true, I’m talking about a 5th-grade coach with no championships.

In the span of a week, the guy went from being put-together to always being a step away from coming un-glued. Now, for the rest of us, it was probably a good thing that him coaching basketball flushed out that side of his personality. But for him, it wasn’t good at all. It would have been better had he prescribed to a phrase my engineer brother always said to me growing up: “It is better to remain silent at the risk of being thought a fool, than to talk and remove all doubt.”

I know a bunch of people that would sour to the thought that what they do in their personal lives should have an effect in their professional lives. They are crying “phony!” I can hear them. But that doesn’t change the fact that everyone around them has a perception of who they are. You can think the greatest thoughts in the world, but if you present them poorly – who will know? It’s like the tree falling in the woods analogy.

I actually like branding. It requires effort and loyalty to an idea. I’m always looking for the people who are shining lights on things for me to follow, rather than those who are constantly pointing out the darkness. I don’t want to know how bad everything is. I want to see how great it all can become.

Rates Push Further Up

While the movement has not been huge, nothing has been able to knock mortgage interest off their stride in a steady move upwards.

Since passage of the new tax bill, there has been really no bad news to cramp our improving economy’s style. For the past several years, while we’ve seen good numbers from most of the things economists measure to determine a strong, growing economy(GDP, consumer confidence, unemployment, etc..), inflation has remained stubbornly low. Inflation is the measure of wages and the prices of goods and services. Economists, including governors at the Federal Reserve, have been flummoxed that prices and wages have not gone up with the growing economy.

They reasoned that it was because of us now competing more with a global market than we were prior to the economic collapse of 2008. If we raise prices of our goods and services, we won’t be competitive with our foreign companies. And we can’t raise wages if we can’t charge more for our products and services. Otherwise inflation usually goes up when everything else looks good(low unemployment, rising GDP, high consumer confidence and retail sails, etc…). Inflation seems to be the last hold-out on the Fed declaring full success for our economy. It kind of felt like the guy charged with opening the doors at Wal-Mart on Black Friday.

Well folks, inflation finally started to move and those doors could now be open.

We’ll see where it goes from here. But as far as mortgage interest rates are concerned, we all expected them to be well into the 5%-range by now. But they have hovered above and below 4% for the last 3 years. Rates typically rise in a growing economy and that’s what they have been doing for several weeks now.

What this Means to You:
According to Mortgage News Daily’s Rate Survey, best execution rates for a conventional 30-year fixed are at 4.22%.


Another Company Moves to be Near MARTA

by Geoff Smith

The sun came up and another company has decided to move its headquarters next to a MARTA station – what else is new?

Insight Global, a staffing company for Fortune 500 companies across the United States and Canada, has decided to move 800 employees into a new, 16-story building that will be built between Perimeter Mall and the Dunwoody MARTA station. There has been a lot of talk over the last year of plans to build a high-rise here on the eastern side of the station, now they have a tenant. State Farm is currently building the second of its four high-rises on its new campus across Hammond Drive from the Dunwoody MARTA station. Their first building includes a walkway over Hammond Drive to the station. And there is already talk of more high-rises that could go up along the western side of the MARTA station.

It has become common knowledge that most company executives believe that to stay competitive for the future workforce, they need to be located near mass transit. Every major corporate move to the Atlanta area has been at or near a MARTA station. Along with State Farm, Mercedes-Benz is building their North American headquarters down the street from the Sandy Springs MARTA station. NCR Corp. just moved its large headquarters from Duluth to intown Atlanta to be near mass transit.

According to a recent article in the Atlanta Business Chronicle, Metro Atlanta Chamber of Commerce President Hala Moddelmog said that the recent corporate relocations were in part, because of MARTA.

“They would not have come to this market if it had not been for MARTA,” she said.

As the Georgia General Assembly heads into session, transit and expansion of MARTA is something that will again be a hot topic. It has only been in the last couple of years that state legislatures have seen expansion of the system as an issue they need to be concerned with. With these large corporations citing MARTA as a reason for their move to Atlanta, it has become more acceptable for legislatures from outside of the Metro Atlanta area to be open to conversation about putting state money aside for MARTA expansion.

State Senator Brandon Beach, who chaired the Transportation Committee in the Senate last year, said one of the big issues this year will be to try to bring Gwinnett and Cobb Counties together with Fulton, Dekalb and Henry counties in funding MARTA. Gwinnett and Cobb both have their own transit systems independent of MARTA. Even though their systems drop riders off into the MARTA system, they do not help fund it. Being two of the most populated counties in the metro area, bringing them together with Fulton, Dekalb and Henry would be a huge plus for transit in Metro Atlanta.

Here in North Fulton, the debate continues about what an expansion of mass transit would look like. Many officials seem warm to the idea of expanding rail up to Holcomb Bridge Road. But there is little consensus to go further north than that. State Senator John Albers is preaching another concept: autonomous vehicles and buses. Rail expansion is expensive and would take 5 to 10 years to build. By that time, Albers says autonomous vehicles will be in use and residents will be more used to taking Uber and Lyft. Instead of spending the billions of dollars it would take for full-rail expansion, a fraction of that money could be used to install a state-of-the-art system of autonomous buses, he argues.

With NCR’s move intown, North Fulton officials are taking the issue of mass transit expansion in North Fulton serious. Fulton County officials are in the middle of putting together a comprehensive master plan for transit it North Fulton. Called the “Fulton County Transit Master Plan,” it will have recommendations for how North Fulton should move forward with transit improvements. They hired a consultant to put together several options for local officials and residents to consider.

The options will be presented on January 23 at the Atlanta Mariott in Alpharetta from 6 to 8 p.m.


Rates Jump on Tax Bill, Bond Market

Mortgage interest rates jumped Monday and Tuesday as investors sold off bonds to put money into stocks. When bonds are bought in low volume, or are not in demand, mortgage interest rates tend to rise. And they did – to their highest level in the last 6 months.

They could get another push upwards today if the numbers released for the Consumer Price Index rise. This would signal a rise in inflation – something economists and the governors at the Federal Reserve have been waiting to happen for several years now. Inflation has been the one sour spot in what has been viewed as an otherwise robust economy.

What this Means to You:

According to Mortgage News Daily’s Rate Survey, best execution rates for a conventional 30-year fixed are at 4.14%.


Fed Raises Rate and I Don’t Care

By Geoff Smith

You would be hard-pressed to find a legitimate economist who was surprised by the Federal Reserve’s move last week to raise its short-term interest rate for the third time this year. But you could open your inbox (or look in your junk mail box) and probably find 20 loan officers who are.

While some are probably pretty tame, I’m sure you also get your share of ones that sound kind of like this: “Quick!!! Buy your next house now because rates are rising through the roof!!!” When in fact, they are not.

Loan officers are taking the news that the Fed raised its rate as an opportunity to warn consumers of a possible correlation to a rise in mortgage interest rates. It’s an easy argument to make. After all, the Fed’s interest rate and mortgage interest rates both have the phrase “interest rate” in them.

While the Fed’s short-term interest does have an impact on the bottom line of the banks who ultimately set the mortgage interest rates, the correlation is really not all that direct. Here is the proof:

In December of 2016, the Federal Reserves raised its rate for the second time since dropping it to near 0% in 2008. Just before it did that, MortgageNewsDaily’s average 30-year fixed conventional interest rate was at 4.38%. Today, after that increase and three others this year, the rate sits at 3.96%. The Fed raised its rate by more than a full 1% in the last year and current mortgage rates are averaging almost a half of 1% LOWER.

As the hosts of my sons’ favorite tv show say: Myth Busted.

While there is some correlation between the Fed’s rate and the average mortgage rate, you would be better served in watching the 10-year treasury if you want to predict the future of mortgage interest rates. When those are bought in high volumes, mortgage rates almost always go down. When they are not, rates go up. This actually makes predicting mortgage rates a much more volatile enterprise because treasury bonds are typically bought when investors are nervous about the stock market and visa versa. It’s almost impossible to predict because our economy is global and one never knows where the next surprise will pop up from around the globe.

If you want to know where the rates for your credit cards, auto loans, business loans and other lines of credit are headed, then pay attention to the Fed’s rate. Banks do peg their base interest rates for those types of loans to the Fed’s short-term rate. But not mortgages.

I’m not saying all of those e-mails you are getting are totally misleading, because there is a correlation between the Fed’s rate and the average mortgage rate. And it goes like this: Mortgage rates tend to go up with the economy. When investors feel good about their understanding of the economy, they play the stock market and don’t buy bonds – which as I just said, makes rates go up. The Governors at the Federal Reserve are some of the most well-respected economists in the world. When they raise the Fed’s short-term fate, it’s because they feel good about the economy and that borrowers, mainly businesses who borrow, don’t need the incentive of a low interest rate to apply for a loan. If you follow this logic, it should make sense that we are indeed headed toward a rising-rate environment. We are just not there yet.

If you are really on the fence about buying a bigger home, the larger concern should be rising home values here in Atlanta. If you get an e-mail about that – that is no joke.