Sunday, January 23, 2011

Fear, Uncertainty, And Doubt!

While news reports are a valuable source of information, they can often lead to making assumptions that are not accurate.  Two examples come to mind.  Last year as the economy began to show signs of making significant progress towards recovery, talk of a likely "double-dip" recession was reported everywhere.   The effects of this is difficult to measure, but the undeniable result is that many companies delayed hiring, or capital spending in an attempt to defend against such a "double-dip".

The second example appeared in the Charlotte Observer on Sunday, 1/23/2011.  The headline read "Over half of 2010 sales were troubled mortgages".  The related documents do lead to a surface map that then shows the location and extent of the problems, but the initial impact of the headline can lead potential buyers to expect bigger price drops, and sellers to also make hasty decisions.

I have analysed the past 12 months sales activity for downtown Charlotte and have found that of the 147 sales recorded in MLS only 51 were classified as financially "distressed".   That is just under 35%, and many of those can be related to contracts that closed during the peak of the market. 

There is increased activity in this market, potential buyers are feeling more comfortable with the general direction of our economy.  To be sure there are "financially distressed properties" available, and will likely be more, but the recovery process needs to have these properties addressed and sold, and faulty information can result in a longer time for that to take place.

Friday, January 21, 2011

How Should We Interpret Higher Gas Prices?

I have always loved this parable:

"They say that if you put a frog into a pot of boiling water, it will leap out right away to escape the danger.
But, if you put a frog in a kettle that is filled with water that is cool and pleasant, and then you gradually heat the kettle until it starts boiling, the frog will not become aware of the threat until it is too late.
The frog's survival instincts are geared towards detecting sudden changes. This is a story that is used to illustrate how people might get themselves into terrible trouble.
This parable is often used to illustrate how humans have to be careful to watch slowly changing trends in the environment, not just the sudden changes. Its a warning to keep us paying attention not just to obvious threats but to more slowly developing ones."

What brings this to mind is the rising price of oil.  It has passed $90 a barrel, and continues to rise.  The continued rise in oil prices will make living farther from the city more problematic, both for one's own personal expense as well as a municipalities ability to sustain it with utilities and governmental services.  The likely outcome of higher oil prices is to continue to develop infill lots.

The "frog" part of this story is that the gradual rise in gas prices will not have an immediate impact, but a slow deterioration of lifestyle until it is too late.

Many people who read my newsletter or this blog have already subscribed to the theory of living closer in, more densely packed.  Some also subscribe to public transportation.  The long term truth is that the entire auto society we live in has a termination point as it exists, it may be reached as oil is depleted, or it may be reached as oil becomes too expensive, but it is coming.  Retooling our society for the next fuel source beyond oil will be a huge and extremely expensive task, one that I believe many will not want to do.

So, do we jump out of the water now, or wait until it is too late?

Thursday, January 20, 2011

Charlotte's Street Car Future?

The Charlotte Business Journal reported today that Kinkisharyo International has brought a Streetcar to downtown Charlotte for exhibition just north of the Seventh Street Station by the Ninth Street current terminus of the rail line.    To be sure, this is but one potential winner for what will be the first in-street rail line for probably 40 years.

One of the most intriguing aspects of this particular design is that it runs off a rechargeable battery, allowing it to run without overhead lines.  The aesthetics of this Streetcar running down Trade Street without the overhead wires has significant advantages

It is no secret that I am a big proponent of mass transit.  I hope you can all take the time to see this Streetcar.

Wednesday, January 19, 2011

Beginnings Of North Tryon Rebirth?

First it was Palomino's, then GW Fin's, now, here comes Delta's!  The cavernous space located in the 525 North Tryon Street Building has been vacant for over 2 years.  The most significant disadvantage to this location is that it is 5 blocks from Trade and Tryon, and is an island unto itself.

While Palomino's was a moderately priced restaurant, GW Fin's was more of a high end restaurant, and they provided live entertainment several nights a week.  Fin's featured a New Orleans style cooking.

Delta's seems to be more in line with GW Fin's, focusing on Southern Style cooking, and an aggressive entertainment schedule.  The targeted opening date is June 2011.  Click here to see their website.  Welcome to Charlotte!

Wednesday, January 12, 2011

Why Are People / Companies Moving Here

Charlotte's growth, even during the Recession, continued to increase.  Somewhere in the neighborhood of 3,000 people a month targeted the Charlotte Region as a place to live.  January 10th, the largest accounting firm in the southeast was created when a firm from Winston-Salem, Dixon Hughes, and
a firm from Virginia Beach, Goodman & Company, merged and made Charlotte their corporate headquarters.

Opportunities for better jobs or better weather, present time excluded, are bringing people here.  Better business conditions, or opportunities for growth are bringing companies here.  The two feed off eachother.

Couple with that the increased cost of living in the north.  Here is an article from Associated Press concerning Illinois raising their personal tax rate 66%!  Wow!

The infrastructure costs, and pension / health care costs continue to rise while the current revenue base continues to not be able to meet the committments.  As companies look to control expenses, this tax will be a major consideration.  As people look to control their expenses, this again will be a major consideration. 

Illinois is just one example.  Any and all of the northern states are in a position to do the same.  Look out, here they come.

Tuesday, January 4, 2011

Renting vs Owning...Which Is Better?

Franklin American Mortgage Company sends out a weekly newsletter.  In this week's edition, I found the following information that points to the benefits of long range (5 years or more) ownership over renting.

"House price appreciation may not be what it used to be, but most participants in the National Association of Realtors’ annual profile of buyers and sellers still believe home ownership is a sound investment. Of the folks who purchased homes during the 12-month period ended in June, 85% said owning is a good financial investment. And of those, 47% said ownership was a better investment than owning stock, according to the survey, which was released at NAR’s annual convention in New Orleans. The results were similar, whether the buyers were first-timers or repeaters, or bought new or previously-owned houses. Ditto whether they were married or single, male or female. Sellers weren’t asked how they felt about their housing investments. But those who held their properties for five years or less didn’t do nearly as well as people who owned their places longer. Sellers who owned just two or three years were unable to realize any gain, while those who purchased in the 2004-2006 time frame took a profit of only $6,000, for a gain on only 3%. After that, sellers’ gains started piling up: $17,000 (11%) after six years, $35,000 (26%) after eight years, $49,000 (40%) after 11 years, $79,100 (78%) after 15 years and $108,300 (152%) after 20 years. But in an interesting anomaly, sellers who sold after 12 months or less bagged a $37,600 profit, or a 17% gain, probably because they had purchased a distressed property and substantially rehabbed it prior to putting it back on the market. Source: National Association of Realtors."

Sunday, January 2, 2011

What To Look For In 2011

As employment begins to increase and our growth starts to return to pre-recession levels, 2011 will bring about some significant issues/opportunities that will have an impact on our property values.

2012 Democratic National Convention. The decision as to the location of this event seems to be between Charlotte and St. Louis. The economic impact of a convention this size is substantial, but of even more importance to Charlotte will be the national attention focused on our city. Expect a decision early in the 1st Quarter.

Rhode Island School of Design. This is a topic that originally surfaced about 4 years ago. It was rumored that in part due to the success and growth of Johnson & Wales, RISD was looking to open a campus here. The likely site was located in the First Ward near the UNCC Downtown Classroom building and the LYNX Light Rail Line. The synergies for this Fine Arts College to be connected both with the downtown area, and the UNCC Campus via the impending rail extension are great. Great also will be the associated development this will bring along the North Tryon corridor.

Knight Stadium, Third Ward. This will need to be the year this is finally decided. Jerry Reese is almost out of appeals, he has not one any of his petitions. Construction costs are likely to be as low as they will ever be. The impact of this development will create the opportunity for upwards of 10,000 people to find their way to the stadium some 70 times a year. This will bring out merchants and restaurants to take advantage of that traffic flow.

Amtrak/Greyhound Stations. Stimulus funds will be used to do some track relocation near the ADM plant which will be the needed impetus for these stations to be built. The double impact of the Stadium and Stations will breathe life into an area that has been abandoned for the past 20 or so years.

The Park, Two Ten Trade, The VUE. All three of these developments were caught in the recession, only The VUE proceeded to completion so far. The Park is scheduled to finish its construction this year, only different from originally planned. It will now be a Hybrid of condo’s and hotel rooms. An interesting product, and one that is used in many cities. Two Ten Trade (Epicentre) is finally coming out of the courts, but I do not expect anything to substantially develop on this site for some time.

The VUE is entering a time of legal action. Some buyers are suing the developer
 to get out of their contracts, and the developer is suing some buyers for non-performance on their contracts. I would expect the legal action to settle down by summer, and believe that by the end of the year there will be over 150 units (of the 408 in the building) to be occupied. All legal action aside, there will not be another building in the city like The VUE for the next 10 years. The size, the amenities, the location, and of course the views are all incredible. It is a shaky birth, but I believe it will survive.

To be sure, there will be other issues that will come up, but I expect that these will be the talk of the town!