This week I read two positive articles online from CNN about the residential real estate market. As a student of the market, I thought it would be fitting to revisit some fundamentals this afternoon as I analyzed these articles:

Real Estate Fundamentals:

1) Cost to Buy vs. Rent; 2) Level of New Construction Starts and 3) Ability to Buy

Market Fundamentals:

1) Supply & Demand; 2) Unemployment and 3) Consumer Confidence

In “Real Estate: It’s Time to Buy Again,” statistics on the shortage of new construction starts (which are well below closings) and a steep decline in prices are positive signs for those who can and want to buy to get off the fence. And in the complimentary article, “10 Best Cities for Home Buyers,” Atlanta came in as the #1 best city for having an average monthly rent much higher than the average mortgage payment and for double-digit declines in home prices the past few years.

Based off my calculations, we’ve hit 3 of the 6 fundamentals above. Unfortunately, buyers who want to take advantage of this market still have a low sense of confidence about the market and/or their own situations. Or truly, they might not be able to buy. Interest rates are still low, but without a down payment or good credit history, homeownership is still in the future.

The last sentence of the “10 Best Cities Article” asks “…When will those Atlanta renters recognize the clearance sale going on all around them?” Sorry Mr. Reporter, but I think you would benefit from a fundamentals refresher too. See above.

The Top Five Reasons for this downsizing trend:

1) Young adults are seeking energy efficient space and prefer  more “green” features to larger square footage.

2) Baby Boomers downsizing want less space and an easy lifestyle.

3) The new attitude of “Bigger is not always better”.  Consumers are looking at homes now to fit their lifestyle.

4) Formal living areas are rooms of the past.  Today’s buyer is apt to purchase homes with a combined great room and kitchen.

5) Due to the economy over the past two years, consumers have become realistic and state that affordability is important.

In a nutshell, homes of the future will be smaller, more energy efficient and geared to fit a particular lifestyle.

1) Don’t wait for the phone to ring.  Stop spending time on the “up desk’ and devote your energies to less passive activities like holding first-time buyer seminars, knocking on doors, calling sellers who have let contracts expire and wooing FSBO’s.

2) Be a specialist.  Top producers pick a niche or two and work it.  Common niches include geographical farms, new homes, estates, and relocation.

3) Work your farm.  If you have not closed at least four transactions from your geographical farm in the last two years, replace it with something more profitable.

4) Stop being a secret agent.  Networking should produce leads.  If yours isn’t, then find other ways to solicit leads.

5) Tidy up your database.  Delete the people who haven’t produced any sales in 24 months.

Let’s make more money by working and marketing smarter in 2011.

Source: Inman News, Bernice Ross (12/28/2010)

1) Build your equity instead of your landlord’s equity.

2) As an owner you will receive homeowner tax benefits and as renter you will receive rent increases, with no tax deductions.

3) Pride of ownership is an important part of owning a piece of real estate.  It is your piece of the American Dream.

4) Owning a home allows you a sense of stability and community.

5) Last but not least, you will have the freedom to express your style in your home.

As stated by Liz Pulliam Weston in her weekly post on msn.com, ” Buying is one of the smartest financial decisions most people will ever make .”

Fannie Mae’s new lending guidelines go into effect next Monday, December 13.  It’s expected that the new guidelines will make securing a mortgage easier for some borrowers, but harder for others.

The new rules are summarized in a recent article in the New York Times, from which we’ve quoted for today’s Friday Five:

1. The rules will allow buyers to use gifts and grants from nonprofit groups for their minimum 5 percent down payment, which is the threshold set by Fannie Mae. Previously, borrowers had to contribute a minimum 5 percent down payment from their own funds, but additional down payment money could be from a gift (though never from a home seller). The exception was for borrowers who put 20 percent down: all that money could come as a gift.  The gift rules apply only to single-family principal residences, including town houses, co-ops and condominiums, and covers mortgage amounts in excess of 80 percent of the property’s value. Also, there is a limit on the loan balance — $729,000 in high-cost areas like New York City, and $417,000 in other areas.
2. Fannie Mae is getting tougher on debt-to-income ratios, or the amount of a borrower’s gross monthly income that goes toward paying off all debts. The maximum ratio for those seeking a conventional mortgage will drop to 45 percent from 55 percent under the new guidelines.
3. The agency is also taking a harder look at payment histories on revolving debt. In the past, if a borrower missed a monthly payment, Fannie Mae ignored it, or required that lenders add a few percentage points to the total balance when calculating the debt-to-income ratio. Now, buyers who have missed a payment will have 5 percent of the total balance added to their ratios.
4. In addition, Fannie Mae is scrutinizing people who are at the end of their mortgages, with 10 or fewer payments left. It will now count those remaining balances in the debt-to-income ratios — another departure. Mortgage experts say that older buyers near the end of their loans may now have a tougher time securing a loan for a second home.
5. But perhaps the toughest news from Fannie Mae concerns borrowers who have gone through foreclosure. They will be excluded from obtaining a Fannie-backed loan for seven years, up from five.

To read the full article about the new guidelines, click here.

The last few years have changed the way we look at every aspect of real estate – from designing to marketing and selling to financing.  So it’s inevitable that the continually changing business and consumer mindset will also impact planned communities.

ULI recently published a very interesting article on the topic.  In the November issue, reporter John K. McIlwain said that the shift to more urban lifestyles, the high unemployment rate for those under 30 and the large number of boomers who are looking to age in place will change the way we look at planned communities during the next two decades, considering full buildout of such a community can take around ten years.

In the article, ULI suggested new approaches for future planned communities, including the five listed below.  If you are a ULI member, you can click here to read the full article.

1. Expand the town center. Clustering more homes, especially smaller ones, around the center of a community begins to create a real downtown feel and allows people to walk to stores and services. Here, also, is where that elusive but increasingly important idea of “community” can occur, facilitated by locally owned businesses, places for people to interact informally, a community center with a hall for community events, and an intriguing mix of stores and services. Consider creating an association of business owners, homeowners, and renters to advise on the management of the town center, and to create events, musical and otherwise, to bring the community together.
2. Consider forgoing expensive amenities like golf courses and clubs. Among the most popular amenities these days are project layouts promoting walking and bicycling. Tax breaks and other benefits are available for dedicating land to be held in open space permanently. (See ULI’s new book Conservation Communities: Creating Value with Homes, Open Space and Agriculture by Edward T. McMahon.)
3. Reconfigure floor plans to add one home office and eliminate one bedroom. Flexi-force households need space to work from home—with the accoutrements of communication, such as broadband, a computer workstation, a printer, and a quiet businesslike environment. To obtain that, residents must either share the living/dining area with the rest of the family, or convert a small bedroom into a true home office. The latter is the better option, especially with plummeting broadband costs and rising commuting costs, both personal and external. To maximize the use of such semidedicated home office rooms, they should be wired with extra electrical outlets, coaxial or broadband cables, and wi-fi nodes.
4. Encourage conversion of suitable new-entry ownership properties into permanent high-quality rental properties. With several million households downshifting to rental properties, several million dwellings constructed for occupant ownership should be converted to become permanent rental units. Aside from condos being converted into rentals, the market may see the return of the intermediate-term, furnished-flat lease or the American adaptation of London’s market in tradable leasehold interests. The U.S. market may reinvent the investor/landlord model through hybrid financing approaches, such as rent-to-buy or shared-appreciation hybrid ownership/rental finance vehicles.
5. Rethink leases and security deposits to allow greater flexibility. Leases and deposits can be modified to allow multiple signers who can add to or drop out of the housing configuration. No longer do multiperson tenancies merely mean students shacking up; they now reflect shifting consumption patterns by people attendant on being in the flexi-force. Landlords want all residents on the lease, but if those residents are making and unmaking household configurations, the landlord will want to ensure there are enough wallets among the tenants that their changing status does not change his or her creditworthiness.

I’m sure we’re all inundated with information about how the U.S. real estate market is doing on a monthly, weekly and even daily basis.  But it’s also interesting to take a step back and see what overseas markets currently look like.

The Economist recently published a roundup of global house prices.  The publication’s 2009 roundup included a “sea of negative numbers,” but this year’s list only included four year-on-year declines.  Below are five findings from this year’s roundup:

1.     Singapore, Hong Kong and Australia boast the gaudiest year-on-year price increases, even if the rate of appreciation is down a bit from the summer.

2.     House prices in China rose by 9.1% in the year to September, compared with a 12.4% rise in May. That is still too fast for the government, which unexpectedly raised interest rates on October 19, 2010 and has outlined more measures to cool the market in recent weeks, including higher down-payment requirements and the introduction of a property tax in some cities.

3.     Europe shows a familiar split between core countries and peripheral ones. Ireland, Spain and Italy continue to suffer year-on-year price declines; German and French homes have shown big gains in value over the past year, a particular turnaround for France.

4.     Japanese housing fell by 4% in the year to the end of the first quarter, despite being stuck far below its long-run price-to-rents ratio.

5.     Only Ireland’s property catastrophe has worsened.

Click here to read the full article.

The Wall Street Journal reported this week that non-profit group Walk San Diego found that homes in walkable communities retained 5% more value than non-walkable communities during the recent housing market decline. For the study, the group broke an area known as Mid City (which includes a handful of San Diego neighborhoods) in 11 separate zones to study walkability and found that the pedestrian-friendly spaces saw less of a decline between 2007 and 2009. Walkable areas decreased 12.4% while non-walkable areas decreased 17%.

We aren’t surprised in the least, as we regularly hear that a neighborhood’s “walkability” is what brings in potential buyers at many of the local properties that we represent.  Metro Atlanta has quite a few unique walkable neighborhoods, many of which have likely taken cues from the more well-known walkable suburbs in the U.S. – including those that were recently ranked in the Wall Street Journal’s list of the top 10 walkable suburbs in the U.S. (ranked by education levels, per capital income and travel time to work).  The top five include:

1. Bethesda, Md.
2. Princeton Township, N.J.
3. Highland Park, Texas
4. Evanston, Ill.
5. Birmingham, Mich.

On Monday, a few of NRT Development Advisors’ team members attended the GET MOTIVATED Seminar and there is no better word to describe how we felt after the event than “motivated!”  We received advice from celebrity speakers including Bill Cosby, Goldie Hawn, General Colin Powell, Lou Holtz, Zig Ziglar, Rudy Giuliani and others during the one-day seminar.

Below are our top five timeless motivational tips that were discussed during the event, which are just as applicable now during a challenging economy as they are during a booming economy:

1. Every day is a new day, so it’s important to stay positive.
2. Don’t play the blame game.  Instead, work through the process to create a positive outcome.
3. Attitude is everything in every situation.
4. Communication is essential, regardless if it’s positive or negative news.
5. Ask for feedback from your team.  And then listen to what they tell you.

Today’s Friday Five is borrowed from a recent and very creative Zillow blog post that ranks their top 5 Atlanta neighborhoods in which to trick-or-treat.  The site calculated home values, population density, walk score and local crime data to determine the prime neighborhoods for this weekend’s festivities.

Below are Zillow’s top five Atlanta neighborhoods:

1. Virginia Highland
2. Morningside/Lenox Park
3. Inman Park
4. Brookhaven
5. Garden Hills

What neighborhoods will you target this weekend for trick-or-treating?