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Winter/Spring
2009:
Considerable turmoil
is present in many real estate markets nationwide. Credit is still available to those with
good credit or better at rates which are quite attractive from a historical
perspective, but in many places, expectations of continued loss in values
have cooled markets to a standstill.
Foreclosures are up nationwide, and they are higher in Alabama as
well. Without getting into too much
of a political statement, repeated comments by various politicians
sometimes appear almost calculated to exacerbate negative perceptions
regarding the general economy, but there is little doubt that the nation is
in the midst of a significant recession.
Now, somewhat better
news. In the central Alabama area as well as the state as a whole, unemployment
is around a percent lower than surrounding states and is lower than
national averages. Thus far, values
have remained static but stable in many markets we serve. Inventory levels have increased compared
to this time two or three years ago, but appear to have reached their peak
this winter. Even then, there are
few markets in the Birmingham metropolitan area which have average
marketing time on sold properties of over 180 days, and most are between 60
and 140 days. This has been possible
because the local economic situation has been relatively stable. Homeowners have been able to afford to
hold their homes on the market longer, hold off marketing them, and/or take
other measures to generally hold values within a few percent of this period
last year. That said, even local
unemployment has increased one percentage point over the last year. Should local unemployment take a
significant downturn locally, this could trigger larger numbers of distressed
sales, and would result in broader value losses. As it is, there are a few sectors and
locations where oversupply, over-development and over-reliance on atypical
borrowing vehicles have resulted in modest value corrections. Recreational housing and mid-high and
high end housing in some sections come to mind.
The commercial real
estate market has slowed as well, though there are a number of projects
underway in the Birmingham area.
Preferred commercial lending in the region at this time includes small
and mid-range warehouses, bulk distribution, limited service lodging,
office, and anchored grocery.
Cautionary projects that lenders will approve with careful
consideration include a number of broad retail and industrial uses, such as
unanchored retail, restaurants, retirement and senior living, flex/R&D
industrial, larger warehouses, self-storage, manufactured housing parks,
etc. At this time, lenders are more
cautious still regarding acute care, heavy manufacturing, full service
independent lodging, resort properties, convenience stores, outlet malls,
Big Box centers, regional malls, and churches. There is the possibility of a commercial
paper credit crisis within a year or so of the expected recovery of the residential
market in 2010, but the positive is that at that time the rebounding
residential sector will help carry that market and offset losses.
It is a broad
indicator and not particularly applicable to any one property, but weighted
composite cap rates across a broad range of property types is around
9.75%. The general retail and office
cap rate index is around 9.0% to 9.2%, Industrial is about a third of a
point higher. These are very general
capitalization rates and are provided for general information only.
James M. Bagwell, the
founder of Bagwell Appraisal Service, suffered a stroke in June 2005.
It was a major stroke, and resulted in significant left side paralysis and
speech and movement difficulties, but at this time he continues to live
semi-independently with his wife of more than fifty years, Christine.
We appreciate your continued thoughts and prayers for them.
Turnaround times at
this date are running around five working days, depending on the assignment
type and location.
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