John Mauldin is the most interesting and circumspect  financial writer that I read. I‘ve written about his opinions and his free weekly newsletters before.

This week’s Outside The Box is on point, and right on the money for today’s buyers and sellers. Yes, all real estate is local. But, when I wrote about the Lakewood to Buckhead Butterfly Effect before, I meant it…

John offers “financial intelligence for the informed investor” for free.

Here’s a few pieces of “A Closer Look at the Second Leg Down in Housing…”

“In my analysis, price stands out as being the prime mover of the next leg down.

“Home prices remain too high.”

“One of the things that Markets are best at is price discovery – the determination of a price for a specific item through basic supply and demand factors. Without the heavy hand of the government intervening, the residential real estate market is about to experience what price discovery is all about . . .”

“Two of the major homebuilders look particularly weak.”

“Until the picture clears up, we remain uncommitted, keeping a healthy amount of cash in our accounts. We advise readers do the same . . .”

“Housing” is not what it used to be, Intown Atlanta and Decatur Buyers and Sellers:

Here’s how:

1. because 59.3% of all listings in 8 metro counties failed to sell in the first quarter of 2010

2. because 86% of listings in 8 counties were initially overpriced in the first quarter of 2010

3. because any given neighborhood’s numbers are just about as good as those, right now…many are much, much worse

Regardless, savvy “move up” sellers who want to take advantage of a tremendous market move, can do so right now in a historic way. Prices are back to what they were in 1998, and that was a tremendous time to buy…with mortgages at way higher interest rates than today’s historic lows!

Bright, cash enabled families making sensible market moves across Intown Atlanta and Decatur – right now, they are about 8-10% of the market in any given month. Find that market, buyers and sellers – the rest is somewhat distressed.

If the bank’s stance is a loss for the buyer, then the buyer can wrap things up with this classic walkaway line:

“I’m not a bank, and you are not broke.” (All credit for that gem goes to Sherman Gaskins.)

In the case of a short sale, the stance is “I’m not a bank, and your mortgage lender is not broke.”

Work that one into the dialogue when emotional attachment arises.

Most banks are not broke. Especially the banks and other entities that are holding, managing and listing REO foreclosures. And the Loss Mitigation departments at many of these same banks, the folks who are handling the short sales, they are empowered by massive cash reserves.

These organizations are making a lot of money right now and / or they are well funded…that’s a better way to put it: well funded.

Knowing all of that, bank-owned real estate negotiation is really simple as long as the buyer gains strength from three primary resolutions:

1. The buyer’s expectations must be low.

2. The buyer should have more than one opportunity in the works.

3. The buyer can not have emotional attachment .

More than one opportunity? How low? No attachment?

Think about it like this…

One of the seven habits of highly effective people is that they maintain an attitude of “win / win, or no deal.”

Certainly, real estate transactions are a workshop for this highly effective habit, but bank-owned real estate transactions do not enable the easiest wins. Banks get rigid. Banks are either holding up their profit margins or holding the line on the margin of their “acceptable” losses. Banks are staffed with folks who have rules to follow – rules that are quite often out of favor to the purchaser.

As one example, many short sales requiring bank approval or many REO, bank-owned  foreclosure sales attract multiple offers from more than one buyer. That means that a potential buyer loses the exclusive leverage of a “buyer’s market,” right?

The “win” for the bank is a quick sale at greater than asking price. This happens often enough, especially in the Atlanta submarkets with houses and land selling for under $250,000.

Sometimes, with a short sale or an REO, the bank won’t pay the negotiated value of the buyer’s closing costs. Sometimes, other disagreements arise over price, regardless of “binding” agreement with the seller.

This assumes that the bank even responded at all in a timely manner and started a dialogue. (see point #2 above…)

Banks don’t necessarily subscribe to the first habit of highly effective people, which is “Be Proactive!”

Simply put, banks are not broke.

Fools rush in, where wise men never go…

Atlanta’s median Days-On-Market (DOM) decreased slightly (-1%) in the fourth quarter 2009, compared to the same period of the previous year, remaining +10.3% higher than in 4Q 2007 and +16.4% higher than 2008 for the full year in 2009.
Many properties still failed to sell during their initial listing period in 2009, causing total DOM to increase during the market downturn.

Even though the overall measure was slightly lower in the fourth quarter of 2009, changes by price range reveal that increases occurred in all ranges except for the <$200K range.
Increases in the higher price ranges were substantial compared to those in the fourth quarter of 2008, and lower prices continue to carry Atlanta’s overall real estate demand.

The median of DOM segmented by Sales Price and New/Resale, shows increases in time on market for all but the resale segments below $300K.
The variation in increases between segments ranged from a low of -22% for Resale properties priced <$200K, to a high of +155% for New properties in the $200K-$299K price range.
The DOM measure for New Construction is subject to the point during construction at which a builder enters the listing and the listings are often longer than for resales.

Price, terms and time all have a delicate counterbalance. The significance for Atlanta sellers has been addressed here before – just because a property is on the market doesn’t mean that it’s “in” the market.

The significance for Atlanta’s buyers is that they know the difference between stale and fresh, and when a sign lingers in the front yard a stigma develops. Today’s buyers have so much inventory to choose from, that avoiding stigmatized property purchases is a pretty easy pursuit nowadays.

Although multiple factors may have influenced median sales prices during this market downturn, foreclosure sales have been one of the biggest.

“Expect the percentage of the portion of total sales in Atlanta represented by foreclosed properties to be high and to remain high for a few more years.”

Although the number of foreclosure sales fell somewhat after July, which contributed to somewhat more stable sales prices during that time, the impact of foreclosures in 2010 is expected to be significant.

“On the Mortgage Banker’s Association (MBA) conference call concerning the “Q2 2009 National Delinquency Survey”, MBA Chief Economist Jay Brinkmann said:

# The problem is moving to prime loans, and fixed rate prime loans. Although the delinquency rate is lower for prime fixed rate than for other loans, these loans make up 65.5% of all loans – so the increase matters.
# Brinkmann expects delinquencies to peak in mid-2010.
# Brinkmann expects foreclosures to peak at the end of 2010.”

As a lesson from 2009, properly priced properties continued to sell at a median of 97.1% of their original listing price, within a median of 23 days on market, compared to a median of 78.5% and 247 days for initially overpriced properties which made up 87% of listings in 4Q 2009.

2010 sellers should take note of the accompanying chart which reveals that as the number of foreclosure sales (red trend line) increased, the median sales price (gold trend line) of non-foreclosure properties has declined. Street for street, neighborhood for neighborhood, school district for school district if 2010 property sellers and listing agents do not know their foreclosure competition and do not comprehend the impact on appraisal of any given property at any given price point, then they are fools.

2010 buyers know that foreclosure properties and those that have been price-reduced may set up a more favorable negotiating environment for buyers, causing anxious Sellers to negotiate away more of their listing price. This is a national problem with a hyper-local impact on Atlanta’s submarkets.

“Although most of the delinquencies are in a few states – because of a combination of high delinquency rates and large populations – the crisis is widespread…historically house prices do not bottom until after foreclosure activity peaks in a certain area. Since the subprime crisis delinquency rates might be peaking, it would not be surprising if prices are near a bottom in the low end areas. But in general expect further declines in house prices – especially in mid-to-high end areas.”

Ignore the facts and join the ranks of the unsold and the continually distressed.

Median sales prices appear to have reached bottom in January, 2009.

But, there is a lot more to consider.
The steep declines in median sales prices seen on the chart coincided with an acceleration in the number of foreclosed properties sold in each period. Now, in 2010, the word is out that foreclosure inventory, short sale inventory and distressed selling in general will lead the market…on another downward slide.

In early May, the Intown Atlanta Real Estate Examiner will examine the latest charts and statistics from the first quarter of 2010. Until then, speculation abounds and a lot of the speculation is worthy of making plans for the worst, yet hoping for the best.

And, hope is not a strategy.

In the meantime, some national forecasting is worth considering. The federal government has stimulated a short term period of relative stability. The federal government stops buying mortgage backed securities soon. FHA will stiffen their loan underwriting guidelines soon. How will these factors and other macroeconomic considerations “play out” and how will they ultimately affect housing prices in metropolitan Atlanta?

* The folks at Calculatedrisk.com recently quoted Lawrence Yun, the Chief Economist for the National Association of Realtors who is one of today’s most optimistic economists. He recently stated: “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May and June … The real question is what happens in the second half of the year.”

“The NAR is currently forecasting an annualized existing home sales rate of 5.1 million homes in Q1, 5.8 million in Q2, and about 5.5 million in the 2nd half of 2010. I think those numbers are generally high – especially in the 2nd half of 2010.”

* Paul Smalera, a writer for Moneywatch.com, recently stated: “So even if you qualify for a rock-bottom rate buying may not be worthwhile in the near term. Especially not if you end up being underwater on your brand new mortgage.”

* Felix Salmon, a writer for SeekingAlpha.com, recently stated: “Throwing money at the problem will alter the amount of time it takes to finally arrive at a market-clearing, private-sector-generated level of house prices. But there’s little doubt that such a level is well below where we are right now. Which is yet another reason not to buy, at least for the time being.”

Quite a few others agree with Felix.

* Douglas A. McIntyre, who writes for 247wallstreet.com, recently stated: “The slowdown in housing sales, both for new and existing properties, also make it more likely that sellers will need to drop prices to attract buyers. Under those circumstances more mortgages will move underwater as downward pressure on prices remains a significant factor in the market.”

* Barry D. Wood, who writes about the global economy for the Huffington Post, recently stated: “What is most worrying is that foreclosures are still rising and an increasing number of homeowners are underwater on their mortgages, meaning that they owe more than what the home is currently worth…of the 57 million US home mortgages, 6 million are in the distressed category, meaning that they are either in actual foreclosure or payments are seriously delinquent. Foreclosed properties drive down prices.”

* Meredith Whitney, CEO of Meredith Whitney Advisory Group, told CNBC on Tuesday that there is a “corporate recovery, while the consumer continues to deteriorate.”

The catalyst, according to Whitney, is the Fed’s pulling back on purchasing mortgage backed securities (MBS).
“The asset classes of MBS and Treasurys are priced for a material correction in my opinion,” she said. “The only buyers of agency MBS are the Fed and banks, so you see how precarious that market is..If the Fed pulls back, that’s a really big deal… because there’s no substitute buyer.”

She state on Tuesday that “THE HOUSING MARKET IS SURE TO DOUBLE DIP” in this video from CNBC.

So, did Atlanta’s median real estate sales price reach bottom in January 2009?

Maybe, that depends on how deep the double dip, dips…

The focus of most of the articles at The Intown Atlanta Real Estate Examiner’s page will be on single family housing, but a question arose today on the Trulia Voices “Question and Answer” forum that merits a little more examination.

The question is “What is the median sales price for a condo in Atlanta?”

That’s a fairly easy question to answer but a few folks requested more geographic clarity, and some questioned the intent so the questioner, a guy named Mark, further explained “I would say for the whole metro. Overall, I am looking into a condo but want to know their value in relation to a regular home…”

Here’s the answer:

$144,000.00 through the fourth quarter of 2009…was $164000 in 2008 and $174000 in 2007.
Condos, lofts and townhomes combined.
The information comes from analyzing the First Multiple Listing Service data for sold listings across eight counties – Cherokee, Cobb, DeKalb, Douglas, Forsyth, Fulton, Gwinnett, and Paulding.
That’s a 3 year slide alright…

Furthermore, median sales prices were lower in each quarter after the second quarter of 2007, until some stabilization occurred during 2009.
The median sales price during the fourth quarter of 2009 was -5.8% below that of the fourth quarter of 2008, but was nearly equal to that of the previous quarters in 2009.
By comparison, Single Family Detached residence sales prices increased by +.6% in the fourth quarter of 2009, compared to the fourth quarter of 2008.

Since failed listings in the fourth quarter of 2009 were 59.5% of total listings, and overpriced listings were 87% of total listings, the pressure on sellers is immense.

So, is hope alive?

Well, recovery hawkers and confidence builders touting easier money and steadier sales make their case for 2010 as a year of growth. Robert Freedman, the Senior Editor of REALTOR magazine, stated the following in a 2010 outlook article, which quotes Lawrence Yun, the Chief Economist for the National Association of Realtors:

“Economists disagree about how the economy will fare in 2010, but they agree the recession will be firmly behind us. Yun forecasts economic growth of 2.8 percent, up from a recessionary –2.5 percent in 2009. Varvares puts growth at a more robust 4.2 percent.
Improved stock market performance, the need for business to replenish inventories, and the continuing impact of the federal government’s stimulus efforts are all playing a role in boosting the economy, they say. Supporting it all is the improvement in housing. As home prices stabilize, households feel wealthy and start spending again, which drives retail and other business growth, in turn boosting confidence and the stock market, and creating a virtuous cycle of growth.
Yun predicts home prices to grow 3.6 percent in 2010, a significant rebound from 2009’s 12.9 percent national price decline.”

Lets see how the first quarter numbers shake out – as long as Uncle Sam is holding up the housing market, the housing market has every reason to start feeling better…

The median residential real estate sales price across 8 metropolitan Atlanta counties posted a small gain of .6% during the fourth quarter of 2009 compared to the fourth quarter of 2008.

Although slight, this is also the first positive quarterly change in median sales prices in the last 3 years.

On the downside, the median sales price in the fourth quarter was lower than that of the third quarter of 2009 and the year finished -12.5% below 2008 and -24.6% lower than 2007.
To offer some perspective, here’s a restatement of recent “sales” performance – a look at how many actually “sold:”

•Out of every 100 finalized listings, 60 failed to sell and 40 sold
•Of the 40 sold listings, 27 (67%) required a price reduction, when listing prices from previous listing periods are included, in order to attract a Buyer
•Therefore, if 60 failed due to overpricing and another 27 required a price reduction in order to sell, 87 out of every 100 listings were initially overpriced in 4Q 2009, resulting in either no sale, or a sale at a much-reduced price after a much-longer listing period.

Now, is this a momentum building?

Will 2010 reveal an overall decrease, once again?

Will 2010 be the year that the market begins a sustainable recovery?

The answer lies in pricing…a successful market turnaround will only occur when that 87% number comes down…

Even though overall sales were +14% higher in the fourth quarter of 2009, not all segments had increased sales.

The activity for properties sold under $300,000 is particularly strong, with both new construction and resales up significantly from fourth quarter 2008 compared to fourth quarter 2009.
Gains were generally larger in lower price ranges and with resale properties compared to new construction.

By observing the numbers for new construction properties priced above $300,000, a gradual shrinkage is evident as prices increase, particularly in the $750000-$1 Million range and in the range of $1 Million and higher.

Of course, federal government stimulus is carrying the housing market and since the healthiest activity is under $300,000, the combination of relatively easy FHA lending and the federal and state tax credits are an evident catalyst.

Distressed properties still represent more than 1 in every 4 sales, keeping prices lower and days on market time longer for non-foreclosure properties.

Restating a regular theme here at the Atlanta Real Estate Examiner page, 87% of all properties are still initially being overpriced for current conditions, setting up price reductions, lower sales price to list price ratios and longer days on the market.

Closing that gap in realism is the only cure for a healthier Atlanta real estate market and until the gap shrinks, most sellers will fail and buyers will continue to glean the best terms and conditions for purchasing in history.

59.5% of all listings in the 8 counties were failed listings in the fourth quarter of 2009.

Looking ahead, the first two quarters of 2010 will probably look quite similar to the fourth quarter of 2009, but that is about as far ahead as this Examiner can see. All bets are off after the current stimulus package expires, and beginning in April, when FHA enacts their stricter lending guidelines.

Fourth quarter 2009 foreclosures were also a lesser portion (27.4%) of total sales compared to 4Q 2008 (32.2%)

The percentage is slightly higher than in the third quarter of 2009.

Foreclosures were 35.6% of fourth quarter 2009 sales in the <$200,000 price range. Since the percentage one year ago in this price range was 44.5%, the pressure is obvious on sellers who are not in distress.

Short sales place even more pressure on those sellers who “don’t have to sell…”

In 2010, the expectation of foreclosure and short sale properties arriving on the market in “possibly record numbers” is a financial phenomenon that savvy sellers can not ignore.”

You can find the rest of the article here, at Examiner.com…