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Memphis Homes Values Increase in 2010, but why?

Posted by Edward Pierce on Sunday, January 10th, 2010 at 2:43pm.

An interesting article by SmartMoney.com and circulated on Yahoo Real Estate the other day mentions that Memphis should be one of the few areas to see a slight increase in home values as compared to the rest of the nation for 2010. While I am in agreement with the basis of the results, I disagreed with the author (Lisa Scherzer) as to the reasoning behind the results in an article I wrote on my other Blog (View that Article Here).

 

Memphis is a unique real estate market for many reasons, here are a few that will contribute to our market showing a slight increase in home values for 2010 and not because of FedEx as the article eluded to. Now keep in mind, as with most Metro areas, the suburb communities while affected by the city’s market do have their own issues and different positive aspects.

 

Memphis has a very high ratio of HUD backed loans (FHA & VA mainly) and unfortunately we also have the distinction of being the HUD foreclosure capital of the Nation (not even close for conventional foreclosures).

  

We have a large segment of the community who are unable to qualify for conventional loans with today’s rigid underwriting requirements or unable to bring what could be 10% or more to the closing table for a down payment, fees, etc.

 

According to RealtyTrac there were 2.3 million foreclosures in 2008, an estimated 3.2 million in 2009, and they are estimating close to 4 million for 2010 – so we are in for an increase in foreclosures for 2010, how will that equate to an increase in property values?

 

Well let’s look a few facts. Going through to November, Year to Date Median home prices were only down .8% using MLS numbers and 3% when considering bank sales not associated with the MLS. So we really don’t have that much of a climb for Memphis home values to get in to the positive. The underlying factor though for an increase in home values for 2010, even with an expected increase in foreclosures will be that we are at an apparent bottoming plateau; investors have moved in to the area from California, The East Coast and even Italy and there is a renewed market for lease Purchase properties because of the foreclosures in the area.

 

Memphis is a prime area for any investor with a business model of buying REO properties (sometimes at less than 50-cents on the dollar), then renting or lease purchasing them back to folks who are at this point unable to qualify for a home loan. They want their children moving in to a better school district or remaining in the one they are accustomed to, they want to maintain their way of life in general and can typically get in these properties for less down than the now standard 3.5% for a FHA loan (up to 6% with fees, etc).

 

The fact that we should be at the bottom of the market values and an increase in investor activity as well as normal market activity will result in the Memphis area showing a slight increase in home values for 2010, not because the mighty FedEx has an increase in their package volume for the year, although we will hope for the best for FedEx and the other major companies for the area.

  

1 Response to "Memphis Homes Values Increase in 2010, but why?"

AJ wrote:
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Posted on Thursday, August 12th, 2010 at 6:13 PM.


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