Lake Lanier & Luxury Properties

Peter Edwards' 2007 Lake Lanier Real Estate Market Report TM
Lanier's 50th Birthday Present Is A "Buyers Market!"
While The Bears Worried, Goldilocks Bought Two!
This Report, as in 03, 04, 05, & 06 is written as a public service to all with an interest in Lanier Real Estate

News: With the Corps' now extended to a 210 day, moratorium on slip permit issuance in effect, it's very likely that during that time the decision will be made on who will receive the last slip permit on Lanier. In anticipation of this event Lake Lanier Real Estate values have been on a sustained upward trajectory and 2006, as we predicted, was the best year for sales of properties on Lanier in the 50 year history of the Lake. The simultaneous convergence of decreasing slip availability, ongoing low interest rates, a healthy stock market, and the "Baby Boomer" demand surge combined to deliver ideal market dynamics in 2006. 2007 on the other hand has brought us a 180 degree change in market conditions and the overflow of the general real estate market slowdown has now impacted the Lake market and we are in a "Buyer's Market". While all the talk is about subprime mortgages, that issue is limited to about 1.5% of the total mortgage market and will not be a factor here on the Lake (more on the subprime issue later). The major economic indicators remain strong, despite the recent stock market turbulence and subprime issues, and that bodes well for a quick recovery in the Lake housing market. The good news is after a very slow Q1, the economy in Q2 strengthened, and the Lake Market is beginning to turn up while still offering excellent market conditions for Buyers. I have seen a marked increase in Buyer activity in the last 6 weeks and believe that will continue. The off lake market will take longer to recover.

Boat Slip Permits: In 2006 the Corps issued approximately 860 "change of ownership" permits which indicate sales of properties with existing boat slip permits, an increase of over 260 from 2005. Based on my estimates they also issued close to 400 new permits, and several hundred or so during the first 6 months of 2007. In my conversation with the Corps in March, they indicated 200 slip permits remaining but in their moratorium press release, they indicated 500 remaining. The translation is that they probably had in hand at the time over 300 applications that they believed would likely be permitted, with more requests coming in daily. We can assume that during moratorium, ending in November enough valid applications will be linked to a permit, such that the Corps will assign to a request the remaining 200 and at the end of the moratorium issue the last slip permit during November, or sooner. Forever after, Buyers seeking a private boat slip property on Lanier will only be able to purchase re-sale property that already has a slip permit.

Market Impact: We reported last year that the limiting of slip permits on the lake has forever changed the fundamentals of the Lake Lanier Real Estate Market. Just looking at the slip numbers from 2006 we see that in a few months(or weeks) a full third, 400 plus of the 1200 plus new and resale properties with permits sold in 06 will forever disappear from the supply side of the market formula. That will have a massive impact that will drive the continuing rise in values of permitted properties on the Lake. The absence of new properties with new permits on Lanier will permanently position the Lake market as one that will almost always be a "Sellers market", where demand consistently outstrips supply. But on occasion, such as this year, due to factors outside this market, there will be a Buyer's market condition. Proof of the continuing rise in property values is evidenced by an almost complete disappearance of the price band with lakefront residences priced at $300,000 and below. What used to be the largest segment of sales on the Lake, usually in the several hundreds per year, according to FMLS, was at just 22 in 2006. Next to disappear will be the $300,000 to $400,000 price band, and so on into the future. I suggest that 5 years from now the average price for a lakefront house on the lake will be in the $800,000 plus range, and dock values will surge towards $200,000 with slip values close behind .

Water Levels: We are once again enduring another weather double whammy with an ongoing drought condition and daily high temperatures exceeding the norm. Both last year and this year we were then, and are now, well under our normal rainfall levels which has the biggest impact on water levels, and consequently the lake never really fully recovered from last year's disastrous water level gauge fiasco. The other impact is that with the high heat, the electrical power usage is unusually high and thereby requires the operation of the two large generators at the Buford Dam, which require larger amounts of water flow than the single small generator.
Thanks to the Lake Lanier Association (our volunteer Lake Stewards) for their leadership's common sense suggestion at the Congressional Hearings last year that the "full pool" level of the lake be raised by two feet. That change would provide a solution to many of the issues that impact the water levels on the lake and would also go along way in providing the best opportunity to reach a final agreement in the tri-state water wars. I believe that this will eventually be done, since it is politically easy, technologically doable, will have the least environmental impact, and best of all will provide an additional 25 billion of gallons additional water supply for all that lay claim to the Lake's water. The studies by the Corps should be complete within the next year and hopefully that proposal will move forward!

Interest Rates & Economy: Current long term interest rates, while having risen, still remain at historical lows at around 6.25% - 6.65%. The FOMC (Federal Open Market Committee) has held the rates steady once again this past month, while it assesses the slow Q1 economy and upward inflation pressures from food, gas & oil prices, and the negative impact of the general housing market slump, as well as the subprime mortgage issues. The early assessment for Q2 is that the economy recovered nicely and produced a growth rate of approximately 3%, a strong comeback from Q1. That suggests a slow increase tied to the economic growth rate. Although with the recent stock market gyrations, the Fed may have to step in and lower their long term interest target rate by either .25% or possibly even .5%. The Fed did step in and add liquidity multiple times as did several other Central Banks recently and they are committed to be involved in the solution. The Fed also dropped it�s "Discount Window" rate by .5%, extended payback period from 1 to 30 days and encouraged holders of subprime mortgage backed securities to utilize the window to off load their risk. It is my belief that the subprime/liquidity issues will work through to resolution over the next six months, but the involvement of the Fed (and other central banks) will allow for rational markets to prevail.
Those actions represent the beginning of the cleanup of the subprime mess, and have begun to relive the credit crunch in the mortgage market. Many of the weakest mortgage companies that issue the worst of the subprime mortgages have already declared bankruptcy and a few more will go by the wayside. The positive news is that employment is at record highs, unemployment is at record lows and consumer confidence and spending remain high and corporate profits are strong, commercial construction is booming and the stock market, with the exception of the last few weeks, continues to rebuff most all negative news. We continue in this "Goldilocks" economic environment where as one segment of the economy softens another surges to pick up the slack. Pay attention Buyers' the time to act is now! With the Fed's commitment to act to insure orderly financial markets I believe this is the bottom of the Lake market and from here on out we will begin to see our market improve.

Population Growth: HOT HOT!! In or 2006 we reported that all five of the counties that border on Lake Lanier were in the top 25 fastest growing counties in the State of Georgia (as of 2003 Census). In a December 22, 2006 article in USA Today, Election Data Services reports that the South Region is growing at an 8.8% rate, second only to the West region at 9.7 %. Further more when comparing Florida and Georgia and Texas we see that from 2000 - 2006 Florida grew at a rate of 13.2% and Georgia at 14.4% and Texas at 12.7%. More recently during 2005 & 2006 Florida grew at a rate of 1.8% and Georgia grew at a rate of 2.5% and Texas at a rate of 2.5%. So as a percentage of population Based on the data shown, Georgia is now the fastest growing state in the South Region with Metro Atlanta and Gainesville on Lake Lanier leading the way.
Why?...The reasons remain the same, a growing south east US transportation hub expanding in all directions, proximity to the best International Airport in the US, great climate, access to one of the most beautiful lakes in the US, relatively low taxes, and relatively low cost of construction, and you have a formula for high growth. Overlay that with the surge of Baby Boomers moving south and the extraordinarily high price of Southeast US waterfront property, and the stage remains set for explosive price appreciation in the greater Lake area over the next several years.

Who's Buying: The short answer is that smart investors and smart individual buyers are taking advantage of the existing market conditions and getting good deals. Their focus is primarily on lots since they require no maintenance, upkeep, or other care. Buy them and watch them appreciate. They can use the dock or slip themselves or take advantage of the revenue opportunity since one can rent out the slip attached to the lot.
The "south to north" buyers that we are actively working with fall into two categories, those that do not need to sell in order to buy and those that are willing to take less profit and sell now in order to avoid ever increasing property taxes and insurance rates. The other source of "south to north" Buyers are our usual base from the greater metro area, and that source is also anemic, although showing signs of a good recovery. Even the significant source of "north to south" Boomer Buyers at or near retirement age, while active, is substantially down year over year, but some are beginning to break lose of their holdings and are coming down to buy. Again anyone who intends on buying on Lake Lanier should make their move now while we are in a Buyer's Market, and they will be handsomely rewarded with excellent appreciation rates going forward. Those that wait for even better prices will miss the bottom and be sorely disappointed later.

Real Advice for Sellers: Only those that must sell now should be listing their properties for sale. Many builders and developers are in that category since making investments in the last half of 2006 with a plan to bring product to market in spring of 2007. Builders would be wise to offer incentives to clear their inventory prior to next year. Your best shot for a sale is with a professional Lake Realtor that focuses primarily on Lake Lanier properties since they have the most reach to the Buyer community, and hence best potential to sell your property. You can identify them by asking if they are lake specialists with 80% of their sales being lakefront property, and if they are members of the Lake Lanier Realtors Association, all certified Lake Lanier specialists. Lastly we firmly believe that the Lake market will "snap back" since there is pent up demand waiting in the wings, and as our would be Buyers sell their current homes they will move aggressively to take advantage of our Buyer's market. We are recommending to our current Owner Clients that they ready their property for sale and go to market as the market shows improvement. Use this time to make those improvements, upgrades or repairs that will help you achieve maximum pricing power. Your Lake Realtor will be happy to point out those improvement items that will give you maximum payback. Note for Owners: Don't let your permit expire! Owners with permits but no dock yet, contact one of the dock companies and get at least a "placeholder" dock installed now.

Real Advice for Buyers: It's a Buyers Market so act now! For Buyers this year presents an opportunity to buy on the Lake at prices and interest rates that are lower today than they will be at any time in the foreseeable future, with high confidence that their investment will grow in value. Do your homework, work with one of the Lake Lanier Expert Realtors (there are less than 20 of them) and make your move now. The very best time for a Buyer to buy is when the market conditions favor the Buyer as they do now. When this market recovers it will be with a "snap back" recovery due to the pent up demand currently waiting in the wings and the loss of supply of new slip permitted properties. If Buyers wait till next year to buy thinking the market will deteriorate further and prices will fall, they will get a nasty surprise from substantially increased prices for what they looked at in 2007, but did not buy.
Remember, as supply of permitted lots decreases, and prices increase, and interest rates rise, Buyers will see their buying power will erode over the next several years. We are now beginning to see mortgage rates increase due to strength of the economy and it is clear that barring Fed move due to the financial markets, rates will move up. As mortgage rates move up, Buyers are less able to afford both the higher property price and mortgage rates and therefore we are recommending to our Buyer Clients that NOW is the time to buy rather than later. Buyers who wait will simply be priced out of the Lake Lanier Market.

Next Development Trends for Lake Access: Developers have led the way during the past year racing against time to get through the Planning, Engineering and Zoning approval process in time enough to apply for and get boat slips before the Corps stopped issuing permits. With several new subdivisions now approved and in the market there has been a surge in availability of lots with private slips in community docks. On the other hand, quality lots with existing docks and permits continue to be snapped up quickly by investors, builders, and individual buyers, and remain in short supply. That subdivision race is over now and any new subdivision currently still in planning and not yet approved, will probably not have boat slips. We saw many new lake subdivisions come to market this past year, most of which are "mixed" communities, in that they have a limited number of lots with slips, and the remainder will be regular lots with out slips.

Next Trends in Lake Real Estate: The most important trend in Lake Lanier Real Estate is that Lake Lanier property will continue to appreciate at a rate substantially faster than the general real estate market and in a relatively short period this will be a market dominated by million dollar and above lakefront homes and estates. Last year we discussed new subdivisions, located near ramps, that will be "off lake" with on site boat storage. Several have already been proposed and approved. The impact will be that more local residents will be using the ramps and to some extent crowding out visitors living further away, which will increase local property values.Over the last several years the Internet has substantively changed the way Realtors and agents work. At the high end of the market, Realtors now serve a Client base that is worldwide and use of the Internet and world wide web (www.) is fast becoming the preferred advertising medium. Print advertising is pretty much relegated to the mid and lower end local marketing. Another reality is that the Luxury Realtor is now dealing with a savvy customer base which demands that their Realtor's real estate, business, internet, and market knowledge be even more sophisticated than they have been in the past. Hence the demand for specialization such as Lake & Luxury specialists is on the rise.
On the low end of the market what we see are Internet web sites competing to replace the traditional minimum service agent in the initial steps of the search and purchase process. Eventually it will be harder and harder for the generic real estate agent to compete with on line solution web sites and agents will become more transaction based than skill based. The third change we see taking place is the expanding use of teams lead by a professional business Manager / Leader, with multiple agents and assistant(s). By leveraging the competencies and knowledge of the Leader, the team operation generates a higher level of efficiency, business, and cash flow needed to support the higher levels of advertising costs for Owner Clients and longer and wider reach to attract Buyers to the Owner Clients listings. This trend will continue in the future and will lower the ability of individual agents to compete.

Lanier Luxury Homes Team News: Once again Pete Edwards' Lanier Luxury Homes Team was a Top Sales Team at RE/MAX! For our listing Clients this is just re-enforcement of our commitment that "We will show your property to more qualified Buyers than any Agent...Period!" And to our Buyer Clients that "We will find the properties that best fit your requirements where ever they are on Lanier!" If you're considering buying or selling or if you would like more detailed information about the Lake market, or an email or hard copy of the Report please call or visit us at www.LanierLuxuryHomes.com, or send mail to Pete@OnLanier.com
Pete Edwards: 678-549-2770 Owner, Lanier Luxury Homes