What’s Undermining Residential Real Estate Values in the City of Johns Creek?

Johns Creek receives many accolades throughout the year, and 2016 has not been an exception to that trend.

For many residents, concern over ever higher densities of residential real estate developments such as apartments and town homes has been a major concern.  But the City of Johns Creek pushes ahead with ever more high density development with seemingly arbitrary lines drawn as to where the higher densities are permissible and where they are not.

Residents did not directly vote on these issues.  They only have cast votes for those that decide on these issues.  And as history has shown, there are not a plethora of voters that even bother to make their voices heard.  That, however is changing.

There is a cost to current residents as more and more of these high density developments are approved and put into place.

Let’s ask the residents of Johns Creek who were here in 2007.  Taking the data from the 2015 CAFR report (you can find it here:  http://www.johnscreekga.gov/JCGA/Media/PDF-Finance/2015-cafr.pdf ) on page 61 shows Johns Creek had a population of 70,050 and a residential tax digest (page 79) of $3,215,735,140.

A simple calculation reveals that in 2007 we had $48,727 of residential real estate per resident.

How have the residents of 2007 fared over the course of the last 8 years?  Well, not so well.  Using the population counts and the residential tax digest from the same pages mentioned above, we can see that residents of Johns Creek  have seen that number drop to $40,117 per resident, a decline of 17.67%.

Residential Property Value Per Capita
Year Residential Property Population
2007 $3,215,735,140.00 65994 $48,727.69
2015 $3,333,836,970.00 83102 $40,117.41
-17.67%
Source: Johns Creek CAFR 2015

Why are residents from years past seeing such a drop in values for their community at large over time? The drop in housing prices from the recession is behind most communities in our area and should certainly be behind us in Johns Creek.

I’ll blame that in large part to the additional higher density housing which has been added over the years and continues to be added even as we speak.

Those that move into higher density developments are those that are not buying the current real estate stock we have in Johns Creek.  Fewer buyers for that real estate naturally lowers the selling prices of the real estate.  Yes indeed, the supply and demand curve you had to learn about in high school and college is actually meaningful.

Additionally, all of this “new” higher density living is coming in at average price points below what the average homes in Johns Creek are worth.

So we have less demand lowering selling points and lower prices units pulling down the averages as well.

Also interestingly enough the amount of commercial real estate per resident is rising.

Commercial Property Value Per Capita
Year Commercial Property Value Population
2007 $691,897,960.00 65994 $10,484.26
2015 $879,818,130.00 83102 $10,587.21
0.98%
Source: Johns Creek CAFR 2015

So as residential property values fall per resident, commercial property values are rising per resident.

I doubt that has been the objective of many of the residents within our community.  Those that reside on Findley Road at City Hall are undoubtedly happy about this outcome, however.

After all, they are the ones who continue to vote and push us along this path of more commercial development and higher density housing.

 

 

 

 

 

Worsening Economic Conditions: Where’s the Growth?

Today’s GDP report paints a bleak picture.  GDP for the first quarter was revised down to 0.8%.  The second quarter of 2016 came out at 1.2%, and will likely be revised lower.

Here is what they also released, but are not talking about:

Corporate profits before and after taxes have also been revised back to the first quarter of 2013.  And it is bleak.

Remember that businesses do not go into business just to sell you goods and services.  They do so to sell you goods and services to generate profits.

Would you trudge off to work every day to earn less than you did last year? And less than you did two years ago?  Or would you make some changes? Continue reading

(*) Local Option Sales Taxes- How We Are Ripping Ourselves Off

Chances are, you have cast votes on more than one occasion to tax yourself via sales tax for education. traffic or other local projects.  Chances are, you, like many others, felt it was just a penny here and there, and chances are you bought into the notion that others from outside your jurisdiction would also be paying the tax, which is a win-win for all but those outside of your community.

tax dollars

And chances are, you’d be wrong. Continue reading

Play or Pay: How We Are Subject to TSPLOST Extortion

Cities in Fulton County are being held up at legislative gunpoint in Fulton County, Georgia, and if they do not play along with how the rules have been written by the State Legislature, their constituents will pay the price.

Cities within Fulton County (I live in Johns Creek) are required to either get on board with a Transportation Local Option Sales Tax (TSPLOST) or run the risk of having the TSPLOST passed in the fall of 2016, and their jurisdictions be subject to the tax and receive nothing. Continue reading

Why Aren’t You Getting That Raise?

Janet Yellen and the Federal Reserve Bank have a problem.  The economy is weakening by the most basic of measurements and yet, they have continued to tell us things are getting better.

The most basic of measurements of employee productivity clearly show otherwise.

The amount of profit earned after taxes annually per employee on behalf of businesses has fallen to a six year low.  For how long overall will American businesses attempt to expand if they are generating less profit per employee? Continue reading

Earnings Crush(ed)

Total Earnings by quarter Up Same Down $952.48 $972.31 $999.32 $983.51 $1,099.24
QTR Change % year over year 49.94% 810 45 767 -13.35% -10.39% -2.96% 3.52% 11.25%

Here’s the pivotal point I have been watching for on the economy.  Less than 50% of the companies listed in the Valueline Index made more money for their most recently reported quarter than they did one year ago.  And the steepness of that drop is severe.

For the most recent data I have, companies earned $952.48 on a per share basis.  That is down from the same period of a year ago of $1,099.24 on a per share basis.

The most recent quarter was also the worst of the last four quarters.

On average, the stocks made 13.35% less in income per share than they did one year ago.  This means that adding up all the stocks that made more than they did a year ago and all the ones that made less than they did a year ago, and the total is down a whopping 13.35%.

Do you think those businesses will be expanding for the rest of the year?  Or fighting for survival?

I have not seen this indicator of mine turn negative since the last recession.  It’s not a normal event, and it indicates that there is something wrong with this economy.

The regulatory and tax burdens faced by American businesses are crushing the bottom line.  Obamacare is crushing the bottom line.

The Federal Reserve, with rising fuel prices year over year, and low unemployment(thanks to a plethora of low paying part time waiter and bartender jobs) will have no choice to but to raise rates at least once more this year.

Those rate increases, which will affect the refinancing of the the debt that American corporations hold at record levels, will decimate the bottom line even further.

These are not one time or one off events.  This is the cost of doing business in the United States today.

Further compounding the bleak picture is the outlook going forward.

Dow 30 Profits Analysis 20160517

 

2012 2013 2014 2015 2016 2017 2021
Dow 30 Total Profits(millions) $347,711 $341,897 $351,263 $326,459 $319,660 $351,990 $469,760
Change $24,953 -$5,814 $9,366 -$24,804 -$6,799 $32,330 $143,301
% YOY 7.73% -1.67% 2.74% -7.06% -2.08% 10.11% 40.80%

Above is an analysis of the profits of the DOW 30 Industrials in total dollars earned.

The year 2015 was the worst  since the year 2011.  Adding icing to that cake is the forecast that 2016 will be worse than 2015.

The year 2017 will get us back to the performance we saw in the year 2014.  We have lost years of economic performance gains while the Federal Reserve Bank has constantly told us that we had an improving US economy.

Do the numbers in the table above appear to indicate that our economy has been improving?

Not even close.

The US economy is dead in the water, and is taking on water.  The forecasts for future years are way too optimistic in my view, and there is no economic stimulus available, other than reducing regulations and cutting taxes that will get this economy moving again in a healthy manner.

Prepare accordingly.

This Election Year Indicator Has Been Correct 9 Of The Last 10 Presidential Elections(and the 10th is Easily Explained)

We are seeing hundreds of millions of dollars spent on this year’s election. And a lot of money is being spent to predict what the outcome will be in the fall of 2016.

I have an indicator that has been correct 9 of the last 10 Presidential elections, and the 10th can be explained with relative ease: Richard Nixon and Gerald Ford.

Corporate profits after taxes, as reported by the Bureau of Economic Analysis has easily predicted whether or not the incumbent would win, and whether or not the party in power would hold that power going forward.

How is that possible?  Corporate Profits after taxes is an amazingly easy concept to understand.  It’s an overall look at just how the economy is doing.  After all, if companies are not growing profits, the people that work for these companies will experience the stress and duress of an unsteady economic environment. Continue reading

Corporate Profits: Continuing to Drop and Expected to Drop Even Further in 2016

FrownIt’s becoming harder and harder for the Federal Reserve to continue selling us on the idea that things are getting better and better.  One of my built from scratch spreadsheets shows the profits in total dollars for the Dow 30 Industrials.  The numbers continue to get bleaker for how 2015 really was, and now the forecast for 2016 is now showing that 2016 will be weaker than 2015.

Have a look at the following data, which I have completed updating today.  The outlook is not good.

Dow 30 Profits Analysis 20160408

We have actually given back five years of profit growth and are now back to where we were in the 2011 time frame.  Which makes me ask the question why are you paying record prices for companies that are earning what they did five years ago?  When will the price correction occur?  Your guess is as good as mine.  But when the stampede heads for the exits, you will wish you had already left the playing field.

At what point are we really going to admit that the US economy is headed in the wrong direction.  If things were better, there would be profit growth.  There isn’t.

Last evening the four living individuals who have headed the Federal Reserve and are still alive had gathered to discuss the economy in New York City.  There was a comment made by Bernanke that there is a 15% chance of a recession in any given year.  And he emphasized that there is not a greater chance of recession the longer you go between recessions.  The risk is still 15%.

Unfortunately his logic is wrong.  If you are in an economic situation where profits are falling, GDP is flat, and things are not getting better, you will indeed have a recession.

Corporate profits drop prior to recessions, not after they have officially started.  One day they may wake up.  Until then, I hope you are paying attention and are prepared for what is coming.

 

Corporate Profits-Dropping Faster Than Before The Last Recession

smiley-face

This is how the Federal Reserve and others want you to think of the US Economy.

Unfortunately, the only people that think the economy is like this are located at the Federal Reserve, and the media who continue to paint the rosiest of pictures.

The numbers behind the economic performance show that it  is anything but a big smile.

Quarterly Profit Detailed Analysis 201603018

Click Here To See the Quarterly Profits After Taxes By Quarter

How well do you remember the year 2007?  This was before the economy imploded before “The Great Recessions”.  At the end of the year 2007, Corporate Profits after taxes had fallen by 7.64% year over year, and for the fourth quarter of 2007, had fallen by 8.12% from the same quarter in 2006, indicating that things were getting worse.  But we ignored the signals this was telling us.  Why? Continue reading