November 25, 2015

Some Figure Prices May Be Nearing Their Peak

A report from Bisnow. “The other real estate sectors may have picked up this year in North Texas, but, make no mistake, multifamily was still the darling of commercial real estate for 2015. Many deals are seeing several types of buyers competing for the same assets, and private investors and midsized companies are stepping up into bigger deals with the money they’ve made over the last few years. They’re taking that equity, buying bigger deals, upgrading their portfolios and taking advantage of the economies of scale, says Marcus & Millichap national multi-housing group senior director Al Silva. NOI growth has contributed more to appreciation in this market (especially Class-B and C space) than low rates have. Al’s marketing Villa Bonita, a Class-C apartment complex in Dallas. Between 2012 and 2015, that property went from an NOI of $530k/year to $900k/year, a 67% increase.”

“Al tells us there are still real value-add opportunities out there, they’re just harder to find. The market is not overpriced across the board, he says; just don’t expect the same frenzied growth forever. No one is building any new B and C apartments, and the rent growth is sustained across DFW, Al says. Just a couple of years ago, not everyone was convinced that major rent growth was sustainable here; now, everyone knows it and that has helped drive down cap rates. As a result, DFW is beginning to look more like gateway and coastal markets with investors expecting appreciation and rent growth.”

The Dallas Morning News in Texas. “The number of homes for sale in North Texas has inched up for the first time in more than two years. Agents sold 8,138 single-family homes in October in the more than two dozen counties included in the North Texas numbers. In October, 20,254 preowned single-family homes were listed for sale with real estate agents, according to data from the Real Estate Center at Texas A&M University and the North Texas Real Estate Information Systems.”

“Dr. James Gaines, chief economist with the Real Estate Center, said homeowners who are having houses built might also be putting their current homes on the market. ‘Some figure that prices may be nearing their peak and want to cash out,’ he said.”

The Daily Journal of Commerce in Washington. “Seattle’s rental market seems to be softening a bit as all those new units under construction start to have an impact. Billy Pettit, senior VP at Pillar Properties, said he’s seeing signs that demand is slowing down. Market analysts are still reporting 95 to 97 percent occupancy rates for Seattle properties, he said, ‘but when we call (the properties) they’re more like 92 to 94 percent on the high end.’

“Pettit was part of a panel discussing multifamily trends in the Puget Sound area. ‘The next 12 months will be really telling,’ said fellow panelist Chris Rossman, VP at Wolff Co. ‘We’ll see how deep demand really is.’”

“Panelists said there’s one product we won’t see much of anytime soon from local developers: condos. Claudio Guincher, president of Continental Properties, said he’s sold 88 of the 117 condos in Vik, a complex in Ballard that will be done in January. Guincher said he chose to do condos because Ballard was ‘awash with apartments.’ The units have been selling for $550 a foot, he said, and demand has been shallow. ‘Young workers don’t want to get bogged down with a condo if they switch jobs,’ Guincher said.”

Vegas Inc. in Nevada. “Las Vegas builders sold the fewest homes and pulled the fewest permits in months in October, a new report shows. And while business this year remains above 2014 levels, one analyst doesn’t expect ‘any notable improvement’ in demand next year. Builders also pulled 556 new-home permits last month, a ‘disappointing’ sum and the lowest monthly tally since January, Home Builders Research founder Dennis Smith wrote.”

“Smith noted that Las Vegas’ housing market faces a number of roadblocks, including stagnant incomes and high rates of underwater homeowners. These and other issues ’seem to be hanging around like an unwanted house guest,’ Smith wrote.”

The Wall Street Journal. “The prolonged slump in crude prices is rippling beyond the oil industry into areas of the North American economy that, until recently, had managed to avoid the worst of the downturn. Signs of that distress are spreading throughout once-booming oil-producing regions across North America. Sales of single-family homes in Houston fell 10% on the year in October, the first double-digit decline this year, according to the local association of real-estate agents. Restaurants in Texas and the Southwest have experienced a drop in revenue and customer traffic, industry tracker Black Box Intelligence said in a recent report.”

“The slowdown is being felt acutely by towns in western North Dakota, the heart of the Bakken formation. Newly built apartment complexes and hotels in the regional hub of Williston stand half-empty, victims of disappearing oil field work crews. Williston rents have fallen by half from their peak in 2013, according to a survey by a local apartment management association.”

“John Sessions, who co-owns a real-estate developer called Bakken Housing Co., said his Eagle Crest multifamily apartment complex in Williston opened in February, but is still at 65% capacity. ‘Two years ago, it’d have been full up in two months,’ he said. ‘Back then, you could write a business plan with premium rents more akin to Seattle or parts of New York City due to the dearth of housing and seemingly endless flow of inbound potential employees in the oil patch.’”

KGW Portland in Oregon. “The stars of an HGTV show are coming to Oregon next week, but they’re not coming to film. They will be here for a seminar to teach people how to flip houses for a big profit. Tarek and Christina El Moussa, of the show Flip or Flop, remodel run-down homes in California, and sell them for big profits. Their traveling seminar has been advertising on Facebook and Instagram saying you can ‘…learn how to flip houses in the Portland area for a profit without using your own funds.’”

“Scrolling through the hundreds of comments on a sponsored Instagram post, most go like this: ‘Stay out of Portland!! You’re preying on low income families and marketing to out of state buyers that are pushing locals out. You are not welcome!!’”

“There are six stops for this seminar from November 30 through December 5. It will make stops in Eugene, Salem, Portland, Vancouver and Longview. Some people on social media promise to picket the locations.”

Bits Bucket for November 25, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here: