May 5, 2016

No Building Is Immune To The Slowdown

A report from “Many upper-end renters are now actually seeing price cuts. But some housing experts believe the market could be arriving at a turning point where these discounts begin filtering down to the masses. It’s already beginning to happen in some of the nation’s hottest housing markets, where yesterday’s top-of-the-line buildings are dropping their prices to compete with the fresh, young properties hitting the market, creating a trickle-down effect. Rents have already begun falling in New York City’s Manhattan borough as a slew of newly constructed residential towers have shot up, dotting the skyline. Rents for the cheapest 30% of units fell 2.2% year over year to $2,258 a month, according to the Elliman report.”

“In wildly expensive San Francisco, rents also appear to be plateauing: The average asking prices have stayed steady over the past three quarters, reaching $3,620 in the first three months of 2016, according to Paragon Commercial Brokerage data. In Nashville, TN, renters haven’t been used to the kind of amenities now coming onto the market. The country music capital had about 24,000 new rental units in the pipeline as of the last quarter of 2015, according to the Greater Nashville Apartment Association. The group counted only complexes with 50 or more apartments. The monthly rents on two-bedroom, two-bathroom units above $1,500 fell nearly 3% to an average of $2,311 over the past six months compared with a year earlier, according to the numbers local real estate agent Michelle Maldonado pulled from the local multiple listing service as of April 17.”

“Builders’ rush to respond to Denver’s population boom has resulted in a glut of new buildings in the Colorado city’s downtown competing with one another as well older buildings for tenants. To lure residents, some of these new buildings are also offering incentives ranging from a month or two in free rent to $1,000 gift cards. ‘We’re building apartments faster than people are moving into them,’ says Cary Bruteig, owner of Apartment Insights. ‘The party is over,’ says Nancy Burke, vice president of government and community affairs at the Colorado Apartment Association. ‘There is oversupply.’”

“New residential high-rises in Boston are also offering sweeteners to fill their floors, say local real estate professionals. And they’re poaching tenants from the city’s stately brownstones, the area’s traditional luxury rentals, by offering doormen, elevators, and parking spaces. As a result, some of the older brownstone units are ‘taking a little longer to rent and we’re having to lower the prices a little bit,’ says Amy Goldberg, a Compass real estate agent in Boston.”

“In Houston, some newly constructed buildings have had the bad luck to be opening just as the local energy industry is suffering from lower prices at the pump, leading many residents to leave, says local real estate agent Greg Nino of Re/Max Compass. Rents are falling as homeowners rent out their properties—rather than sell at a discount. Nino says he’s seeing suburban prices start to fall 10% to 15%, depending on the neighborhood. ‘We’re saturated with so many properties for rent,’ he says.”

From Bloomberg on Florida. “Apollo Global Management LLC founder Leon Black is seeking a buyer for his condominium at Miami Beach’s Faena House, joining Ken Griffin and former Saks Inc. Chief Executive Officer Stephen Sadove in selling units at the just-opened tower that’s been a magnet for billionaires. The local luxury condo market is now cooling after a flood of new supply and a retreat of foreign buyers. Sadove recently lowered the asking price for his Faena House condo almost 11 percent to $12.95 million.”

“No building is immune to the slowdown, said Kevin Maloney, principal and founder of Property Markets Group, which builds condos in New York and Miami. ‘Everyone is reaching for the sky in terms of pricing — we’re all guilty of that,’ he said. ‘Billionaires don’t like to throw money away either, and overpay.’”

The Bakersfield Californian. “Am I the only one who suspects we may be experiencing a mini bubble in the housing market, or does hope spring eternal when you are selling a home? Look around in virtually any neighborhood and you will find a lot of inventory on the market, and many of these homes seem aggressively overpriced. Yes, mortgage rates are still attractive but when prices of $200 per square foot become the new average in this town, you have to wonder how long this will last.”

The Midland Reporter Telegram in Texas. “A new year brought continued decline to the combined Midland-Odessa metropolitan economies. Construction activity continued its downward trend in early 2016. Building permit valuations for the two cities were down 52.6 percent in March from the previous March and down 35.1 percent in the first quarter compared to last year’s first quarter. In Midland, March permit valuations plunged 81.1 percent from March 2015 levels and so far this year are down 55.9 percent compared to last year.”

“The construction downturn spread to new housing construction. Midland and Odessa issued 206 permits for new homes in the first quarter, down 26.7 percent from the same period a year earlier. In Midland, 106 new permits have been issued so far in 2016, down 43.3 percent from a year ago. ‘Until the cycle of contraction in the regional oil and gas industry is complete, the general economy of the Midland-Odessa metro area will remain under downward pressure,’ said Karr Ingham, the Amarillo economist who prepares the Midland-Odessa Regional Economic Index.”

The Detroit Metro News in Michigan. “What’s left of the old house at 3383 15th St. in North Corktown is the type of horror show that’s so commonplace in a city no longer fazed by overwhelming levels of post-industrial wreckage that anyone who lives here could easily fail to take note. The 15th Street rubble also shares a similar backstory with tens of thousands of other vacant structures and blighted properties citywide.”

“That part of the story is worth a look. As is typical, the person who owns the home isn’t a Detroiter nor anyone who appears to particularly care about its impact on the neighborhood. It’s one of 32 that Jimmy Lai, a billionaire media mogul in Hong Kong, bought at the 2013 Wayne County tax foreclosure auction, according to Loveland Technologies, a company that tracks Detroit’s parcels.”

“Like many investors — from places like Utah, Florida, France, and Oakland County — who charge at the annual auction for its doorbuster deals, Lai doesn’t appear to be spending much money beyond acquiring the properties, says Alexander Samul. The longtime North Corktown resident lives across the street from a Lai eyesore, which some residents have shortened to ‘Lai-sores.’ Samul met several times with Lai’s local agent — Ann Arbor businessman, conservative activist, and former Rick Santorum aide Joseph Cella — to talk about the blighted properties.”

“During their discussions, Cella said they intended to renovate the homes, but the city wanted Lai to pull permits and the idea got too expensive, Samul says, adding that the justification Cella offered up stunned him. ‘He said, ‘There are abandoned houses all over the city — who really cares?’”

“It’s generally agreed among those in the neighborhood that the Lai/Cella team overpaid from the start, dooming their effort to make any real money any time soon. And that’s why out-of-town speculators who view neighborhoods like North Corktown as a gold mine instead of a community are bad for the city, says Bill Cheek, who’s part of the North Corktown Neighborhood Association.”

“No one took a larger or more impressive haul away from the 2013 auction than Wendy Briggs. The Pontiac-based real estate agent snagged a collection of 428 properties scattered throughout Detroit and Wayne County for the bargain basement price of $379,000.”

“However, it appears Briggs didn’t consider secondary costs, and she’s hardly alone in that regard. She now owes $4.7 million in back taxes on the properties, and around 95 percent of those are headed to the 2016 tax foreclosure auction, records show. And the city already spent $229,000 demolishing some of her more blighted properties.”