June 23, 2016

It’s Astounding How Universal It Seems To Be

Insider Louisville reports from Kentucky. “Ok, pop quiz! (applause) First question: In what month were Louisville homes selling the fastest? You guessed it, May! Second: What month had the lowest absorption rate in Louisville real estate history? Yes, again it’s May! How about a trick question? Since January 2006, which month had the highest median home sale price? Drat! You guys are smart. The answer here is also May 2016. Can you believe this stuff? If you walk up to the next real estate professional you see and ask them, ‘How’s the market?’ you’ll likely be met with a pregnant pause while they gather their thoughts, stridently searching for words to accurately describe what in the world is going on right now.”

The Seattle Times in Washington. “The building boom sweeping downtown Seattle is hard to miss, between the jostling cranes, giant holes in the ground and construction crews closing down streets. But new data shows just how intense things have gotten — and how much more is still yet to come. There are currently 65 major buildings under construction across downtown, South Lake Union and surrounding neighborhoods, more than at any point since the figures were first tracked in 2005, the Downtown Seattle Association said in a new report. The previous midyear high was 50 buildings under construction in 2014 and 49 last year.”

“And the frenzy isn’t set to end anytime soon: Most of the structures will take until next year to finish, and there are dozens more in the pipeline set to start in the next year and a half. About two-thirds of the project are residential. The number of housing units under construction downtown has also hit a new high since 2005. ‘There is a ton of development on all fronts,’ said Don Blakeney, a vice president for the downtown group.”

The Washington Post on Virginia. “Arlington County, which last year approved construction of a record 3,747 rental apartments or condominiums, has given the green light to build about 1,900 more so far in 2016. David Howell, executive vice president and chief information officer at the real estate firm Mc­Enearney Associates, said he sees no indication that residential units are being overbuilt in Arlington and other close-in communities. ‘I don’t think we’re there yet,’ he said. ‘Millennials are slowly coming out of mom and dad’s basement, and the first rental or purchase tends to be in these apartments and condos. There’s an enormous pent-up demand.’”

The Charlotte Business Journal in North Carolina. “One Charlotte City Council member stopped just short of mentioning an apartment moratorium during the public hearing portion of Monday’s zoning meeting. Though pausing new multifamily development in Charlotte wasn’t the focus of her comments, LaWana Mayfield, who represents District 3, said council and city staff needed to more closely examine the repercussions of proposed multifamily projects.”

“Tens of thousands of apartments are being developed or planned across Charlotte. But while demand is high, with low vacancy and high absorption rates, many have wondered when the boom will end. ‘If you notice where this project is located, it’s almost diagonal from Brookhill,’ Mayfield said. ‘You have a community that has been predominately lower-income (and) minority.’ In the wake of new development, she added, lower-income residents are ‘continuously being displaced.’”

The Wall Street Journal. “An annual report from Harvard University’s Joint Center for Housing Studies, the State of the Nation’s Housing, reveals that even while the housing market begins to recover and regain solid footing, large parts of the country are being left behind. Middle-income families are increasingly losing ground, facing housing affordability challenges that were once largely limited to the poor. One reason middle-income renters are struggling to find an affordable apartment: Developers are catering to a growing number of affluent renters.”

“While newer rentals have always commanded higher prices than older units, the premium for new apartments has risen sharply, the Harvard report finds. The median asking rent for new apartments built in 2015 was $1,381 per month, more than 70% higher than the overall median rent. The rent premium for new studio apartments was even more stark, at 90% above the overall price for a studio. ‘It is just astounding how universal it seems to be’ that the majority of new rental apartments in cities across the country are at the high end, said Chris Herbert, managing director of the Joint Center for Housing Studies.”

From National Real Estate Investor. “Tens of thousands of new apartments are now opening in central business districts (CBDs) around the country. Some will have a hard time finding residents. ‘There’s a lot of angst about downtown apartments right now,’ says Jay Parsons, vice president for apartment market intelligence firm MPF Research. ‘The real challenges will come in the next 12-18 months as supply further accelerates in downtown sub-markets across the country. Anyone who subscribes to the idea that downtown sub-markets offer a higher barrier to entry is holding onto outdated conventional wisdom. It hasn’t been true for a decade.’”

“In downtown sub-markets, the number of apartments is growing at a furious rate of 5.0 percent a year, on average. ‘That’s a huge number—particularly given that downtown areas are, by definition, smaller and more confined areas,’ says Parsons. ‘That means you have new apartments within walking distance of a ton more new apartments.’”

“Prices for apartment properties in CBDs have risen much more strongly than prices for suburban apartments, which helps explain why developers are eager to build downtown. Prices for downtown properties rose nearly 450.0 percent from 2000 to the end of 2015.”

“Prices also rose for suburban properties, but not nearly as much. And the more suburban locations resembled a downtown, the more price growth they experienced. Prices rose nearly 300.0 percent for suburban apartments in ‘highly walkable’ areas, close to 250.0 percent in ’somewhat walkable’ areas and just 200.0 percent in ‘car-dependent’ suburban areas, according to MPF.”

The Miami Herald in Florida. “It’s a trend that can’t last forever: Home sales in Miami-Dade County are falling, but prices are still going up. Total existing home sales slid to 2,435 in May, down 10.4 percent annually, according to data from the Miami Association of Realtors. Single-family homes — down 7.2 percent — fared better than condos, which fell 13.3 percent. (Existing condos are competing with a glut of new luxury construction.)”

“That makes sense, experts say. For now. ‘Historically, even after there has been a noticeable change in the market, home prices continue to increase for six to 12 months despite the shift in supply and demand,’ said Jack McCabe, a real estate analyst. ‘If you see a big change in the real estate market, it takes a long time to sell. It’s not like stocks or commodities.’”

“Sellers are already starting to respond, especially in the luxury market, said Ron Shuffield, president of EWM Realty International. About 37 percent of Miami-Dade listings over a million dollars have seen price reductions since Jan. 1, according to research conducted by EWM. ‘We’re seeing a lot of people reducing prices as inventory goes up and sales go down,’ Shuffield said.