August 31, 2016

More A Picture Of The Past Than The Future

News OK reports from Oklahoma. “Renters are feeling the heat of Oklahoma City’s hot apartment market. Vacancy is generally stable, with even temporary softness from new construction around Quail Springs Mall and in Moore being absorbed into metro-area stats about as soon as new units are being absorbed by the market, according to ARA Newmark. Midyear figures from REIS Inc. show apartment rents rising faster here than in any other market in the Southwest and at a rate that is 13th highest in the country, ARA Newmark said in its second-quarter report directed by Tim McKay, senior managing director in Oklahoma City.”

“Multifamily property has lost none of its shine as an investment, the firm said, taking a long view: ‘Strong buyer interest in multifamily product continues. An affordable market coupled with low interest rates clearly affect the demand, and more equity than ever is looking for deals.’ And a broad view: ‘Foreign capital is pushing buyers to the Midwest in search of higher yields.’”

“And, for investors especially — as well as those who can afford to see past their own bills to the general health of the economy (you know who you are) — a sanguine view: ‘In terms of sales, cap rates (returns on investment, basically) have never been lower (but that’s because the quality and price of investment are high), and prices per unit are still setting records. The diversity of the economy is evidenced by the resilience of the multifamily market.’”

The San Francisco Chronicle in California. “Two new studies confirm that Bay Area rents are softening, after years of double-digit increases. The San Francisco metro area saw average rents decline year over year for the first time in more than six years last month, according to a survey by Dallas research firm Axiometrics. ‘Things are definitely slowing down,’ said Benjamin Scott, founder of Advent Properties, which manages rentals in San Francisco and the East Bay. ‘We are seeing a lot of concessions … especially in SoMa, where there has been a glut of new apartment properties coming online at once.’ Those concessions, such as reduced deposits or a month of free rent, ‘are reverberating’ throughout the city.”

From ABC Action News in Florida. “Local landlords are increasingly being replaced by big corporations, like national real estate investment trust (REIT) Waypoint Homes, which owns 30,000 houses valued at nearly $7 Billion nationwide. But local tenants tell the I-Team that bigger isn’t always better, as they struggle to get things fixed and to keep up with rising rents. The Better Business Bureau gives waypoint an ‘F’ because it has a high number of unresolved complaints.”

“‘Anytime you have a landlord who’s not responsive, you’re gonna have a major problem,’ said attorney Kirk Eason, who has sued Waypoint on behalf of multiple clients. ‘Mom and pop, they would want to fix it, because it was their asset. But when someone just buys it from a foreclosure auction or they buy it from bankruptcy, they have very little into it. They have very little motivation to fix these things, because it’s a profit machine instead,’ Eason said.”

“Waypoint’s most recent financial report shows revenue grew 6.3 percent over the same period last year and the company had a 95 percent occupancy rate. The list of local unhappy Waypoint tenants is long. Shaun Fedoris moved out of this Palm Harbor Waypoint home, after an outdated air conditioning system cost him thousands. ‘The electric bill was through the roof. It was over $500 a month,’ Fedoris said. ‘There’s a lot of places out there that are a lot cheaper.’”

The Village Voice in New York. “Forget Biggie — the real soundtrack of Brooklyn is the din of construction, reverberating up and down Flatbush Avenue as luxury condo after luxury condo springs from the ground like brushed steel weeds. But developers are starting to realize that they may have overshot their mark. The Times reports that the incredible boom in new apartments has finally saturated the market, forcing landlords to offer rent breaks and deals as a means of luring potential tenants.”

“Jonathan Miller, the president and chief executive of real estate consulting firm Miller Samuel, says the issue isn’t too many units generally, but too many that cater to the market’s upper end, above $3,500 per month. ‘The problem is that there’s a mismatch between what we’re building and the jobs we’re creating,’ Miller said.”

From Houston Public Media in Texas. “A report by apartment search website RentCafe finds 95 apartment complexes have already opened or are slated to open this year, for a total of 26,000 new units in Greater Houston. But that may be more a picture of what happened in the past than the future. ‘A lot of these projects were on the drawing board in 2011, 2012, 2013, when the economy was still booming, when we were creating 80,000, 90,000, 100,000 jobs a year,’ said Patrick Jankowski, regional economist and vice president of research at the Greater Houston Partnership.”

“He said job growth here has slowed to a trickle – in large part due to the oil slump – and the demand just isn’t there anymore. ‘From January ’13 to July ’16, we actually added 65,000 apartment units to the market,’ Jankowski said. ‘We are already overbuilt in apartments. There is already an apartment glut, and it’s only going to get worse this year and next year.’”