December 7, 2016

The Boom Times Are Quieting To An Echo

A report from the Seattle Times in Washington. “At $750 a month, a new apartment opening in the University District is one of the cheapest in Seattle. So what do you get for that price? A room the size of a parking space with a toilet that’s not even behind its own door. The landlord for a congregate housing building opening on Seventh Avenue Northeast recently posted an ad online searching for tenants, and it was widely circulated this week in a Reddit post that referred to the room as a ‘prison cell.’ The ad features a 130-square-foot ’studio’ that contains a sink, shower and toilet. The entire space is in one room: The toilet and shower are open to the rest of the living space. There is no kitchen.”

“The rent is $750 a month, plus a $1,000 deposit, and includes access to a congregate kitchen area and free utilities. For perspective, just seven years ago, $750 got renters the average University District studio, according to Dupre + Scott Apartment Advisors. And the typical studio in the neighborhood is more than three times bigger than the one featured in the ad, and has a shower and toilet in a separate room called a ‘bathroom.’”

The Washington Post. “For the second time this fall, average monthly rents declined in the Washington area in October, according to Axiometrics, a provider of data on apartment and student housing market trends. ‘An employment base where one in five jobs is in some level of government does tend to have a stabilizing effect on the overall D.C. apartment market,’ says Nick Fitzpatrick, a real estate analyst with Axiometrics. ‘However, as we saw in 2013 with the budget sequestration, there are times when that can work against the D.C. apartment market.’”

The Miami Herald in Florida. “Repeating a strategy from the last time Miami’s luxury home market cooled down, the Related Group — South Florida’s biggest condo builder — is announcing plans for two new residential projects in Mexico. South Florida’s condo market has had a rough year thanks to a grueling election season and a strong dollar. Developers including Related have delayed, suspended or canceled new projects in the absence of foreign buyers. Sales for existing condos in Miami-Dade County fell 30 percent year-over-year in October.”

“When the housing market crashed in 2008, many developers bought land and built projects in more stable markets abroad, hoping to weather the downturn until the United States recovered. ‘We’ve always been doing projects in Latin America and most of our buyers are in Latin America,’ said Carlos Rosso, head of Related’s condo division. ‘When things start slowing down here, we do more projects in Latin America.’”

From SF Curbed in California. “The consulting firm Beacon Economics assessed the state of the Bay Area’s financial bearings on Monday. They conclude that the boom times are quieting to an echo, thanks in part to housing costs. Oh, jobs are still on an upward trend. But they’re smaller gains than they have been, with even shrimpier returns projected for the near future, somewhere between one and one and a half percent.”

“Meanwhile, the Beacon analysis points out that ‘a mere 13% of San Francisco County residents were able to afford the monthly payments on a median priced home.’ Actually, that might even be a slightly generous assessment. The California Association of Realtors projects that you need to be making about $252,000/year to afford a home in San Francisco. The Census says the city’s median income is just over $92,000. (Although admittedly the mean is much higher: $134,000.) ‘As the rising cost of living in the area chips away at wage advantages, net migration is expected to dramatically decline over the next few years,’ writes the Beacon team.”

“Of course, you can rent for about half of what CAR estimates is the monthly cost of a standard SF mortgage ($6,310).”

The Whole Thing Is Sad!

A report from Bisnow on New York. “The supply flood and Millennial masses heading to cheaper fringe areas are causing rents to noticeably dip and condo/townhouse sales to soften. Leslie J. Garfield & Co real estate advisor Ravi Kantha said this pushback should’ve been expected as Brooklyn townhouses are being listed for the same prices as Manhattan luxury condos. ‘If the value’s no longer there, only the people who really want to live in Brooklyn will pay those prices,’ he told the crowd at Bisnow’s Brooklyn’s State of the Market.”

“He said companies, including his own, need to readjust their expectations. Toll Brothers City Living president David von Spreckelsen said his firm’s already done so, focusing on a delivering condos worth $2M or less.”

From Crain’s New York. “Buyers at Manhattan’s tallest ultra-luxury condo tower are getting discounts worth millions, a sign of the times in a market that’s swamped with costly homes. At 432 Park Ave., buyers who signed contracts and completed those purchases this year got price reductions averaging 10%, according to an analysis by appraiser Miller Samuel Inc. In one of the most recent big transactions to close, a penthouse on the 88th floor sold for $60.9 million, a 20% markdown from what developers initially sought, city property records made public Dec. 2 show.”

“As new high-end projects mushroom across the skyline, developers of ones that came to the market earlier are cutting deals to unload units before competition gets even more heated. Sales at 432 Park, a 1,397-foot tower on 57th Street off Park Avenue, started in 2012, when the building was just an idea on paper. Now, with construction finished, purchases are able to close and the developers are highlighting that, along with price cuts, as ways to seal a deal with buyers who have many choices.”

“‘It think it’s smart,’ said Jonathan Miller, president of Miller Samuel. ‘This is a recognition of the product that’s coming up behind this one.’”

“The building isn’t the only recently completed ultra-luxury tower that’s lowered prices. A few blocks away on 57th Street, a 4,193-square foot apartment at Extell Development Co.’s One57 sold in October for $21.6 million, or 24% off the last asking price, according to listings website StreetEasy. Discounting is also happening at Manhattan projects that are still under construction. ‘Every building is implementing some some sort of negotiability,’ Miller said. ‘It’s a sharp change from peak new development in 2014, when there wasn’t that opportunity for buyers.’”

From Vanity Fair. “One of the more ghostly, lonely things about modern New York City is that many of the luxury apartments tumored across Manhattan are bought and paid for with millions of dollars, and yet they lie empty. Whole towers of massive duplexes, owned yet unoccupied, vanity purchases made by Saudi billionaires and Russian oligarchs that were never meant to be lived in. They’re simply equity, or bragging rights. Hell, there’s a whole hideous quarter-mile-high totem to this practice currently destroying the city’s skyline.”

“It’s just a fact of New York City that oftentimes rich people buy apartments that they never live in. Even celebrities do it. Celebrities like Leonardo DiCaprio. Yes, the FernGully to our collective There Will Be Blood purchased a Manhattan apartment in the East Village—a home for ‘wellness’ endorsed by Deepak Chopra—in 2013 for $10 million, and yet never moved in. Now he’s sold it at a loss, for $8 million. He lost $2 million on the deal! And he never even lived there. Isn’t that sad?”

“It’s sad for DiCaprio’s bank account, of course. It’s sad for Deepak Chopra. It’s sad for the free parking space DiCaprio was given, to park his ‘$100,000 Fisker Karma hybrid,’ according to Page Six. If anyone had any idea what a Fisker Karma hybrid is, then I’m sure we’d find something sad there too. The whole thing is sad!”

From Mansion Global. “Colin Kaepernick is back in the news, although this time it has nothing to do with the National Anthem: The San Francisco 49ers quarterback has bought a Tribeca condo and is selling off his San Jose home. Mr. Kaepernick quietly bought the two-bedroom apartment in luxury development One York for $3.21 million in July under a family trust, Mansion Global has learned.”

“Mr. Kaepernick’s new apartment, at 1,733 square feet, is only a fraction of the size of the mansion he’s now selling in San Jose, a 4,569-square-foot house in San Jose’s Silver Creek neighborhood. He announced through the team that he’s listed the mansion for $2.895 million. According to the listing, the property benefited from a $300,000 renovation, presumably by the 29-year-old athlete, who moved in two years ago. Mr. Kaepernick bought his San Jose home under a family trust for $2.7 million in 2014, according to property records.”