February 13, 2017

Fear Of An Overheated Market Hitting The Wall

A report from the Winthrop Transcript in Massachusetts. “The real estate market showed median home sale prices go up anywhere from 8-21 percent in the Revere, Winthrop, Chelsea, East Boston, Everett and Lynn. Jim Polino of Highland Real Estate in Winthrop agreed that East Boston is hot. The public is coming around to realize that East Boston is part of the city. The spillover to Winthrop and Revere is part of the Boston boom. ‘The millennial are buying heavily,’ Polino said. ‘High income and low downpayment. It’s all a function of the economy.’”

The Boston Globe in Massachusetts. “The apartment building boom looks to be taking a break in the Boston suburbs. After a surge of construction earlier this decade, the number of permits issued for multifamily housing in the cities and towns that ring Boston dropped off steeply in 2016. In the 29 municipalities that ring Boston, permits for multifamily buildings — those with at least five units — dropped an estimated 53 percent in 2016 over the previous year, according to an analysis of US Census data by the Boston Foundation. Most cities and towns in and around the Route 128 corridor, where demand is greatest, experienced significant decreases, compared to 2015.”

“‘I’m not quite sure I’d call it a downturn quite yet,’ said Marc Draisen, executive director of the Metropolitan Area Planning Council. ‘Our production numbers are not bad; our permit numbers are not bad, historically, but I’m worried that we’re at the top [of the market] and we’re going to start slowing down production before we have met demand.’”

The Tennessean. “The pace of commercial development in Nashville has been challenging to keep up with. Some worry the pace of development has outrun the momentum of demand. There is fear of an overheated real estate market hitting the wall as Nashville becomes overbuilt. The number of new apartments built or being built in Nashville is stunning. As of late last year, there were some 12,000 apartment units under construction both in the urban core and in suburban areas. With that many units set to be delivered in a compact time frame, we can’t avoid some level of temporary oversupply. That will lead to some short-term softness in the market.”

“We’re already seeing this play out as some newly constructed apartment projects are offering concessions like three months free rent to attract new residents. I don’t believe our real estate market is at the bubble stage getting ready to burst. It’s more likely to gently contract.”

The Washington City Paper. “In a competitive housing market like D.C.’s, lease incentives such as one month’s free rent or a reduced security deposit can entice potential tenants to commit to a building. But at a new 45-unit, light-filled development in Trinidad, the owner is offering different kinds of carrots: $1,000 to a tenant’s charity of choice—plus a complimentary trip to Cuba—when a person signs a lease. Until March 1 and while apartments are available, that is.”

“Ditto Residential officially opened Hendrix, a multifamily project filled mostly with two bedrooms earlier this month. As of Wednesday, according to a spokeswoman for the firm, four leases had been executed at the property. Prices range from $1,515 a month for a studio to more than $3,315 a month for a three bedroom. Nicola Y. Whiteman, senior vice president of government affairs at the Apartment and Building Association of Metropolitan Washington, says the swath of luxury real estate in the District is leading developers to be creative. ‘We are likely to see more of these offers surrounding the amenity-rich housing to which millennials are attracted, and this is the same demographic that so many developers are competing for,’ Whiteman continues.”

The News Review in Oregon. “Driving through Roseburg’s Mill-Pine District, it seems like every other house has boarded-up windows, lawns overrun with weeds and sinking roofs layered with moss. The historic Mill-Pine District is nestled between downtown Roseburg and the South Umpqua River. Most of its homes were built in the early 1900s and are distinctively American Craftsman: low-pitched gable roofs, spacious porches, tapered columns. The types of homes people in Portland are scrambling to snatch up for hundreds of thousands of dollars, cash in hand.”

“Abandoned properties, sometimes called ‘zombie homes,’ make the Mill-Pine District less appealing. They sit vacant for months, sometimes years. These abandoned homes and many others peppered around the county and state are lingering ghosts of the nation’s 2007 financial crisis. ‘At one point, in about 2010, there were so many that (banks) started withholding some homes from the market,’ said Victoria Hawks, a Roseburg Realtor. ‘And that’s why we ended up with problems further down the road.’”

“Douglas County is not alone in the vacant and abandoned home issue. Portland City Council decided to speed up the foreclosure process for five homes last year, after it voted to use eminent domain to foreclose on them, reads an Associated Press article from June 2016. The mayor has his eye on another 25 to 30 houses.”

“Hawks, who was a Roseburg city councilor until last month, said there might be some unintended consequences if Roseburg used a similar tactic. ‘I don’t think they would want us to flood the market again with less desirable homes at cheaper prices, which then turn around and make other homes worth less,’ she said.”

“The county’s abandoned homes, no matter how derelict they become, will eventually get on the market and they will get multiple offers, she said. That’s because the housing market is tight, even in rural Douglas County. ‘They aren’t just left forever, it just feels like forever those first few years,’ Hawks said.”