The Housing Bubble

A report from Bloomberg. “As members of Congress in Washington debate raising the minimum required to obtain a U.S. immigrant investor visa from $500,000 to $1.35 million, concern about the hike has set off a scramble among wealthy would-be participants in China. China’s wealthy, using not-always-legal means to skirt capital controls to get their money out and at the same time gain residency in the U.S., are continuing to dwarf all others as the largest participants in the EB-5 program, despite heightened measures by the Chinese government. The initiative channels money to high-profile U.S. real estate projects from New York to Miami to California.”

“New projects recently doing the rounds in China’s chat rooms, web forums and hotel-ballroom investor seminars include a 5-star hotel complex in Palm Springs, California, and what’s touted as ‘the world’s tallest residential building,’ on New York’s 57th Street, known as Billionaires’ Row. Because Chinese individuals are limited to exchanging $50,000 worth of yuan a year, a 10th of what the EB-5 program requires, some agents are advising clients who don’t already have assets offshore to use a means nicknamed ’smurfing’ to move their money.”

“‘Our suggestion to the client is to open three to four personal accounts in the U.S. or line up three to four friends’ accounts, so they can split the money and wire it to different personal accounts without being put on a blacklist by the Chinese authorities,’ said a Shanghai-based real estate agent who gave the surname Dong. ‘It may require a trip to the States to do so to facilitate the process.’”

The Sparks Tribune in Nevada. “The revitalization of the downtown Sparks area will take another step forward this week when crews break ground on another luxury apartment community on the northeast shore of the Sparks Marina. The five story, 209-unit Waterfront at the Marina surrounds and incorporates an abandoned parking structure that has been vacant since 2008. The Waterfront will have water and mountain views along with an assortment of one and two bedroom models featuring high end amenities including an art fitness center, concierge services, business center, dog wash and park, roof top deck and secure parking.”

“‘There is nothing like this project in Northern Nevada,’ said James Previti, CEO of Guardian Investment Capital. ‘Five story elevator buildings and a secured parking garage are extremely expensive to build, and impossible for others to replicate. It will be the premier, high end community in the area.’”

From Philadelphia Magazine in Pennsylvania. “Our apartment-building engine continues to chug along. Signs of activity recently sprouted on two more construction sites: Pearl Properties’ proposed 32-story apartment tower at 1910 Chestnut, and Southern Land Company’s high-rise at 1911 Walnut. The only problem? Finding enough people who want to live in them. Welcome to the world of ‘post-millennial’ real estate.”

“Real estate services firm JLL noted that the flow of young professionals to Philly has already slowed — a problem when you consider the flood of apartments set to hit the market. In fact, a recent Center City District report says 4,167 apartments are under construction — more than double the 1,833 that came on the market in 2016. What’s more, 75 percent of these units are set to come on line this year — three times as many as the annual average since 2010. There’s a hope that If you build it, they will come — but what happens if they don’t? ”

The Grand Forks herald in North Dakota. “The Greater Grand Forks Apartment Association biannual vacancy survey released last week showed vacancies in the city are at the highest level they’ve been since February 2011, at 9.38 percent. ‘The market is turning into a renter’s market as opposed to a landlord’s market,’ said John Colter, executive director of the association.”

“With a complex market such as housing, it’s difficult to boil an outcome down to any one cause. But Colter speculates the record-high vacancy rates are tied to the large number of apartment developments springing up in Grand Forks over the past few years. Terry Hanson, executive director of the Grand Forks Housing Authority, said Grand Forks is at the higher end of the healthy vacancy rate. The rates as they are now, he said, will put downward pressure on the sky-high rents in town. Hanson said the rapid building of apartment projects was ultimately leading to this point. ‘It’s time to sit back and absorb what we have,’ he said.”

The Real Deal on Florida. “In the latest barrage to sell preconstruction units in a sluggish condo market, the Related Group is offering a slew of incentives at its Paraiso complex in Miami’s Edgewater neighborhood, The Real Deal has learned. The email also offers 30 percent deposits, rather than the usual 50 percent, which has been the standard among new condo developments this cycle. Commissions at Paraiso were already raised to 8 percent to 10 percent, depending on the tower, far above the original 5 percent.”

“Greater Downtown Miami, including Edgewater, currently has 21 towers under construction with 7,077 units. An additional 3,666 condos are currently on the market, representing resales, equating to 29 months of supply, according to Peter Zalewski, principal of Cranespotters. ‘A developer does not want to cut pricing, so what a developer will do first is raise commissions for brokers; second, eliminate or offer free maintenance; third is provide an incentive or credit for buildout of units; and the final step is reduce prices,’ Zalewski said. ‘So we are about halfway through the process when you have too many units and not enough buyers.’”

From Urban CNY in New York. “All you need to do is take a ride through various sections of our city and see construction. Not the typical Family Dollar, Dunkin Donuts, or Cell phone store, which has been our primary source of growth in neighborhoods, this is a housing boom. The most dramatic change came with the completion of Syracuse University’s Connective Corridor. Buildings are being converted into high-end residential as quickly as they can be acquired.”

“Buildings many of us have known for years as locations for business or industrial occupancy are now being transformed into glistening condominiums and apartments, towering over the crumbling infrastructure below. Massive apartment complexes have sprung up seemingly overnight. Miles away from campus, there are even more apartments and condominiums newly opened or under development.”

“Once these multiple projects are fully functional there could be a housing glut in the Syracuse area. Older rental units, more costly to operate housing will start to vacate, first to empty will be the uninsulated, poorly maintained rentals. Due to competition from the various housing options now available, university area property owners will no longer get top dollar for their older dwellings.”