May 9, 2017

Setting A Tone For The Market

A report from the Kansas City Star. “Where dogs have long been part of the downtown scene in New York and many other big cities, they are relative newcomers, in large numbers anyway, to Kansas City’s urban center. Several downtown luxury apartments are now advertised as ‘pet friendly’ and offer amenities such as grooming, dog walking, play areas and even dog washing stations at a premium price.”

“Dan Thompson, owner of the Leawood-based dog day care, grooming and boarding business Dog Pawz leased a 12,000-square-foot building for his second location. The number of downtown dogs is growing with every new housing project, and he’s feeling good about the future. ‘We hope the bubble does not burst,’ he said.”

The Union Tribune in California. “Because REITs are publicly traded they offer a window into the San Diego rental market. Despite a good start to the year for many apartment-focused REITs, Aimco CEO Terry Considine said an increase in more apartments coming on the market could begin to affect the bottom line. ‘The supply of new apartments continues to increase and there are many markets where new lease rent increases have slowed or turned negative,’ he said during a conference call with investors.”

“Dan Castro, founder of New Jersey-based Robust Advisors, has worked for more than 25 years with REITs. He said the first thing he looks at is how the trusts are financed and then examines their earnings. Another important factor, he said, was how broad their portfolio is. Most of the REITs operating in San Diego have properties all over the United States. ‘If somebody is 60 percent in Southern California, if that market goes down, you’ve got a problem because you’re not diversified,’ Castro said.”

The Longview News-Journal in Texas. “Average rents for Longview apartments have fallen over the past year. Judy Harris has worked more than 30 years in the apartment management industry. She said keeping apartment units filled is not about reducing rental rates, but increasing customer service. ‘If you lower your rent, how will you raise them back up?’ she said. ‘You are setting a tone for the market when you do that.’”

“Like Longview, rents decreased year-over-year in Midland, Wichita Falls and Laredo. In Houston, rents were down 2.7 percent in the past year. Instead of dropping rent or offering free or $99 move-in specials, Harris instead offers discounts throughout a renter’s lease, she said. It’s a tool she says helps residents endure tough economic times without putting her apartment complex in financial hole. ‘We are very much a service industry because they have built so many apartment complexes,’ she added. ‘If they don’t feel like they’re home or they’re happy here, they will go somewhere else where they can be.’”

The Real Deal on New York. “Yikes! Not only did the city’s luxury residential market slog through the weakest start to May in six years, but the priciest unit took a $34 million haircut from its original asking price. The market saw 22 contracts signed at $4 million and above in the week of May 1 through May 7, which was the weakest start to May since 2011, according to Olshan Realty’s weekly market report.”

“But even more striking is the fact that the week’s most expensive contract, a duplex at the Time Warner Center asking $16 million, reduced its price by nearly 70 percent from the $50 million it had been asking when it hit the market in October 2013. The median asking price for a luxury home for the week was $6.65 million, with an average discount of 20 percent from the original ask. Luxury homes spent an average of 475 days on the market.”

The Miami Herald in Florida. “According to a new study by EWM Realty International, sellers lowered prices to propel sales of high-end condos in Miami-Dade in March 2017. Ninety-two condos costing over $1 million were sold that month — a 31 percent increase over March 2016. But only two of those units sold at full price. The median sales price of luxury condos in March was $1.47 million, and the average discount was almost 20 percent off the asking price.”

“Despite the increase in sales, though, Miami still has a luxury-home glut. According to data from the Southeast Florida Multiple Listing Service (MLS), 4,467 high-end single-family homes and condos were for sale on March 31 — a 124 percent increase over the same day in 2013, when there were 1, 996 listings. ‘There are more properties on the luxury market right now than we’ve ever had in history,’ said EWM president Ron Shuffield, who conducted the study. ‘When you have a stockpile of four years’ worth of supply of luxury condos, that’s too much.’”

“Real estate analyst Jack McCabe says he believes it will take some time for the current inventory to go down. ‘How many multimillionaires could there possibly be in the world, and how many of them haven’t bought in South Florida yet?’ McCabe said. ‘As new buildings are finished and hit the market over the next 18-24 months, the increase in inventory is going to surge. Already, you drive by these huge condo buildings at night and there are only 12 units out of 100 that have the lights on.’”