The Housing Bubble

A report from the East Valley Tribune in Arizona. “Demand for rental apartment housing is on the rise in the East Valley and the rest of the metro region, buoyed by an increased desire for high-end apartments. Even older high-end apartment complexes are attracting investors because of the growing market interest. Despite the boom in class A apartments throughout the Valley, the industry is likely not at risk for a bust.”

“‘I do not think that there is the risk of a bubble in the apartment market,’ Mark Stapp, Fred E. Taylor professor of real estate at W.P. Carey School of Business at Arizona State University, said via email. ‘If anything, this is going to continue to be a tight market both for home sales and for rentals.’”

“‘The larger point about Maricopa County that is important to know and understand is that there are not many new (affordable) units at all,’ said Erika Poethig, Urban Institute fellow and director of urban policy initiatives. ‘They are either being upgraded to higher-end units or being demolished and replaced by high-end product.’”

“Quite simply, there is more money in producing luxury apartments. There is plenty of available capital for developers seeking to meet that demand brought by the boomers and young professionals with high incomes who are increasingly flocking to rentals. The same is not true for affordable housing. ‘It does not pencil out to build rental housing for lower-income Americans, because the developers cannot get the lower-cost capital (to build) housing at the rents that people (with low incomes) can afford,’ Poethig said.”

From the Boston Real Estate Times in Massachusetts. “Average Boston apartment rents declined in July for the first time this year, according to Axiometrics. ‘Job growth is exceptional for the market at 2.8% in June, so the demand for apartments is there,’ said Jay Denton, vice president of analytics for Axiometrics. ‘Occupancy is high at around 96%, but the amount of new supply coming to the market this year (7,545 units) increases competition for renters.’”

The Waco Tribune in Texas. “Baylor University leaders set a lofty goal 15 years ago of housing half the school’s students on campus by 2012. Though the benchmark hasn’t been met, school officials still see value in keeping students close. Jeff Doyle, dean for student learning and engagement, said Baylor officials don’t see unaffiliated off-campus apartment complexes as competition, partly because university housing offers a ‘different product’ with fewer amenities. ‘The (off-campus complexes) are competing mainly with each other,’ he said. ‘In my opinion, they slightly overbuilt. I don’t want them to fail, but they’ve built way more beds than Baylor has grown.’”

From Bisnow on Texas. “Austin does not rank among the markets with the biggest multifamily rent percentage increases, according to Abodo. Abodo’s Sam Radbil, an Austin native and Austin condo owner, does not have to run the numbers to see the Austin multifamily market changing. He lives through the trends not necessarily reflected in Abodo numbers. He sees the scale in the rental market beginning to tip from a landlord’s market to a renter’s market.”

“When Radbil first bought his condo on Congress in 2010, it commanded $1K a month in rent. Since then, Austin became the nation’s crane capital, and rent steadily rose to $1,500 a month. Now Radbil, who currently lives in Chicago, is finding it hard to get that $1,500, given the new projects that have come online. ‘Supply and demand is evening out,’ Radbil said. ‘Five years ago, a landlord could have asked $1,600 and the renter would take it. They had no choice. All the leverage was with the landlord,’ Radbil said. ‘There’s not so much of that anymore.’”

From The Inlander in Washington. “In the tussle between the landlord and tenant, a low vacancy rate hands extraordinary power to the landlord. One Zillow sale listing this spring even referred to a ‘fixer upper’ West Central duplex rental with long-term tenants as a ‘cash cow,’ advertising that ‘repair and maintenance can be deferred’ because of the ‘extremely low vacancy’ rate.”

“The good news? The fact that it’s so much easier to make money on rental units right now is driving developers to finally build a lot more of them. More than 1,900 apartment units were built in Spokane County in 2015 and 2016, according to a tally from Valbridge Property Advisors. That number is only growing. As of this April, more than 2,100 new units are permitted and under construction — and nearly 2,200 more have been proposed.”

“That’s what’s supposed to happen: There’s a high demand for a product, that product gets expensive, and so investors climb over themselves to offer more of it. Eventually, that drives down prices.”

From Fox 5 Vegas in Nevada. “Hundreds of University of Nevada, Las Vegas students found out over the summer that the apartment complex they were supposed to live at this upcoming fall semester wasn’t even finished being built yet. Student Nick Hull said he was excited to live at The Degree apartment complex on UNLV’s campus but started to get worried earlier this year that the project wasn’t going well. ‘I lived on campus last year in the dorms. I was always going past the building,’ he said. ‘You could see it wasn’t going up.’”

“So far, The Degree doesn’t look anything close to the renderings posted online of the what the finished product is supposed to look like. Students said they couldn’t wait to hang out in the luxurious pool and live so close to their classes. Some of them said they left positive ‘five star’ reviews online because of a promotion. Others said they were required to leave fake reviews.”

“‘I used to work there,’ Maya Dendy wrote on Facebook. ‘We had to write reviews to get ppl excited about it… the layout was nice tho.’ ‘I worked at another asset campus housing place and we swapped reviews,’ Christian Kelly wrote. ‘So it was a fake review,’ he said. ‘Isn’t that kind of shady?’”

“At least five people told FOX5 that their positive review was fake. Many others, who still work for Asset Campus Housing, refused to respond. ‘The Degree of excitement I get from The Degree is unreal,’ Jacob Kiker wrote in his review, despite listing on Facebook that he works as a leasing agent at a different property owned by Asset Campus Housing.”