The Housing Bubble

A report from McKnight Senior Living. “An overabundance of unoccupied independent living, assisted living and memory care units means that billions of dollars in capital is not earning returns in the marketplace, Larry Rouvelas, principal of Senior Housing Analytics, and Kurt Read, principal of RSF Partners, told those attending the National Investment Center for Seniors Housing & Care Fall Conference in Chicago. Between independent living, assisted living and memory care, almost $20 billion in capital is not earning returns, they said. The growth of memory care communities has been an ‘impressive’ 44% over the past five years, going from 67,000 to 96,000 units, and more growth is coming, Rouvelas said.”

“But the number of vacant units increased during that time, too, from 8,000 to 18,000, he said., and 11,300 units are under construction. ‘If nothing else were built starting tomorrow … it would take over three years to fill up those units to 93% occupancy,’ Rouvelas said. ‘That’s about $3.6 billion of capital that’s getting a 0% return,’ Read pointed out. ‘That’s a sobering fact.’”

“The story is similar in assisted living and independent living, Rouvelas said. In assisted living, occupied units are up 13% in five years. It would take five years for the sector to hit 93% occupancy, however, Rouvelas said. ‘The number of empty units has grown, too,’ to 45,000, he said, and 20,000 units are under construction. ‘That’s over $9 billion of capital that’s not getting returns,’ Read said. In independent living, recent absorption has been 6,400 annually in the past two years, Rouvelas said. ‘There are 36,000 empty independent living units, with 17,000 more under construction,’ Rouvelas said. ‘And that would be about $7.2 billion in private capital in the industry,’ he said.”

The Daily Northwestern in Illinois. “The Park Evanston apartment building is being placed on the market in an effort to renovate the facilities, a move that could increase residents’ rents, said Ald. Donald Wilson (4th). The 24-story building, 1630 Chicago Ave., sits among many Evanston businesses and restaurants, including a Whole Foods. It also houses numerous Northwestern students who live off-campus.”

“Wilson said the increase in the number of proposals for mixed-use towers in Evanston is ‘reflective of the economic recovery in the county.’ However, NU’s new two-year live-in requirement coupled with an increase in the supply of rental units might weaken the market, Wilson said. ‘We have to be careful because we don’t want to put ourselves in the situation where you have a glut of properties,’ he said. ‘One wonders at what point the supply is going to overtake the market.’”

From LA Weekly in California. “The onetime magnet for the homeless has become, in the span of 10 years, a magnet for the young and wealthy, with median two-bedroom rents reaching $3,350 last year. Buoyed by South Park, the Old Bank District, and the Arts District, DTLA has become Venice East. But there’s been some grumbling that the dream downtown could be crumbling. Amid continued high rents regionwide, one of the hottest communities in the city for the young and prosperous has seen lease rates, in the assessment of Crystal Chen, marketing manager at rental listings site Zumper, flatten out.”

“Builders are responding with deals, including, in some cases, first-month-free leases and parking concessions, experts say. ‘The sheer amount of new apartments being built all at once and hitting the market all at once has caused a supply and demand issue,’ says CoStar senior market analyst Stephen Basham. Rents are being depressed as a result, he argues. ‘All of these buildings target wealthy renters, people making $80,000, $90,000 $100,000 a year and up,’ he says. ‘There’s only so many of those people out there.’”

“Indeed, Chen of Zumper says there has been a ‘lost of interest in the luxury housing market’ that’s also being seen in parts of San Francisco. It ‘leads to these expensive apartment buildings offering concessions like a month of free rent, cheaper security deposit, or a free parking spot,’ she says.”

“‘Developers, I think, are going to have to look at their pricing at some point,’ says downtown real estate agent Bill Cooper. ‘Every time you turn around a new building is opening and putting 500 to 1,000 new units on the market. We’re running out of people who can spend $4,000 a month on an 800-square-foot apartment. It’s not sustainable.’”

From San Francisco Curbed in California. “A long, hot summer has given way to a slightly cooler fall in San Francisco. Not in terms of weather but when it comes to the rental market. At least according to Zumper, which released its quarterly rent map displaying the median price of a single-bedroom apartment in San Francisco neighborhoods. A comparison to the same Zumper map from this time last year reveals that prices in each of the hot neighborhoods crept down from 2016. In fact, prices are down year over year in almost every neighborhood.”

From CBS Pittsburg in Pennsylvania. “For years now, cranes and construction crews have filled the skies of Pittsburgh as huge luxury apartment buildings have shot up in just about every city neighborhood. Places like Bakery Square in East Liberty, which have enticed scores of young professionals and tech workers to pay upwards of $1,500 a month on a single-bedroom apartment by providing services and amenities like a health club, a concierge and free Starbucks in the lobby.”

“Since 2012, more than 5,000 luxury apartment units have been built in the city. But after five years or torrid growth, the luxury apartment boom seems to have played out its string. ‘The supply has now outpaced the demand,’ said real estate expert Paul Griffith.”

“Experts like Griffith, of Integra Realty Resources, says there are now more units than new renters, and while some 1,300 more apartments are slated for construction next year, that should be the end of it. KDKA’s Andy Sheehan: ‘So the boom has ended, or it’s ending right now?’ Griffith: ‘I would agree with that. By the middle of next year, 2018, those units that are under construction will be complete and we’d expect to see a significant slow down at that point.’”

From KXAN in Texas. “A series of construction delays at an apartment complex is forcing hundreds of college students to jump from couch to couch or hotel to hotel. The residents were supposed to move into Pointe San Marcos apartments in August, but now they are being told they have to wait until the middle of October. Brianda Ramirez signed a lease with Pointe apartments earlier this year. The apartment is labeled as a luxury apartment building, with a resort-style pool and ‘the most over the top amenities.’”

“‘I’m living out of my car; I don’t know where most of my stuff is because it’s just been everywhere,’ Ramirez said. ‘I’m having to borrow things from people and having to ask if I can sleep at their apartment.’ KXAN did speak with Pointe apartments General Manager Mikkel Lopez who said he had no comment on the matter and referred us to corporate. We have yet to hear back from their corporate office.”

From Bloomberg on New York. “The asking price to rent a Manhattan apartment owned by Ivanka Trump has dropped by 30 percent since her father was elected president. The two-bedroom, two-bathroom condo at 502 Park Ave. was listed at $15,000 a month in November, according to StreetEasy. In February, it dropped to $13,000. The asking rent on Tuesday was $10,450, the website shows.”

“It seems that even the first daughter isn’t immune to pressures on Manhattan’s rental market, which is suffering from an oversupply. There were 7,497 apartments listed for rent in the borough at the end of August, 31 percent more than the monthly average going back to 2008, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.”