The Supply Surge Is Becoming The New Normal
A report from Bisnow on Virginia. “The Fairfax County submarkets of Reston and Tysons, both emerging areas boosted by the opening of Metro’s Silver Line, have pipelines full of new apartment construction. Several top developers at Bisnow’s Fairfax County State of the Market, worried they might be building too many rental units. JBG Smith Executive Vice President of Development Greg Trimmer said apartment rents in Reston are flat, and in some cases slightly negative, due to the amount of new multifamily construction. But he said the problem is worse in Tysons, where millions of square feet of development is underway around its four Silver Line stations. ‘In Reston we’re a little sick, but Tysons is in hospice in terms of the glut of apartments,’ Trimmer said. ‘They’ve way overbuilt.’”
“Also at the Wiehle-Reston East station, Bozzuto recently delivered Aperture, a 421-unit apartment building. Bozzuto Senior Vice President Mike Henehan said Reston is not alone in welcoming a glut of new apartment buildings, and said the supply surge is becoming the ‘new normal’ across the region. Still, he said Bozzuto has achieved annual rent increases of 1% to 1.5% across its Reston portfolio.”
“MRP Realty principal John Begert said he is optimistic about the area’s future, but does not expect to see notable rent growth in Tysons over the next three to four years, making it difficult to underwrite new apartment projects. ‘If you’re a family office or you have patient capital, in 10 to 12 years you’re going to love it,’ Begert said. ‘But to try to see legitimate rent growth soon, I think you’re kind of fooling yourself.’”
The Miami Herald in Florida. “According to a mid-2017 market study released by the Miami Downtown Development Authority (DDA), rent prices are stable, development is being balanced with demand and financial institutions have raised their requirements for loans — all indicators that the city’s downtown area is on stable long-term footing. Overall, the volume of condo sales was down 50 percent from the previous two years. According to Cranespotters.com, more than 3,600 existing condo units are currently on the market in the downtown area — a 26-month supply (six months is considered the ideal amount of inventory).”
“In other words, it’s a good time to buy. ‘Asking prices are steadying out, and with that kind of inventory on hand, now’s the time to look and find a motivated seller,’ said Chris Zoller, a Realtor at EWM Realty and 2017 chairman of the Miami Association of Realtors.”
From Greenwich Time in Connecticut. “On the surface, Greenwich’s high-end housing market seems to be staging a comeback. These favorable numbers portraying a market on the upswing surprised Jackie Hammock of Coldwell Banker’s Greenwich offices while completing her own third-quarter market report. ‘I started my analysis feeling like the market was terrible in the third quarter, yet when I looked at the overall numbers, everything was good,’ she said. ‘Based on my listings and meetings I’ve been in, it seemed like fewer people were walking around to showings and stuff; yet sales showed the average price was up for the quarter and up for year-to-date,’ Hammock said. ‘So I started digging to see what’s going on.’”
“Hammock said she found 11 homes in the third quarter that sold with ‘huge reductions,’ she said. ‘The more I got into it the more it screamed out to me. Some people were at the point that they had to dump the house.’ An extreme example includes a home on Upper Cross Road for which its owner paid $13.5 million in 2012, according to Greenwich property records, but it closed for just $7.5 million in September. Another property on Lake Avenue was originally listed for more than $10 million, according to Hammock, but it closed for several million less.”
“We did have big sales that pulled up our stats, but it’s when you look at what’s underneath that it’s not as fine,’ she said.”
“Sellers who unloaded their homes for less than they originally listed it, or maybe even bought it for, represent the trend that sellers are finally ‘more willing to meet at market price,’ said Peter Janis of Berkshire Hathaway N.E. Properties. From his experience, many of them ’say ‘It is what it is,’ and move forward because they’re looking at it as a business transaction. They take a loss and move to the next thing,’ he said.”
“While the number of Greenwich homes sold in the third quarter fell by almost 24 percent when compared to last year, an array of high-end sales helped raise the average sale price for the quarter by nearly 21 percent to $2.67 million, as reported by Jonathan Miller in a Douglas Elliman market analysis last week.”
“‘It’s very positive that the market is shedding its disconnect in perceived value at the high end versus what the market is willing to support,’ Miller said. ‘Part of the problem has been a lot of overpriced listings not moving. In all these luxury markets — Manhattan, Westchester, Fairfield, the North Shore and the Hamptons — it’s all the same scenario: all these listings are coming off the market because they were never in the market. The brokerage community continued to list these properties, so they became the perceived market. This is a significant improvement in conditions because what we’re having is an acknowledgment that those homes weren’t priced correctly.’”
The Real Deal on New York. “Manhattan investment-sales volumes continued to fall during the third quarter of the year, setting 2017’s total on course to be lower than it was in 2008 when Lehman Brothers collapsed. Commercial property sales across the borough clocked in at $4.36 billion over the past three months, a 45.4 percent decline from the same time last year, according to third-quarter figures from Cushman & Wakefield. That brings the total for the first three quarters of 2017 to $14.37 billion, or 54.6 percent below the $31.66 billion recorded during the first nine months of 2016.”
“That puts Manhattan on track in 2017 to finish below the $19.8 billion the investment sales market saw in 2008. Sales have slowed to a trickle after the market hit a peak of $59.9 billion in sales in 2015 and started to decline as buyers turned their noses up at paying record prices.”
The Union Tribune in California. “In Southern San Diego County, four sand-colored towers rise up above the natural landscape, a landmark of sorts in a sea of buildings that rarely rise above two stories. Newly built condos in the towers cost less than half of what something similar would cost a half mile away, and the amenities — 24-hour guards, gyms, Jacuzzis, tennis courts — match even the fanciest residential offerings in downtown San Diego. The catch is the condos are in Tijuana and living there means commuting and living in Mexico.”
“Condos start at $170,000 for a 950-square-foot unit and go up from there based on size and location in the building. There are 1,550-square-foot units for $280,000 and 2,000 square-foot units for $315,000. Homeowner association fees are around $200 to $250 a month, and yearly property taxes are about $200. NewCity might have been the first out the gate, but pent-up demand for new residential development in the city has led to a major condo vertical building boom. There are roughly 600 new condos expected to hit the market by the end of this year and most sell out before construction is completed.”
“Even with the ambitious building pace, it does not appear the market is anywhere near being overbuilt, said Gary London, a San Diego-based real estate consultant that also does work in Baja California. ‘There is no historical basis. They haven’t been building a lot of housing for years,’ he said. ‘(600 new condos) does not seem very high, relative to the size of the two metropolitan areas combined. The market is probably quite capable of absorbing more housing.’”
