November 13, 2017

Too Much Supply Or Not Enough Demand?

A report from Bisnow on Texas. “The Dallas multifamily market is looking a little rough with rent growth continuing to sag due to incessant Class-A deliveries. More product is on the way — Dallas is No. 2 in the nation for multifamily permits issued this year. This has raised some concerns about overbuilding. ‘Dallas continues to experience steady declines in rent prices due to a huge number of new apartments coming to the market,’ Abodo Senior Communications Director Sam Radbil said.”

“Despite this, Dallas issued 20,150 permits in 2017, including 1,389 in September, a study from RealPage shows. Taken together, these stats seem to indicate weakening in the market, but experts say these numbers do not tell the whole story. Axiometrics Senior Vice President Jay Denton said a decline in Dallas’ frenzied job growth numbers may have caused the recent stress on the market. ‘As of September, according to the Bureau of Labor Statistics, [job growth in Dallas] is down from 105,000 [jobs added year-over-year] to 67,000. So you can ask the question of, ‘do we have too much supply or do we not have enough demand?’”

From LA Weekly in California. “A wave of new apartments downtown has slowed the pace of rent increases and inspired landlords to offer free parking and a month’s free rent. ‘Rent has started to slow down, and that will make capital forces hesitant,’ says Greg Willet, chief economist at RealPage. Even as planned building is flat or even on the decrease, construction that was seeded two and three years ago will result in a peak year for new apartment openings in 2018, Willet says. As many as 18,000 units could come online, much of it in downtown, Hollywood and other core areas, he says.”

“That’s a mixed bag: It’s still not enough, and it’s mostly luxury housing. Downtown real estate agent Bill Cooper says the flat figures for L.A. are even more dire than they appear because, he believes, most of that planned construction involves high-end luxury units and not the kind of apartments the average Angeleno can afford. ‘They’re basically filling downtown with luxury apartments,’ he says. ‘There’s only so many people who can pay those rents.’”

“Cooper says the glut downtown could result in rents that aren’t as outrageous as L.A. has experienced in the last few years. ‘You’re going to see apartment pricing change,’ he says. ‘I think it’s going to have to make a correction in the next few years.’”

From BKLYNER on New York. “Hot on the heels of a mayoral election, we found ourselves thinking of the ‘the rent is too damn high.’ While we here at BKLYNER do our best to find the finest deals in the county of Kings, it seems nothing can shape markets like plain ol’ supply and demand (pursuant to incentives, etc.) Fortunately, it seems as though rents might be starting to tick downward thanks to the flood of new housing that has, in part, reshaped the skyline of Brooklyn and its denizens.”

“86 Court Street #3: This Brooklyn Heights one bedroom has seen its price dip from $2,499 down to just $2,099 a month during its time on the market. Now is the time to strike. 72 Clermont Avenue #1: After starting at $2,200 on October 15, the price has tumbled to $1,850 per month.”

The Real Deal on New York. “Though slightly down from last month, the vacancy rate in Manhattan rental apartments in October remained high. ‘We are seeing just general malaise or weakness in the market,’ said Jonathan Miller, the CEO of appraisal firm Miller Samuel and author of the report. ‘The market is soft. We’re seeing a lot of concessions.’”

The Washington Blade. “It’s not rocket science: The more housing there is, the more affordable housing will be. D.C. has begun to prove this simple reality of supply and demand. A report last month by real estate research firm Delta Associates indicated that D.C. rental prices dropped for the second consecutive quarter, following a rare drop in rents in the previous period. These drops were only the third decrease in rents since 2010.”

“This decline in average rents was the result of a record number of new apartments hitting the market in the past year, totaling more than 11,000 units. Optimism that prices will continue to drop is based on an already-planned addition of nearly 14,000 new units in the next three years. Rental prices were anticipated to plateau in the areas with the largest supply of new units, primarily the Riverfront area in Southeast-and-Southwest D.C., as well as NoMa and surrounding the H Street, N.E., corridor. These areas are expected to continue to lead the city in rental housing growth over the next three years, eventually exceeding the total number of units in central D.C.”

“Instead, rents dropped in the more established neighborhoods of northwest D.C., including Foggy Bottom, Dupont Circle, Logan Circle, Shaw, and the Mount Vernon Triangle area. The Shaw-Columbia Heights submarket experienced the largest decrease at 4.1 percent while average rents in Dupont-Logan-Mount Vernon declined 2.4 percent – all near-downtown areas.”

“Nearly all new rental housing in almost all cities is typically, and historically, higher-priced housing. The availability of new ‘luxury’ apartments, however, serves to reduce the pressure on existing housing, including less expensive units. This benefits the mainstream market overall and allows for a broader range of rental price points.”