The Housing Bubble

A report from the Denver Post in Colorado. “Metro Denver should see another 12,000 apartments come on the market in 2018, continuing a long and unprecedented streak of multi-family construction, said Greg Willett, chief economist with RealPage. Builders delivered 10,854 new apartments in metro Denver last year, and tenants soaked up 10,201 of them, keeping the occupancy rate stable at 94.3 percent, according to RealPage. Are apartment developers hitting the accelerator as a cliff of demand approaches or are they simply trying to keep up in a housing market that continues to defy expectations? ‘It could be tough for property owners and operators to push rents much in the neighborhoods that will get the most new product, including the urban core,’ Willett said.”

“Apartment rents nationally have risen for eight consecutive years, but the rate of increase has slowed. Two years ago, Portland, Ore., led the country with a 12-percent gain in rents. Last year, rents there climbed a modest 1.9 percent. Apartment rents rose less than 1 percent in Kansas City, Mo.; Nashville; San Antonio; Pittsburgh; West Palm Beach, Fla.; and Washington, D.C. Austin, once a hot market, suffered a 0.4 percent decline in apartment rents.”

The Boston Globe in Massachusetts. “Rents are still rising in Greater Boston, but not as quickly as they were a couple of years ago. The opening of new apartment buildings in the region has helped to blunt the surge in rents, according to two new reports, the latest sign that the wave of development is starting to have an effect on housing costs. In 2017, large apartment complexes opened from the Seaport to Brighton to Jamaica Plain, and in several cities and towns around Boston. All told, about 6,000 units have opened in the core of Greater Boston in the last 12 months, according to The Collaborative Companies, a real estate marketing firm in Boston.”

“That’s prompting landlords to compete for tenants by offering incentives like a month’s free rent. It’s giving renters — at least at the high end of the market — a bit of a break. ‘You have to be flexible on concessions. That has become the norm,’ said Sue Hawkes, managing director of TCC. ‘But investors still clearly have a lot of faith and confidence in the Boston marketplace.’”

“Boston officials said the city issued permits for more housing in 2017 — 5,349 units — than it has in any year since it started keeping records in the early 1990s. Through November, the region as a whole was on track for its second-busiest year for multifamily permits since 2004, behind only 2015.”

From Curbed Atlanta in Georgia. “Prospective renters of Atlanta may have seen fire-sale deals lately at new apartment hives from Cheshire Bridge to the heart of Midtown: free rent, and access to top-flight amenities, for one or even two months. Could it be a sign the city’s long-booming apartment market is, like the weather, cooling off and bowing to oversupply? (After all, nearly 12,000 new rentals were expected to debut across metro Atlanta last year alone).”

The Greenville Journal in South Carolina. “As more apartments are going up in Greenville, rents are going down — at least for now. ‘The new supply of apartments is likely driving the decrease in rent prices, a trend seen in many national markets as well,’ said Sydney Bennet, senior research associate at Apartment List. ‘New construction causing rent decreases doesn’t necessarily mean apartments are overbuilt. It could just be a market correction for pent-up demand and rent increase in previous years.’”

From WNCT in North Carolina. “Monday’s Greenville City Council meeting brought to light the results of a city issues student housing study. The city prompted study from 2017, found that student housing complexes average more than an eleven percent vacancy rate. Jessica Rossi, planner with the firm Kimley-Horne, said those properties found more than three miles away from campus hold some of the highest vacancies with anywhere between 18-30 percent.”

“The city has two properties currently in construction less than half a mile from ECU’s campus. Many worry the vacancy rates in those properties will only increase.”

The Dallas Morning News in Texas. “Apartment renters are finally getting a break in North Texas. Analysts at RealPage said a flood of new apartments hitting the market this year has put a lid on rent increases. ‘With so many new properties moving through the initial leasing process, there’s no real pricing power in the neighborhoods where cranes dot the skyline,’ said Greg Willett, RealPage’s chief economist.”

“Willett said average quoted apartment rents are actually declining slightly in areas with widespread building, including central Dallas, Richardson, Allen, McKinney and Rowlett. Apartment rents in the hot Frisco market are growing at less than 1 percent. Willett said that in the D-FW area, apartments are opening faster than tenants are filling them up. During the fourth quarter, developers completed 9,141 rental units. Net leasing in the same period totaled only 4,444 units.”

“The fourth-quarter apartment completion total was the second-highest on record in D-FW. For all of 2017, builders in North Texas constructed about 7,600 more apartments than were leased during the 12-month period. An additional 30,296 apartments were under construction in D-FW at the start of 2018. That’s down from almost 40,000 units a year earlier but is still one of the largest totals in the country.”

“The apartment-building cycle shows no sign of coming to a halt in North Texas, RealPage researchers say. Willett said developers of new projects are using more giveaways to lure renters. ‘A month free is routine in the product going through lease-up,’ he said. ‘Some are going to two months free on the biggest units.’”

The San Francisco Chronicle in California. “As high as rent in SF is, that number was down month-over-month in December, and was also down month-over-month in November of 2017. Also down month-over month in December: Concord, Pleasanton, San Ramon, Petaluma. Where can you find ‘affordable’ rent? Surprisingly, Oakland (down 6.4 percent) and Palo Alto (down 3.9 percent), as well as Burlingame and Alameda, among other cities.”

The San Mateo Daily Journal in California. “San Mateo renters may be having a happy new year as monthly fees recently dipped for some apartment dwellers, but national real estate experts are pessimistic the economic relief will last. Local property managers have been quick to note though the asking price data is not representative of the amounts paid by most locally who are often living in older units for less rent.”

“Apartmentlist has acknowledged its data trends expensive, as the database skews toward tracking new listings which are often luxury units toting hefty asking prices. While rents are still higher than most other areas across the state and nation, even a marginal slowing in the astronomical price jumps known in years past may be considered a win for exhausted renters, said Chris Salviati with Apartmentlist.”

“‘At a certain point there are only so many additional rent increases the market will be able to handle,’ he said. ‘Basically even though the Bay Area has a lot of high-paying jobs, there is a limit to what people are willing to pay for rent.’”