We’ve Already Reached A Turning Point
A report from The Daily News in Washington. “In a rental climate favorable for landlords, out-of-town investors have been flocking to Cowlitz County. They are having a major impact on the housing market. Mike Rodley, a California investor who owns 65 rental units in Kelso and Longview, said he rehabilitates his apartments every time a tenant moves out. In the 13 years that he has owned the two-bedroom apartments, Rodley said he has increased rents from about $400 to about $600. ‘Rising property values is something happening throughout the world,’ he said. ‘It’s not like there’s anything malevolent going on here. It’s just the price of doing business. … (Investors) are having to raise their rent to guarantee a return on investment.’”
From the Illinois Times. “Ghosts of pratfalls past haunted Springfield council chambers this week as the city approved public funding for a rogue developer with an unproven business plan who vows to take downtown where it never has gone before. With projected rents for yet-to-be-built units topping out at $2,500, the troubled rehab project at the intersection of South Sixth and Monroe streets would have some of the most expensive apartments in downtown, if not the entire city.”
“The city council on Tuesday voted 5-5 to commit $1.8 million more in public tax increment financing money to the project than had already been approved. The city previously had approved nearly $2 million, but money was cut off in 2016 after developer Rick Lawrence changed plans and started spending money on things that hadn’t been contemplated, most notably an elevator that would access adjoining buildings where apartments are planned. Lawrence, who told the council he’s out of cash, owes more than $1 million to vendors and in unpaid benefits for workers.”
“‘I lost focus,’ Lawrence told the council on Tuesday. ‘I knew where I was going, but I wasn’t sharing it (with bankers or the city). That’s where I got out of step with the construction loan.’”
From Sparefoot on Nebraska. “There is a storage boom happening in Omaha, but it might be more than the biggest city in Nebraska can handle. An unprecedented building spree in Omaha may lead to a glut of new storage supply that could soon depress prices in that state’s largest city, according to a report penned by Alex Burnam, senior acquisitions analyst at StorageMart. Bill Lange, president of the Nebraska Self Storage Owners Association said he’s seeing more developers of multifamily housing in Nebraska and elsewhere jumping into the self-storage sector, figuring that many of their housing tenants will correspondingly need more storage space for their belongings.”
“Lange said the self-storage sector in Omaha and Lincoln, Nebraska’s second largest city, have become attractive for the same reasons experienced in other cities across the country: Low interest rates, solid returns, and growing interest in the industry on the part of larger investors. ‘It’s not to say (Omaha) doesn’t need more space,’ Burnam told Sparefoot. It’s just that a lot of (space) is coming online soon – and that’s going to cause some pain. Price pressures are coming.’”
The Durango Herald in Colorado. “The median price of a home in Durango fell $15,250 in 2017 compared with 2016, a 3.28 percent drop one real estate broker attributed to increasing supply of homes in Three Springs and increased sales of townhomes. Max Hutcheson, an agent with the Wells Group in Durango, attributes the 2017 median home price drop in Durango to a wider availability of attainably priced homes in Three Springs and the sale of more townhomes.”
“Hutcheson said an increasing amount of apartments for rent are coming online this year in Durango, including in Three Springs and the old Rocket Drive-in, and the expected increase in supply should provide more affordable rentals for Durango workers. Also, more apartments available to rent in Durango might increase the number of homes for sale in the Durango market, said Gina Piccoli, broker-owner of Coldwell House Heritage House in Durango. ‘Completion of apartments alleviates pressure on rental supplies, and that puts pressure on rents. People holding homes as rental properties may be more inclined to sell the home rather than hold it as a rental,’ she said.”
The Real Deal on California. “As Los Angeles grapples with a severe affordable housing crisis, a new study shows condo and loft sales remain strong. There were roughly 353 condo and loft sales in the region in 2017, up 40 percent from 2016, according to the most recent report from Loftway, a brokerage specializing in loft sales and leases. That’s due in part to the opening of the much-awaited Metropolis Tower 1 and 1050 Grand, which sold 13 and 39 units, respectively.”
“Despite somewhat discounted prices, Luma South and Market Lofts also added to the tally, selling upwards of 25 units each last year. But a majority of the buildings saw their rents drop, with the Biscuit Lofts, Alta Lofts and Beacon experiencing the greatest dips, according to the report. At the Biscuit Lofts, rents dropped from $4.63 per square foot to $3.49 per square foot.”
“DTLA, which has been home to a flurry of new construction, has been the topic of much concern as industry leaders fear supply is outstripping demand. The deliveries of such luxury projects, like Metropolis, have increased competition in the area, likely causing a downturn effect on prices, the report showed.”
The Herald Tribune in Florida. “Home sales began accelerating nationally last year after growing at a sluggish pace from 2010 to 2016. On the flip side, occupancy in apartments, which showed a steady increase over those same six years, slowed in 2017, Reis Inc. reported. ‘Bear in mind that the occupancy numbers … do not reflect the high levels of new construction that have in fact lowered the overall occupancy rate to 95.4 percent from a high of 95.9 percent in 2016,’ Barbara Byrne Denham and Victor Calanog wrote in the white paper titled ‘Should We be Worried about the Slowdown in Renter Occupancy in Favor of Owner Occupancy?’”
“A different study, this one from Yardi Matrix, also asks a question in the title: ‘Apartment Rent Gains Slow in 2017. What’s in Store for 2018?’ ‘The question for 2018,’ the report states, ‘is how much more steam is left in the market, whether the deceleration will continue or it if will level off or turn negative.’ Downtown Sarasota alone is poised to add 1,721 rental apartments in various projects. Will these developments be a bust?”
From D Magazine in Texas. “Developers have delivered over 100,000 multifamily units In Dallas-Fort Worth since 2010—more than any other metro in the country—and they’re getting built everywhere from Uptown to Frisco to Las Colinas. Rents are rising quickly, and home values continue to skyrocket, too. So is another housing bubble building? Not so fast! Explosive single-family price growth and strong multifamily rent growth are more about an underreported market factor—too little housing—and less the result of rampant speculation or the lax lending environment seen in last cycle’s single-family housing bubble.”
“With rent growth slowing, vacancies rising, and even more supply on the way it’s likely that we’ve already reached a turning point in the multifamily market. However, if the metroplex continues to add jobs at a roughly 100,000 per year pace and single-family construction remains below previous highs, expect a soft landing for the sector as Dallas-Fort Worth continues to extend one of the longest business cycle expansions on record.”
From Mansion Global on New York. “New York City’s luxury rental market is more likely to suffer in 2018 due to a glut of available units rather than the new tax law, according to Donna Olshan, president of Olshan Realty. New York buyers who had in past years snatched up new condos off floor plans, expecting to flip them by 2018, are finding they can’t get quite the sale price they need to break even, Ms. Olshan said. They’re putting those units out to rent and flooding an already soft market, she said, a trend that started before any tax bill was seriously discussed. That trend also explains why many landlords in high-end buildings have to offer concessions in the form of several months’ free rent or gratis gym memberships.”
“Throughout 2017, landlords offered near-record concessions to attract new tenants, according to a November survey of Manhattan, Brooklyn and Queens prepared by Miller Samuel. More of those are likely in 2018, too. ‘What you’ve got going now is a confluence of factors that are all going to depress the luxury rental market,’ Ms. Olshan said. ‘You have too much luxury rental inventory, and at the same time, the [potential] consequences of the tax bill.’”
