The Housing Bubble

A report from Mingtiandi on California. “China’s Greenland Group is reportedly shopping the hotel within its flagship mixed-use project on the US west coast only 10 months after it opened, in the latest sign of overseas strains for the state-owned property firm. Oversupply fears could be a factor in Greenland’s change of plans. Downtown Los Angeles faces an imminent glut of luxury condos, amid a wave of up to 30,000 new residential units projected to hit the city’s market over the next three years. The reported hotel offering suggests that Greenland could be facing financial pressure in the US, after investing in a total of $8 billion worth of real estate projects on the east and west coasts. Like many Chinese property groups, Greenland is highly leveraged.”

“Last October, a Greenland-led Chinese consortium was reported to be selling the Landing at Oyster Point, a 42-acre waterfront biotech and office project in South San Francisco which hasn’t yet broken ground. Greenland also walked away from talks for a 1.9 million square foot mixed-use redevelopment project in North Hollywood, Los Angeles last November before paying the required deposit.”

From Queens News in New York. “Queens rental prices finished down at the end of the year, StreetEasy reports. StreetEasy attributed the decrease to a ‘glut of high-end homes in the area’ combined with the usual market slowdown in the winter. Price cuts also reached an all time high. ‘While a flood of new construction has been the main driver of the rental market slowdown we’ve witnessed over the last year, the fourth quarter’s rent cuts are more far-reaching than in years past,’ said StreetEasy Senior Economist Grant Long. ‘The cooling in the market is no longer limited to new, high-end buildings in select pockets of the city — there’s a broader trend of rents topping out across all price points. The slowdown is forcing landlords across the city to cut deals, and renters now have the most negotiating leverage in years.’”

From CBS Denver in Colorado. “A new report out this week shows several neighborhoods in Denver where rent decreased over a one-year period including in LoDo. Zumper data is made up of new listings on their site available at that time as well as information they get from third parties. The drop of 7.49 percent in LoDo was from December 2016 to December 2017.”

“Beyond LoDo, several other neighborhoods saw a drop in rent for the same period between nine and 20 percent. The five spots with the largest drop were Berkeley, Whittier, Dayton Triangle, Elyria Swansea, and the Central Business District. Ron Throupe, a professor at the University of Denver focuses on real estate. He says his research supports the trend Zumper is seeing in major cities. ‘We probably won’t see the trend until June,’ he said. ‘Whether we’re going to continue with price movement and a lot of demand for new units or are we going to start to slump back.’”

From WFAA in Texas. “Affordable real estate, buildings within walking distance of each other, great mass transportation and a city that’s got a plan for affordable housing. Those are some of Amazon’s top priorities as it gears up to pick a city for its $5 billion second headquarters. In all, North Texas has about 57,000 apartments — or roughly 33,000 vacant apartments in existing properties and another 24,000 apartments that are under construction — available for a major employer, like Amazon, to help fill. Atlanta also has a ready-to-go supply of about 43,000 apartments — with about 30,000 vacant apartments in existing communities and another 13,000 apartments under construction.”

“When it comes to finding big, open spaces at affordable prices to build a new corporate campus, North Texas seemingly has no shortage.”

From the Columbia Missourian. “When plans for the Hagan Scholarship Academy were announced in 2012, the news was greeted with plenty of enthusiasm. Columbia developer Dan Hagan hoped to nurture high-achieving students in rural areas through his new venture. But today, more than five years later, the college preparatory school commissioned by Hagan is still on the drawing board. The stalled academy is yet another testament to what many local experts describe as rising market uncertainty surrounding downtown real estate in Columbia. A pause in growth dampens Columbia’s reputation as a ‘boomtown’ in the region, an uptick spurred largely by enrollment spikes at MU celebrated from St. Louis Today to The New York Times.”

“John John, a real estate agent in Columbia, attributes the slowdown to bad luck for forward-thinking developers, who planned ahead for more students in the area and then got caught in a downturn. ‘Everyone was building in anticipation of the two- or three-year increased growth, so when it stopped and went backward; you gotta regain the momentum, not only what we lost, but get above that number,’ John said.”

From CU-Citizen Access in Illinois. “The development of student apartments in Champaign-Urbana has not slowed down over the past five years, despite two separate federal housing analyses describing the rental market as oversaturated. ‘During December 2016, the estimated student-targeted apartment vacancy rate was 12.9 percent, up from 7.4 percent a year earlier’ a federal 2017 Comprehensive Housing Market Analysis reported in January. But Ben LeRoy, an associate planner for the Champaign planning and development department, said that the city’s policy on student apartments is influenced more by the developers on campus.”

“In 2012, HUD reported that the housing market was soft and that the current overall vacancy rate was estimated to be at ‘9.1 percent, with around 300 rental units under construction at the time.’ The 2012 HUD analysis also presented a three-year forecast that ‘no additional units should be constructed to allow for the absorption of the current excess supply.’”

“But despite this federal report calling for a slow-down in development of rental units, building permits for major apartment complexes such as Latitude and HERE were both approved. These complexes would add 604 and 528 beds, respectively. LeRoy said the City of Champaign views the developers, ‘as having the best knowledge about whether there’s an over supply, an over supply of one type of student housing, an under supply and what prices should be.’”

“The developers may have been influenced the City of Champaign to report that there was a demand for student housing in a 2014-2015 Planning and Development Annual Report. This report stated changes in ‘a new ‘University Neighborhood’ where ‘developers can continue to meet the housing demand generated by continued increases in the University of Illinois’ enrollment.”

“But the 2017 CHMA reported that ‘UIUC enrollment has only increased by approximately 2,000 students since 2012.’ And despite this fact, ‘an estimated 4,600 beds have been added to the market’ since 2012 as well. Overall, 60 percent of apartments constructed since 2010 have been aimed at students, the analysis reported The report found that the average rent per bedroom in a student-targeted apartment was $579 in December 2016.”

“‘The current average rent in a two-bedroom student targeted apartment is approximately 45 percent higher than a two-bedroom non-student-targeted apartment,’ the report said.”