The Housing Bubble

A report from Mansion Global on New York. “The opening months of 2018 have had varying effects on Manhattan’s real estate markets. Manhattan’s luxury condo market—defined as properties priced at above $2,000 per square foot—saw 62 contracts signed in February, a slight boost from the six-month low of 59 transactions logged in the previous month, according to a report by CityRealty. Outside of the big-ticket sales, and across the Manhattan apartment market in general, the number of sales logged in January—from which the most recent data is available—dropped to 779 from 884 in the previous month. The average sales price of a Manhattan apartment fell substantially, too—to $1.9 million from $2.3 million. New condo developments fared particularly badly in January as the average price fell almost 50% to $3.6 million from $6.9 million in December.”

From the Daily Business Review on Florida. “Fortune International Group owes $1.5 million to a lender in the developer’s luxury Jade Ocean high-rise condominium in Sunny Isles Beach, a Miami-Dade Circuit Court lawsuit claims. Fortune International used a network of affiliated companies to funnel investments and loans for the development of Jade Ocean in part by collecting administrative and commission fees higher than what it was entitled to, according to the complaint.”

“Fortune’s affiliates and an outside consultant, who also is a named defendant, falsely said most of the Jade units were sold before construction and the unit contracts were enforceable to persuade Ocean Tower to lend, according to the complaint. Then Fortune and its affiliates created fraudulent financial statements and hired an outside auditor, HLB Gravier LLC, to confirm the project lost $62 million, according to the complaint. HLB Gravier is a co-defendant.”

“Fortune International general counsel Olga de los Santos denied the allegations in the lawsuit and said the developer will seek dismissal. ‘These are baseless allegations made almost a decade after Fortune Ocean built and delivered the Jade Ocean condominium to buyers in the midst of the worst real estate collapse South Florida has ever seen,’ she said in an email.”

From Multi-Housing News on Oregon. “A wave of new inventory and historically high rents moderated Portland’s average rent growth to just 0.8 percent year-over-year in 2017, 170 basis points below the national rate. Investor appetite slowed in 2017, with $960 million in multifamily properties changing hands, a significant downshift compared to 2016’s cycle peak of $2.4 billion. But even though transaction volume dropped, prices continued to rise, reaching a new cycle high of $207,300. The metro’s multifamily pipeline is robust, with more than 7,000 units underway as of December and another 11,000 in the planning stages.”

From the Dallas Morning News in Texas. “If you’re a renter in Dallas — particularly if you moved here from California, where combing through Craigslist posts is a rite of passage — you’ve likely experienced the disorientation that comes with apartment-hunting in one of the nation’s fastest-growing markets. Large property managers use price optimization programs that constantly take in data about everything from how many apartments are expected to open nearby to vacancy rates across the region.”

“Dallas-Fort Worth’s ballooning supply of apartments in large complexes makes it the perfect place for landlords to make use of hyper-specific rent optimization, said David Kahn, Dallas-Fort Worth senior market analyst for the real estate data firm CoStar. Kahn recommends always visiting or touring the complex you’re considering. And ask for deals when you get there. And Kahn also let slide a tip that he joked his clients might not want him to mention: Always put in your 60-day move-out notice before your lease expires, even if you think you might renew.”

“‘The rent’s never really bottomed out until it is. There’s always something extra that can be thrown in,’ he said. ‘When you go to the property management website and you apply, sometimes they will have something different in the actual application portal, and it might be a big difference.’”

From The Oklahoman. “Apartment construction in Oklahoma City slowed last year and is likely to slow further this year as the market gets over a building boom that overshadowed demand for several years, according to Price Edwards & Co. The firm said just 1,554 apartment units were completed last year, down 54 percent compared with 2016. Even fewer, 1,230 units, are scheduled for completion this year, Price Edwards reported.”

“About 3,000 apartments are in planning stages, but that number is always soft because more are always planned than built, the firm said. Demand remained strong, with the market last year absorbing not only the 1,554 new apartments but another 731 units besides, bringing overall occupancy up to 90 percent from 89 percent at the end of 2016.”

“‘This is a welcome trend after multiple years of negative absorption created by overbuilding during a slow economy; however, one wonders whether it is due to construction finally slowing down, or to increased demand,’ according to the report, prepared by broker David Dirkschneider.”

“‘For more than a decade, the number of renter households in the U.S. has expanded year after year, sometimes by more than 1 million a year. This year, the explosion of renters in the wake of the foreclosure crisis has maybe, finally, begun to fade, as 2017 was the first time since 2004 that the number of renter households declined,’ Dirkschneider wrote. ‘Just like in the past, when there’s a need for something people jump on. In the commercial real estate market, when people jump on, they jump all the way in, and they kind of went overboard for a little while. … It was hot and good for awhile, but it went a little too fast for our size of a market.’”

From the Indianapolis Business Journal. “The apartment market is starting to cool off in Carmel, which has added hundreds of units over the past few years. According to an apartment market report by Indianapolis-based apartment brokerage firm Tikijian Associates, average apartment rents in the Carmel/Westfield/Zionsville market dropped by 2.8 percent in 2017. Carmel in particular has seen a lot of apartment development recently, and that has played a significant role in shrinking rents.”

“‘The market’s softened a little bit because there are just a lot of projects coming on line,’ said George Tikijian, senior managing director at Tikijian Associates. ‘It’s going to be a couple more years before Carmel absorbs all of these new properties.’”

The Pasadena Star News in California. “Looking for housing in California — to buy or rent — means having the fewest choices in the nation. A curious stat from the U.S. Census Bureau tracks empty residences, whether those units are rentals or ownership properties. Basically, ‘gross vacancy rate’ is a proportional measure of how many places are available in a geographic area.”

“When I put this housing-supply data into my trusty spreadsheet, I found California has had nation’s lowest vacancy rate in five out of the last seven years. And in the two years, California did not have the slimmest housing supply (2011 and 2013), the state ranked No. 2. Last year, 8.3 percent of California residences — both ownership and rental — were vacant. The only good news is the 2017 California vacancy rate was up from 7.8 percent in 2016 (also a national low) and the highest since 2014 (also a national low).”

“This vacancy data has a key quirk: States with significant seasonal employment and/or well-traveled ’snowbirds’ with second homes. So the highest vacancy rates are found in Maine, Florida, Alaska, Vermont and Arizona.”