March 10, 2018

The Fastest Market To Reach Oversupply

A report from the Coloradoan. “With 1,100 market-rate units coming online and more than 2,000 in the pipeline, some experts wonder if Fort Collins is in danger of a bubble, where oversupply pushes up vacancy rates, depresses rents and leaves hundreds of units wanting for tenants. It’s making some developers and market watchers a little nervous, particularly as thousands of additional student-oriented apartments flood the market. ‘The fastest market to reach oversupply is typically apartments,’ said Brandon Wells, president of The Group Real Estate. Wells is not predicting a bubble quite yet, ‘but we are reaching some numbers that give me reason for a yellow light of caution whether it’s sustainable,’ he said.”

“Vacancy rates don’t tell the full story. Vibe, Bucking Horse and Cycle — with more than 1,000 combined units — are still under construction and not included in the December survey. The survey also does not include roughly 1,160 student-oriented apartments in the pipeline that could house more than 3,660 residents and pull students out of market-rate apartments. The construction defects laws and lack of condo opportunity will continue to fuel apartment development and growth, Wells said. And that has resulted in a plethora of apartments for renters looking for high-end finishes that replicate a ‘for sale’ product and amenities that create a certain vibe.”

“The number of units coming online ‘is spooky,’ said Gino Campana, developer of the Bucking Horse Apartments. ‘There is only a limited number of people.” And there is a limited segment of the population that can afford the higher rents.’”

From the Philadelphia Inquirer in Pennsylvania. “Spring and summer are traditionally the busiest times in real estate, for both homes and apartments. But a landlord’s asking price is never final — especially in today’s market. Philadelphia, in particular, has experienced an unprecedented housing boom in recent years — 6,500 new apartment units and condos are expected to be built in Greater Center City between just 2016 and 2018 — meaning there’s more supply than ever for renters to choose from.”

“Much of that inventory, including in the suburbs, has been high-end apartments, the kind that demand prices greater than $3 a square foot. And while such inventory has forced prices to jump, many buildings are providing ‘concessions’ — a month of free rent, for example — to lure tenants. Accordingly, the actual price of renting is often cheaper than advertised.”

“According to real estate data company REIS, the vacancy rate in ‘Center City’ was 7.6 percent in 2017’s fourth quarter, up from 5.2 percent two years prior. Meanwhile, rent growth has dipped, while competition is up. ‘In the business of renting apartments, it’s very costly to turn over tenants,’ said Allan Domb, a member of Philadelphia City Council and a real estate broker.”

From WACH in South Carolina. “A student housing complex set to be built in downtown Columbia has been met with mixed opinions by local residents. Residents living in nearby neighborhoods are wary about what the student housing could mean for the area. Jonathan Comish, president of Arsenal Hill’s Neighborhood Association, says he’s been meeting with the Vista Guild to discuss the concerns of his residents. ‘If the student housing bubble ever bursts, then that’s just going to be 700 empty beds in the middle of what we sort of think is the crown jewel of Columbia, Arsenal Hill and the Vista,’ said Comish.”

From KBTX in Texas. “According to a recent Bloomberg study, College Station ranks as the number one least affordable place to live based on the percentage of household income going to monthly rent costs. But local experts are skeptical of these numbers. Both Jim Gaines, Chief Economist at the Real Estate Center at Texas A&M University and local realtor Cherry Ruffino believe there are too many housing and apartment rentals in College Station for the demand. Some even theorize that the open rentals could lead to decreasing costs.”

“However, Gaines and Ruffino aren’t as optimistic. ‘Does this mean our rental rates will go down? I don’t think so,’ says Ruffino. ‘I don’t think so at all, but we may level off.’ ‘Sometimes the landlords are a little slow in lowering the rent,’ says Gaines. ‘What they would rather do is give something in concessions like free rent for a month.’”

From Reuters on New York. “Apartment sales in Manhattan fell to the lowest monthly rate in January since February 2012 as a declining trend in city-wide sales both by price and volume emerged, listings and data website CityRealty said. Sales prices fell 15.5 percent to an average $1.86 million in January from an average $2.2 million a year earlier, while the average price in December fell 14.3 percent, from $2.17 million. ‘I’m a little startled, it’s quite a blip,’ Gabby Warshawer, director of research at CityRealty, said of the drop.”

“Data for January showed the lowest number of units sold since February 2012, when 799 sales were recorded at an average price of $1.50 million. Volume peaked in July 2013, when 1,721 units were sold.”

From the Union Tribune in California. “From the saltwater pool on the 18th floor of East Village’s Alexan ALX, the latest luxury apartment to open downtown, it seems like all of San Diego is at your feet. Alexan is just one of the more than 2,000 new apartments opening this year in San Diego County, most of which are high-end and downtown. Trends follow past years as luxury complexes cater to pets, install high-tech gyms and zero-edge pools typically found at resorts in an effort to outdo each other.”

“Russ Valone, CEO of MarketPointe Realty Advisors, said the market has proven it can handle high rents but it’s unclear for how long. What is unique this year is not that most new construction is high-end, but that there are so many luxury projects. ‘You can continue to ask’ for high rents, he said. ‘Will we get them? I don’t know.’”

From City Watch LA on California. “The massive multi-billion-dollar fraud behind Los Angeles’ homeless crisis has taken a gigantic leap forward with the LA Times’ multi-part editorial which has one basic solution: give billions more dollars to real estate developers. In March 2012, I noted, ‘With the hubris for which the Los Angeles City Council is becoming renown, Garcetti, LaBonge and their gaggle of developer good old boys continued to loot the city treasury. After the years of fraud had been uncovered from the gargantuan financial losses like the $454 million debacle at Hollywood-Highland to the small $1.4 million appraisal fraud for CRA 1601 N. Vine Project, one would think that when billions of dollars will rest on the accuracy of the Hollywood Community Plan, the city would come clean and tell the truth.’ Oh, how naive we were.”

“Since his election in 2001, current LA Mayor Eric Garcetti has been promoting his campaign to destroy as many rent-controlled units as possible. The rate is up to 7 RSO units per day making a total of over 24,000 apartments destroyed. If we assume only 2.5 persons per unit, that is 60,000 poor people whose homes have been destroyed. Yet, the LA Times does not think that destroying the homes of the poorest among us contributed to the increase in homelessness.”

“As Adam Fowler of Beacon Economics explained it, the City needs more market rate and luxury housing so that the homeless will have a place to live. (Huh ??) Speaking on Channel 4’s News Conference, a perennial fountain of disinformation, Mr. Fowler explained that wealthy people are living in older apartments. As soon as the city builds new luxury apartments, the wealthy will move into the new places which will free up the older units for the poor. This is ultra-right-wing Trickle Down economics: tear down the homes of the poor and build luxury units for the wealthy.”