The Housing Bubble

A report from the Seattle Times in Washington. “The slowdown in Seattle-area rent increases that began late last year has continued into the first part of 2018, as the crush of new apartments opening across the region catches up with demand in the fast-growing region. The recent cooldown has now extended long enough to be indicative of a longer-term trend. Analysts have pointed to a wave of new apartments opening since 2014; a record number of new units opened last year in Seattle, and even more are expected this year. The changes are most recognizable in the pricey neighborhoods of downtown Seattle and South Lake Union — home to one-third of the new apartments that have opened across the region since last year.”

“Compared to the high-points reached last fall, rents have dropped 6 percent in both downtown Seattle and South Lake Union. And the rate of vacant apartments has grown from 3.8 percent to 6.2 percent in the last year in downtown, and from 5.3 percent to 6.7 in South Lake Union, giving renters more options and negotiating power.”

“John Mullally, whose family has been in the apartment business since the 1940s, said he started noticing a slowdown around September at the 1,450 older units he owns in North Seattle and Queen Anne. Fewer people were applying to his apartments, and the people who were applying didn’t meet the background and income check standards as often. Since then Mullally has reduced the security deposit and offered a half-month of free rent for new leases, but he still has more apartments sitting empty than he used to.”

“‘The market has definitely changed,’ he said. ‘It was in an upward trend for quite some time, and I think it’s peaked and its going the other way now.’”

“Looking just at large projects of at least 50 units, the region has added 40,000 new apartments since 2014. That far outpaces the rate of population and job growth, but follows about 20 years of slow apartment construction. There are about 35,000 units across the region still in the pipeline that haven’t been built yet, roughly the same as a quarter ago.”

From Oregon Business. “Be careful about entering Rivage, a $60 million apartment complex perched along the Willamette River just north of the Fremont Bridge. You might never leave. You can work in the coworking space, have a drink in the communal living room and take a Tuesday yoga class with fellow residents. In 2017, 4,718 apartments came on line in greater Portland, according to CoStar, a commercial real estate firm. Many of the new residential developments, especially those in high end neighborhoods like the Pearl and Slabtown, resemble the Rivage, with services that rival hotels.”

“The new units, which rent for an average of $1,582, raise questions about affordability in a city scrambling to find reasonably priced housing. Today as hundreds of people sit on waitlists for affordable housing, high priced dwellings clamor for tenants. Rivage is only 60% full after being on the market for over a year. Q21, Rivage and Dianne are offering four to six weeks free rent to entice prospects.”

“‘Trying to separate yourself from a luxury standpoint is getting harder,’ says Joel Andersen, the developer behind the $46 million Q21 apartments in Slabtown. ‘The cost of everything has escalated so high.’ The oversupply issue is expected to go away soon.”

From Bisnow on Georgia. “Developers of gleaming new apartment towers in Atlanta are having a dickens of a time raising rents. In fact, they have lost ground, according to the latest report from the city’s top multifamily research firm. Same-store rents dropped 4.8% to some $2.30/SF at high-rise apartment developments within the Perimeter ring as developers saw a slowdown in the number of units leased by consumers, according to the first-quarter Haddow & Co. multifamily market report.”

“‘Communities in lease-up are renting an average of 15.1 units per month, down from 20.1 units per month a year ago, which is evidence of softening market conditions,’ Haddow & Co. officials said in the report. Fundamentals could be poised to only worsen in the coming year as a supply of more than 8,000 new units is slated to hit the market, outstripping aggregate demand overall, Haddow & Co. Vice President Ladson Haddow said.”

“‘There’s a lot more units out there for people to choose from than there was a couple of years ago, especially the high-rise product,’ Haddow said. ‘It’s not all doom and gloom because the market is strong, [but] there’s a whole other wave coming. We’re going to deliver more units in the next 12 months than we have, to date, of any 12-month period before.’”

From the San Francisco Chronicle in California. “For prospective renters on the hunt in San Francisco, there’s even more good news: Certain pockets of the city were seeing rents drop by double digit percentage points in March. The asking price for one-bedrooms in Cole Valley was down 14 percent in March and Inner Richmond prices fell 11 percent compared to a year earlier, according to apartment listing site Zumper.”

“‘Last year, in the Inner Richmond and Cole Valley, rents were spiking due to a lot of demand present, since these areas are safe/low on crime and tend to be less expensive than living in the surrounding neighborhoods like Hayes Valley or NOPA,’ Zumper’s Crystal Chen told SFGATE. ‘While the demand will always be there for these neighborhoods, the price has come down from last year since less people are looking to move right now and it seems a ceiling has been hit.’”

From the New Orleans Advocate in Louisiana. “Within a few blocks of Lee Circle, hundreds of new rental units and condos are expected to come online in the coming years, surrounded by tens of thousands of square feet of new commercial space. A lot has changed in the Central Business District since Marcel Wisznia purchased a blighted Carondelet Street parking garage for $4.9 million in 2007. But one thing has remained constant: Wisznia’s plan to redevelop the 1950s-era former Buick dealership into a high-end apartment building, complete with a car elevator to let residents pull right up to their door.”

“‘You can keep your groceries or whatever in your car until you virtually get to the front door,’ he said. Already, Wisznia believes, the bustling construction activity has made the CBD ‘a highly, highly competitive urban center’ where the real estate market could soon be oversaturated. But like many of the others who are backing their own projects, Wisznia, a local architect and developer, likes his odds for capturing a piece of the market.”

The Time Picayune in Louisiana. “Could rents in New Orleans be going down? A new report by RentCafe, an apartment search website, finds rents in New Orleans are down 2 percent, dropping to $1,088 a month. Nadia Balint, who authored the RentCafe report, noted new construction could be behind New Orleans’ dip in rental rates. The city had at least 10 recently built complexes, and another eight are under construction, she said. ‘On the supply side, it has been very generous in New Orleans,’ Balint said.”

From Bisnow on Pennsylvania. “It has been nearly a decade since the world’s economy was mired in the depths of the Great Recession, and commercial real estate has yet to see a real downturn since. But some of Philadelphia’s biggest names in the industry are not simply waiting for the other shoe to drop. And yet, the number of apartments delivered between last year and today is far beyond what has come before. According to a JLL report, buildings that delivered last year are only 47% occupied so far, meaning that around 1,300 apartments are still vacant from that set.”

“Two thousand seven hundred more units are expected to deliver this year, and absorption is only averaging 1,100 units per year in Philadelphia. Using those numbers, Philly projects to have 2,900 new apartments still available at the end of the year, or roughly two and a half years of supply. Concessions are very likely to increase as landlords fight for the available tenants, especially for apartments asking for over $3.50/SF in rent.”

“But developers are eager to point out that cities like Washington, D.C., have thousands more apartments in the pipeline. ‘There just aren’t enough buildings to create too much of an inventory, and everybody’s doing well,’ said Tower Investments CEO Bart Blatstein.”

The Bismark Tribune in North Dakota. “Williston Realtors sold more homes in the first quarter of the year than in any other previously — even outselling 2012 and 2014 boom levels. The city is in the midst of a single-family housing shortage that promises only to get worse as oil and gas activity picks up for the season. Apartments and hotels are at 90 to 95 percent occupancy already, said Williston’s Development Services Director Mark Schneider.”

“There are some apartment buildings in town sitting vacant because the owners don’t have anyone to manage them, according to Realtor Kassie Gorder. With those in use, apartment occupancy could be lowered to a rate of about 80 percent. She said the owners had listed them for sale a while back but no buyers could be found. Now that they’re vacant, finding a buyer could be even harder.”