The Housing Bubble

A report from Bisnow on Colorado. “McWhinney CEO Chad McWhinney said he can see the Front Range becoming megapolitan — another word that encompasses a widespread urban region — stretching from New Mexico to Cheyenne, Wyoming, and he believes multifamily properties are a great investment, especially for a long-term owner. ‘Apartments are a great long-term real estate asset class to own. The key is to make sure that you have a lot of debt that is long term. The key in this business is to make sure we don’t have a lot of short-term debt at any given time when real estate markets change. A banker will give you an umbrella, and when it rains, they ask for it back,’ said McWhinney.”

The Palo Alto Daily Post in California. “Rents in Palo Alto are sky-high and continue to climb, but new numbers from ApartmentList show that rent hikes, at least, are starting to slow down. Sam Safadi, of downtown Palo Alto-based Cal Bay Property Management, said he had even encountered young adult renters who ‘assume rents go up every year forever’ because they’ve only ever seen the market expand. What those tenants were too young to see, Safadi told the Post, was the ‘post-dot-com rent apocalypse,’ including a 40% drop throughout Silicon Valley in 2002, followed by another ‘massive’ drop in 2009.”

“‘These things move,’ Safadi said. ‘We’ve definitely seen back-off over the last couple of years, since the crazy five-year run.’ Dave Roberson, a real estate attorney who manages 84 houses in Palo Alto as the principal of San Jose-based Silicon Valley Property Management, attributed the slowdown to residents leaving town and new units coming on the market. He noted that the El Camino Real corridor has also seen an uptick in apartment construction, which ‘drowns out demand a little bit.’”

“Jason Born, who mostly rents out single-family homes in San Mateo County at Belmont-based Born Property Management, attributed the slow-down to a new crop of units coming on the market because more homeowners are putting their houses up for rent. ‘Palo Alto clearly is the watermark,’ Born told the Post. ‘The last place the market’s going to be hit is Palo Alto. If you look at the market as a stone dropping in the pond, you have to see right where the waves go out to.’”

From Oregon Business. “The Portland apartment rental market may be tapping out. Portland rents declined by 2.2% in the past year, according to a new report from rental site Apartment List. The site attributed record numbers of new units for the price decrease. Ubiquitous ‘Now Leasing’ signs blare from dozens of new and under construction buildings, and many landlords are offering move-in specials.”

From KTVB in Idaho. “Southwest Idaho chapter of the National Association of Residential Property Managers released a report in May showing Ada and Canyon County vacancy rates are up a tad - from 3.3 percent at the end of 2017 to 3.6 percent currently. Realty Management Associates Property Manager Spencer Henderson says the supply of apartments is starting to swell. ‘The housing market here has changed in the last five years more than it’s changed in the last 20. The spike, the increase, how much is being bought up, how much is being built. And it’s a different group between single family and multi-family buildings. The number of multi-family buildings have just - it’s exceeded expectations. And they’re being built every single day,’ Henderson said.”

The Journal Sentinel in Wisconsin. “‘When you hit the downtown (Tosa) area, you see these big buildings collapsing in on you. Wow, kinda knocks your socks off,’ Sandra Minor, a resident for 35 years, said in frustration at a meeting at Wauwatosa City Hall. Minor said a community that prides itself as ‘the city of homes’ was turning into the city of apartments. After a night of comments like this, the community affairs committee on June 12 recommended the common council approve the 54-unit Harwood Apartment proposal in the village. That followed a meeting at which residents cited traffic congestion, lack of walkability and an oversaturation of apartments among their concerns about the proposal.”

“Alderman Michael Walsh agreed it was not the right location for the project, saying it will exacerbate a traffic pinch point that may have unintended consequences. Walsh said it is not just the people who live next to the proposed project who care, but all of Tosa. ‘People are judicious in terms of the development that has happened and they feel it has reached a tipping point,’ Walsh said.”

The Business Record on Iowa. “A national report carried some startling numbers about affordable housing: None exists in any state, city, county or metropolitan area in the country for workers earning minimum wage and needing a two-bedroom apartment. Say it ain’t so, Des Moines. Well, yes it is, said Eric Burmeister, executive director of the Polk County Housing Trust Fund. With apartment vacancies running 6.7 percent in Greater Des Moines and near 10 percent in downtown Des Moines, Burmeister said the glut of apartments is slowing rent escalation. If rents drop a tad, a few more people can afford to pay them. ‘Things are going the wrong direction from an affordable housing standpoint,’ Burmeister said.”

From Globest on Illinois. “Developers, investors and lenders have been worried that years of exuberant construction would eventually create a downtown apartment glut. And River North, the most established residential neighborhood in the downtown market, was considered especially vulnerable due to the many deliveries in new areas like South Loop and West Loop. Occupancy of some stabilized buildings in other core neighborhoods has dipped, Laura Ballou, senior associate—market analytics for KIG adds, but not in River North. Landlords have secured these leases without resorting to overly-generous concessions. The average rent concession offered in River North now stands at just 6.33%, considerably less than the 8.33% hit landlords take if they offer one month free.”

“The data show new buildings in the South Loop, West Loop and River West are offering greater concessions despite delivering only 19%, 9% and 7% of new units since 2017, respectively.”

From Miami Community Newspapers on Florida. “The Miami-Dade County Property Appraiser, Pedro J. Garcia, has released the 2018 June 1 Estimates of Taxable Values to the Taxing Authorities showing a continued growth in the real estate market. The countywide estimated taxable value for 2018 is $288.859 billion, a 6.0 percent increase from 2017. New construction continues to drive the real estate market in Miami-Dade County with more than $5 billion being added this year.”

“However, officials are beginning to see the effects of market corrections, primarily with condominiums and high value single family residential properties, such as in Key Biscayne and Sunny Isles Beach. In some cases, the new construction value helped offset overall value reductions of existing properties in Bal Harbour, Surfside and Aventura. ‘We continue to see the same market trends as last year, with an oversupply of condominiums putting downward pressure on condo values. However, a relative short supply of mid-range single family homes has increased property values, making it more difficult for working families to afford a new home,’ Garcia said.”

From Crain’s Cleveland Business in Ohio. “Akron’s oldest neighborhood is getting a new apartment complex. Local businessman Nick Pamboukis has purchased a former senior living facility in the heart of the Middlebury neighborhood, and said he’s working to turn it into high-end apartments. ‘I have a knack for working with distressed things,’ Pamboukis quipped. Pamboukis isn’t shooting for low-rent units either. He’s hoping to get about $975 a month for the building’s 54 one-bedroom apartments, about $1,200 a month for four two-bedroom units and something in between for six corner units.”

“Those are on the high end of rents in Middlebury, but he would not be the first developer to find demand for high-end rental units there. He’ll have other challenges, though. ‘About a quarter of the houses in this neighborhood are vacant,’ noted Zac Kohl, executive director of The Well, a community development organization.”

From RE Business Online. “There is one surefire way to make sales hum in seniors housing, says Margaret Wylde, an industry consultant who has conducted research in this niche property sector for 34 years. Know who your customer is, the product they want and how much they will pay to get what they want. She believes that the industry is by and large chasing the luxury market, which is less than 10 percent of the potential market. ‘The middle market is 320 percent larger than the market everybody is going after.’”

“While the product today clearly is architecturally better than it was 15 years ago and has the consumer in mind more so than ever before, it’s ‘over-amenitized, overbuilt and over-programmed,’ says Wylde.”

From All Over Albany on New York. “A sort-of follow-up to the recent post about all the apartments the Capital Region has been adding the last few years (with many more in the pipeline)… Capital Region rents have been on an upswing during the past half decade, but that increase appears to have flattened during the last year. That’s one of the bits from the new Capital Region multi-family market report published by Sunrise Management & Consulting.”

“Sunrise president Jesse Holland in a press release: ‘The data indicates that the market is getting saturated … Everyone wants to know if the time to build more apartments is over, or if the economy is going to take off.’”