The Housing Bubble

A report from The Real Deal on Florida. “The Related Group has shut down its Auberge Residences & Spa Miami project and returned buyers’ deposits amid a sluggish condo market, sources told The Real Deal. Related launched the development in February 2016, just as sales were slowing in Miami’s preconstruction condo market. As of April 2016, Auberge had reserved 20 percent of its units, Related vice president Jon Paul Perez said a year ago. But according to a second-quarter 2016 report from ISG, sales for the project stood at 15 percent. Auberge is among the South Florida projects that have gone kaput due to failing presales. Peter Zalewski, principal of Cranespotters, said five projects have been revised, canceled or put on hold so far this year. That includes H3 Hollywood, which will go to foreclosure auction later this month.”

“The sluggish and sometimes stagnant market has led some developers to provide incentives to brokers in their efforts to sell out a building. Last month, Related unleashed a slew of incentives for its Paraiso condo towers, including free maintenance for a year on new contracts signed by March 31, and offered 30 percent deposits, rather than the standard 50 percent. Commissions at Paraiso were already raised to 8 percent to 10 percent, depending on the tower, far above the original 5 percent. ‘None of them want to cut prices,’ Zalewski said. ‘Once you start the price reduction, it’s like a downward spiral.’”

The New York Times. “Airbnb, the short-term home rental service that began operations eight years ago and is now valued at $31 billion, estimates that there are 46,000 hosts statewide, with more than 45,000 active listings in New York City alone. At her primary residence, the two-family house in Clinton Hill, Tatiana Cames said an apartment she offered for rent sat vacant for months before she listed it on Airbnb, because she could not find a long-term tenant. ‘All these high-rises that went up recently made a total glut,’ she said. ‘Owner concessions are increasing every month, offering four months, five months free’ and making it harder for small-time landlords like her to compete.’”

The Princeton Echo in New Jersey. “After a contentious approval process featuring a citizen group lawsuit, Avalon Princeton began moving tenants last August into its large-scale complex occupying the former Princeton Hospital site at the corner of Witherspoon Street and Franklin Avenue. All 280 dwelling units are scheduled for completion this year. Of those completed more than 50 percent are occupied or leased. ‘We are where we expected to be at this time in terms of both leasing velocity and the pricing of the leases,’ says Ron Ladell, senior vice president.”

“Really? Last May when the first units were just coming online, Avalon Princeton released floor plans with monthly rent for studios starting at $2,213, one-bedroom apartments from $2,655, and two-bedroom apartments from $3,235. The three-bedroom units and townhomes had not yet been priced. Now, nearly a year later the website indicates that the same model studios are starting at $1,780, one-bedrooms from $1,865, and two-bedrooms from $2,795 — substantial reductions.”

“Dianne Bleacher, a Callaway Henderson real estate agent in town since 1975, also believes that the rental market is softer than usual at this time of year. ‘It’s not dire,’ she says, noting that traditionally the busiest months of the rental season are May and June. ‘But it will be an interesting summer.’ Bleacher also notes that there are more single family houses than usual for rent. ‘They usually sell,’ she says. ‘Some landlords may have to soften their prices a little.’”

From Bisnow on Washington DC. “The rapid construction of DC apartment buildings will reach its peak this quarter, with a record number of units expected to deliver throughout the DC Metro area. This has created an extremely competitive environment among landlords, especially in the most supply-heavy submarkets like Capitol Riverfront. The second quarter is projected to have 6,914 rental units deliver throughout the DC Metro area, according to Delta Associates’ Q1 report. Of those, 3,440 will deliver in the District, 1,995 in suburban Maryland and 1,519 in NoVa.”

“Grosvenor’s Jon Carr said the prospective tenants who tour the building often look at three or four other Capitol Riverfront apartments in the same day, but he also sees competition from other popular neighborhoods like 14th Street and H Street. ‘It’s a little unfortunate all of this coming in this spurt,’ Carr said of the neighborhood’s delivery surge.”

The San Francisco Chronicle in California. “The news: Year-over-year, San Francisco rents are down. This fact seems uncontested, and is in itself a novel phenomenon worthy of report. The confusion starts when we try to pinpoint exactly how far rent has come down. San Francisco, meanwhile, ’saw the biggest year-over-year rent drop in the nation for March, decreasing 4.3 percent over the year.’ Rent Café posits that this is the second month in a row that San Francisco has had the nation’s biggest year-over-year drop in rent prices. Interestingly, four other Bay Area cities made this decreased year-over-year rent list: Fremont, Santa Clara, Oakland and Sunnyvale.”

The Victoria Advocate in Texas. “Apartment rental rates are down 6 percent from last year, according to a study conducted by Apartments List. Apartment List’s data, which goes back to 2014, shows the rental rate in Victoria during the past three years has been flat, said Chris Salviati, organization data analyst. At this time last year, prices were increasing, he said. Prices started to decrease in April 2016. ‘Over the past month and January and February data, we saw some slightly bigger decreases,’ he said. ‘In the longer-term trend, things are definitely trending downward. It may recover a bit over the next month or two, but I think the longer-term trend we’re seeing in the Victoria area is definitely down.’”

“Rhonda Griffin, All Star Properties property manager, manages about 130 rental spaces, including single-family homes and four-plexes. The rental rates for the four-plex units are down 18 percent from last year, she said, and houses are down 12 percent. Last year, a two-bedroom, one-bath apartment was about $795 a month. The same size apartment is now about $650.”

“‘We were not getting any calls,’ Ross said. ‘I think the market was flooded with what else was out there. When things started suffering, I was preparing my owners that we may have to reduce the rents to get it leased. We’ve been in that process the last two years.’”