The Housing Bubble

A report from the Los Angeles Daily News in California. “If you’re in the market for an apartment, there may be some relief ahead after months of through-the-roof rents. ‘L.A. is going against the current for a change, with rent prices relatively stable and signs of an even better year ahead for local renters,’ said Amalia Otet, communications specialist at RentCafe, which also shows rental units that are available on the market. ‘Demand for apartment living continues to be strong in the city but supply is finally catching up and tempering rents in the process.’”

The Reflector in North Carolina. “The Greenville City Council on Thursday ignored loud objections and obvious signs that the city’s student housing market is saturated when it voted unanimously for a zoning change that will allow for a new 656-bed development on Charles Boulevard. Fred Pierce of Pierce Education Properties said student housing here was at 92 percent occupancy in the 2016-17 Academic Year. The 92 percent figure likely is a conservative estimate considering the state of The Captain’s Quarters, a 1,700-bed complex north of the river.”

“Richard Hart, a principal with ChainBridge Capital, said in another letter to the council on Wednesday that 1,450 beds at the complex were empty this year. The thought of massive vacant apartment complexes worries people. Thousands read Friday’s story about the vote in the paper, on reflector.com and through social media. One Facebook commenter said ‘I am so disappointed and feel like I need to put my condo on the market sooner rather than later.’”

The Columbia Tribune on Missouri. “Cut-rate student housing and a job fair for displaced University of Missouri employees are among the first signs of how budget cuts and declining enrollment will impact Columbia. Landlords eager to lease bedrooms before the semester ended last week were offering gift cards of up to $1,000 or rent reductions worth the same or more to lure renters. They are getting squeezed from two directions – the number of upperclassmen allowed to live off campus will drop by about 1,400 and new buildings a few steps from campus will add almost 700 units to the market.”

“The offers are intended to match or beat the deals other landlords are offering, said Alexander Phillips, CEO of TwinRock Partners. But the company can only cut rates for so long, he added. ‘How strong the school and state will be will determine whether or not we are happy with our investment,’ he said. ‘If they don’t get their act together and drive up enrollment again, we will be licking our wounds.’”

The Tampa Bay Times in Florida. “When Brian Davison announced plans to build up to 78 new condos in downtown St. Petersburg, he revealed another surprise: His company, EquiAlt, plans to ’self-finance’ the project. That could be a smart move. Both nationally and in the Tampa Bay area, businesses are finding it harder to get money from banks these days. Just in the past two weeks, ‘I’ve seen more banks pull back and tread more lightly,’ said Robert Stern, a Tampa real estate attorney whose clients include lenders as well as business borrowers. ‘I have seen local deals not close, or get declined or blow up because of the difficulty of financing.’”

“In Tampa Bay, apartment developers are among those likely to feel the loan squeeze. Thousands of new upscale apartment units have been built since the recession, especially in Tampa and downtown St. Petersburg. And while the bay area has enjoyed strong job growth, incomes have not kept pace so the demand for rentals as high as $3,900 a month could start to wane. Davison said his Tampa company always intended to use private financing rather than commercial lenders to build its downtown St. Petersburg condos. ‘All my co-business people that I’ve seen at cocktail parties in the last year are having difficulties,’ he said. ‘The banks are flat out not lending on something where the cash is not flowing right now.’”

From Bisnow on New York. “Concessions are increasingly becoming the norm in apartments all over New York City, but it is not doing much to stem the tide of the softening market. The impact is being felt more by higher-value assets, another troubling sign. Doorman buildings in Manhattan, which make up about 50% of the multifamily market, had a 3% drop in median rent, the biggest decrease in five years.”

The Cooperator on New York. “Downtown Brooklyn’s housing boom isn’t letting up – but how much new residential construction is too much? ‘It’s like everywhere you turn there’s a new building,’ says Suzanne DeBrango, an agent at Halstead in Boerum Hill. ‘If you travel down Atlantic, you can’t make right turns at all, there’s so much construction. Brooklyn is becoming Manhattan.’ Most of the developments are luxury rentals, DeBrango says, while a small number are condos.”

“In recent months, three new towers have opened – and according to the New York Times, all are facing challenges leasing. The glut of rentals is pushing prices down and forcing landlords to offer freebies and perks, from free months on 12-month leases to no-fee rentals. According to rental listings on StreetEasy, out of 233 apartments for rent in Downtown Brooklyn, 186 are no-fee. And where will the effect of the glut of rentals be felt? In the wallet, of course. DeBrango says it took almost a year to find a renter for a one-bedroom parlor floor rental in a brownstone building with outdoor space in Boerum Hill. The apartment used to rent for $3,000 and the price has since dropped to $2,500. ”

The Fairfax County Times in Virginia. “On the surface, The Cosmopolitan at Reston Town Center appears to perfectly fit its description of a luxury apartment building. However, some tenants say life at The Cosmopolitan does not quite live up to its initial promise. ‘You go on the tour to move in here and…it seems fabulous,’ said Ann Marie Booher, a tenant and board member of the building’s recently formed Tenant Association. ‘…I felt like within three months of living here, a lot of it was just flashy show, and they didn’t live up to that.’”

“‘The in-house management, they want so badly to do whatever they can, but they are very limited,’ Booher said. ‘For me, it seems like it goes back to the character of the parent company and how much they want to penny pinch every little thing.’”