The Housing Bubble

A report from KENS 5 in Texas. “Are you willing to pay $13,000 dollars a month for an apartment? San Antonio is now home to some new luxury digs that will have you digging deep to lease. At 10 stories high, behind Hotel Emma is the Pearl’s latest gem. The price-tag on this one bedroom apartment we took a tour of is $2,900 a month. And that’s not expensive compared to the largest unit. ‘It’s 3,986 square feet and leases for $13,975,’ Sally Marquez said. There are 122 apartments and Marquez said people are snatching them up. That’s proof San Antonio is ready to step up their luxury living game. ‘Right now we are occupied 22 percent,’ Marquez said.”

From Builder Online. “Slowing rents coupled with rising home prices and mortgage rates are pushing many housing markets in the U.S. into rent territory, according to the latest national index by Florida Atlantic University and Florida International University faculty. ‘The major drivers for this quarter’s scores appear to be slowing rents relative to the costs of ownership and climbing mortgage rates,’ said Ken Johnson, Ph.D., a real estate economist and one of the index’s creators in FAU’s College of Business. ‘This shift should slightly lower the demand for ownership and contribute to the slowdown in housing prices.’”

From Multi-Housing News. “While multifamily rents increased during the month of May, the rate of growth decelerated for the third month in a row, Yardi Matrix reported. May’s growth figures represent the 13th straight month that year-over-year growth has decreased since the peak of 5.4 percent in April 2016. The last time year-over-year numbers were this low was in April 2011. According to the report, ‘Driving the rent deceleration is the increase in supply nationally combined with issues that vary by market, such as slowing demand or affordability.’”

From The Globest. “One hundred days and counting into the new presidency, the market is showing some signs of wear, which could be a continuation of the November hold pattern or simply market dynamics—the waters are that murky. ‘Certainly in the first part of the year acquisitions were down and taking longer to be consummated,’ says Daniel Cunningham, SVP and East Coast manager of the multifamily division at PNC Real Estate. ‘Part of it is due of course to the elephant in the room, but it’s also slowdowns in the market, some absolute rental rate declines, and people trying to figure out what will happen with cap rates and interest rates.’”

“Not surprisingly, the same cautionary atmosphere exists on the construction side. William R. Lynch III, SVP of PNC Real Estate, who works in the Washington, DC, market, agrees that market conditions—whatever the source—are getting tighter. ‘While there’s still capital available for multifamily construction, it’s not as prevalent for a number of reasons and if it is available, it’s likely on terms and conditions not quite as favorable as a few years ago,’ he says.”

The New York Times. “The Federal Reserve in February expressed ‘growing concern’ about commercial property, including large apartment buildings, in cities like New York, Boston and San Francisco. An index of national commercial property prices from Green Street Advisors, a real estate research company, has gained sharply since the recession although has largely stalled since late 2016.”

“But developers do not appear to be pulling back, no matter the warnings. In a sign that the supply of housing will continue to swell in coming months, the number of building permits, a forward-looking indicator, rose 5.7 percent in April compared with a year earlier, the Census Bureau said. ‘It’s exploding,’ said Ron Caplan, the president of PMC Property Group, a Philadelphia-based developer of rental properties in markets including Pittsburgh, Baltimore and Columbia, S.C.”

From Curbed New York. “It’s the same old story with concessions—they still dominate. The share of new transactions with rent concessions was 25.1 percent, nearly doubled from last May’s 12.6 percent. ‘The vacancy rate fell below 2 percent for first time in two years so concessions are working,’ says Jonathan Miller, author of the report. But he adds that ‘the fact that concessions remained high reflects the market remains over supplied.’”

From Bisnow. “Philadelphia may have taken longer than some other major cities to emerge from the recession, but Northern Delaware was still further behind, which means that as Philly enters the late stage of this cycle and margins shrink, its southern neighbor is still in a growth phase. ‘The Philly apartment market is overbuilt, and I think it’s safe to say Delaware’s not there yet,’ Cinnaire Vice President of Business Development Hughlett Kirby said.”

The San Francisco Chronicle. “SF made news recently, refreshingly, for rents going down year-over-year, as rare a sentence to type as it is to read. According to Zumper, that y-o-y decrease has happened again. Though we figure the actual year-over-year rent decrease is somewhere in between all of these projections, anytime rents go down rather than up in this city, we pay attention. And this is the second time that news has grabbed our attention this year.”

From Silicon Beat. “SiliconBeat asked Abodo to further crunch its data to show rent trends in the Bay Area over the past year. What it came up with is significant. Median rents for 1-bedroom flats have dropped by double digits in the region’s three biggest markets: by 14.29 percent year-over-year in Oakland; by 11.86 percent year-over-year in San Francisco; and by 11.76 percent year-over-year in San Jose.”

From KTVU Fox 2. “According to Rent Cafe’s Apartment Market Report, for the fourth month in a row, San Francisco is at the top, but prices are dropping. The reports shows a 3.3% decline in monthly rent over the year. The average cost of rent in San Francisco is now down to $3,369 a month. Have soaring rents in the Bay Area finally come to an end? Apartment construction has grown immensely in the past year, and will continue to rise, adding more housing opportunities in cities that could lead to lower rents.”

“According to Doug Ressler, senior analyst at Yardi Matrix, ‘even if demand for apartment living is still robust, rent growth will continue to taper off in the coming months, mainly prompted by the record number of new apartments entering the country’s tightest markets.’”

From Fox 40 News. “There’s no question that the Sacramento riverfront is an exceptional piece of property to develop. But what has been touted as the gateway to downtown Sacramento has only seen one major piece of property built, which has left the River District as more of an island than a gateway. The site off Richards Boulevard was set to be home to 2,500 condos, office and retail stores and restaurants. And now all of it is on hold after the ownership group responsible for transforming and developing the vacant land, Township 9, filed for bankruptcy last week.”

“The Cannery Plaza Apartments, an affordable housing complex comprised of 180 units, sits alone on the site. The empty fields are now a place for kids to ride their BMX bikes for free until developers can restart the plan for the site. The developers said last week their bankruptcy won’t have an impact on the people living in the Cannery Plaza Apartments, just that it will delay construction around the site until they can re-examine the financing of the deal.”