August 26, 2017

Increasingly Exposed To Cyclical Risk And Massive Oversupply

A report from National Real Estate Investor. “The U.S. apartment completion volume across the country’s 100 largest metros has accelerated to more than 80,000 units per quarter in 2017, up from around 60,000 units a quarter in the previous couple years. That aggressive new supply tally is creating a more competitive leasing environment for top-of-the-market product, especially in urban core settings where so many communities are coming on the market within blocks of each other. Atlanta and Dallas are markets that could drop out of the ’solid performer’ category for urban core properties relatively quickly. The cities are absorbing product additions at breakneck speed. However, construction has gotten so aggressive that rent growth is showing signs of stalling.”

“Rents have been essentially flat for a while now in a big block of downtowns, including the urban cores in Charlotte, N.C., Los Angeles, Miami, San Antonio, Texas, San Diego, San Francisco, San Jose and Washington, D.C. Let’s also put Manhattan and Brooklyn in this category. Downtown Los Angeles is still not an especially well-established marketplace, and it has struggled to absorb new supply totaling more than 7,000 units over the past three years. With ongoing construction at 8,000 or so units, a brief period of sizable rent cuts is looking like a possibility.”

“Effective rents in downtown Portland, Ore. have been gradually drifting downward throughout the past year, and Denver’s urban core has been losing pricing power throughout 2017. Furthermore, Central Portland occupancy of about 94 percent is off roughly 300 basis points from the level recorded a couple years ago, and downtown Denver’s occupancy rate of about 91 percent is down even more drastically.”

“Houston’s urban core apartments are really taking a beating. Annual rent cuts are right around the 5 percent mark downtown, and similar or deeper losses are occurring in other urbanized zones like the Medical District, Greenway/Upper Kirby, Greater Heights/Washington Avenue and the Galleria/uptown area. Furthermore, most of these neighborhoods have been suffering rent loss since late 2015 or early 2016. About half of the 21,800 apartments currently under construction in metro Houston are on the way in the more urbanized submarkets, including some 4,200 units specifically in downtown.”

From Bisnow. “There remains a large disparity between the luxury apartments being constructed and the working-class Americans in need of affordable apartments. This divide is driving companies and renters from expensive core markets with inflated rents like San Francisco and New York to more financially manageable areas, and the migration is not going unnoticed by investors. As for the top sell markets, it may come as no surprise that the country’s leading metros like New York and San Francisco are experiencing a shift in renting power as landlords increasingly offer concessions and perks to lure residents and remain competitive. According to Ten-X research, the five top sell markets for multifamily investors are New York City, San Francisco, San Jose, Washington, D.C., and Oakland.”

“Healthy absorption continues to power the sector forward despite expectations of record new deliveries hitting the market later this year. Yardi Matrix predicts multifamily supply will peak this year, with 360,000 new units expected to come online in Q3 and Q4. ‘While many large metro areas are increasingly exposed to both cyclical risk and massive oversupply, the overall market is being sustained by significant societal shifts that is driving strong, sustained demand,’ Ten-X Chief Economist Peter Muoio said in a statement. ‘As long as gainfully employed millennials and other Americans continue to choose renting over homeownership, a majority of multifamily investors can be confident that rents will continue to rise.’”

The Philadelphia Inquirer in Pennsylvania. “Developer Carl Dranoff is planning 28 stories of luxury condos at Broad and Pine Streets, instead of the hotel-and-apartment hybrid he previously had in mind for the site, as Center City heads toward a likely near-term glut of both rental housing and hotel guest rooms. Tony Biddle, regional leader for CBRE Hotels, said central Philadelphia hotel rooms are being booked at an ever-swifter pace. But Biddle said that won’t be enough to absorb all the new supply in the near term, which could encourage other developers with hotel projects on their drawing boards to join Dranoff in revising those plans.”

“Developers are ‘taking note of the anticipated supply growth that we will have here over the next couple years,’ he said.”

The Dickinson Press in North Dakota. “Are apartments and commercial properties taking on an unfair tax burden in Dickinson? Carlos Royal, owner of roughly 300 apartment units in Dickinson, certainly thinks so. Even as Dickinson’s oil boom continued to pump along in 2013, Royal believes that the apartment market was already beginning to crash. Developers ‘basically overbuilt the market,’ Royal said. ‘The apartment boom started to show signs of a bust in 2013.’”

“He also believes that he won’t be the only one giving the city trouble over this issue and pointed to recent similar lawsuits filed by Menard’s and Sierra Ridge Apartment Homes’, both in Dickinson, as evidence of a more systemic issue. ‘I think you are going to find that there is going to be a whole flood’ of commercial property owners complaining to the city about overvaluation, Royal said.”

From Curbed Miami in Florida. “Miami rents are dipping across many popular neighborhoods, according to the latest report by Zumper. While rent in the city itself still remains expensive—the median one-bedroom apartment price of $1800 ranks 9th in the country—a year-over-year decrease is noticeable in coveted core areas like Brickell (-2.3%), Downtown (-6%), and Edgewater (-8%), but the reductions are especially prevalent in South Beach, where rents along West Avenue and the city’s center have dropped 10 percent and 15 percent, respectively.”

“Reasons why rents have slipped in the aforementioned areas could not only be due to an oversaturated supply but that Miami renters simply want out. Apartment List recently surveyed 24,000 renters across the country and found that 76 percent of renters in South Florida ‘planned to settle in a new city.’ This was 12 percent higher than the national average.”

From Real Estate Weekly on New York. “It may be the busiest time of the year in the New York City rental market, but according to the latest market reports, renters have the upper hand. According to a report from Citi Habitats, while average rents declined in July as compared to the previous month, the vacancy rate increased. ‘Any time the vacancy rate kicks up one month from another in the summer season, that’s something that always intrigues me because it’s the busiest time of the year,’ said Citi Habitats president Gary Malin. ‘Historically, you’d think vacancy would go down because in the summer people are moving here. You just wouldn’t expect it to rise, but given the way the market’s been operating over the last year, it’s pretty much par for the course.’”

“Malin called the rental market ‘very price-sensitive,’ and that while landlords are looking to achieve high prices — and many do — renters will find other neighborhoods where they can get the same amenities and proximity to Manhattan for less. ‘They have an idea in their head that they can go to other locations and get value,’ said Malin of renters.”

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Comment by Mafia Blocks
2017-08-26 08:02:33

Warrenton, OR Housing Prices CRATER 13% YOY

Comment by Jingle Male
2017-08-27 05:24:10

HA, you are such a jokester.

Comment by Mafia Blocks
2017-08-27 05:50:43

It is what it is my good friend. It is what it is.

Chevy Chase MD Housing Prices CRATER 16% YOY

Comment by Ben Jones
2017-08-26 08:08:16

‘The apartment boom started to show signs of a bust in 2013’

This area had the highest rents in the US at the time, and it was a full year before the oil price drop. These guys overshot by years.

Comment by Ben Jones
2017-08-26 08:19:23

‘While many large metro areas are increasingly exposed to both cyclical risk and massive oversupply, the overall market is being sustained by significant societal shifts that is driving strong, sustained demand,’ Ten-X Chief Economist Peter Muoio said in a statement. ‘As long as gainfully employed millennials and other Americans continue to choose renting over homeownership, a majority of multifamily investors can be confident that rents will continue to rise.’

This is the knee-jerk bullishness that got them into this situation. I guess that’s what to expect in a mania. Let’s see: cyclical risk, CRE is big enough to create a recession, certainly in real estate. Cycle: it’s gonna happen eventually.

Massive oversupply: already here. Yet “a majority of multifamily investors can be confident that rents will continue to rise.” Rents better rise because at these prices it’s crap returns. But if rents fall, and they are almost everywhere now, it’s walk away time. That’s what the non-recourse loans are for, right Peter?

Comment by 2banana
2017-08-26 08:20:13

The legacy fake news media.

1. Where did the money go? One got $300,000. And she can’t pay the taxes?

2. You have got to be world class stupid to get foreclosed and evicted over $491.

3. You have to pay your property taxes. It is in the CONTRACT YOU SIGNED. You voted for long term democrat control and public union goon power. They will have no mercy. Not one public union goon pension will go unpaid or cut.


More seniors are taking loans against their homes — and it’s costing them
- Jenifer McKim - August 25,2017 - The Washington Post

As she was getting on in years and her resources dwindled, Virginia Rayford took out a special kind of mortgage in 2008 that she hoped would help her stay in her three-bedroom Washington rowhouse for the rest of her life.

Rayford, 92, took advantage of a federally insured loan called a reverse mortgage that allows cash-strapped seniors to borrow against the equity in their houses that has built up over decades.

Under the terms of the loan, Rayford can defer paying back her mortgage debt that totals about $416,000 until she dies, sells or moves out. She is, however, responsible for keeping up with other charges — namely, the taxes and insurance on the property.

The loan servicer, Nationstar Mortgage, says Rayford owes $6,004 in unpaid taxes and insurance. If she cannot come up with it, she stands to lose her home in Washington’s Petworth neighborhood.

Across the nation, an increasing number of seniors are facing foreclosure after taking out reverse mortgages, either because they fell behind on property charges or failed to meet other requirements of the complex mortgage loans, according to federal data and interviews with consumer and housing specialists.

But a HUD report issued last fall found that nearly 90,000 reverse mortgage loans held by seniors were at least 12 months behind in payment of taxes and insurance and were expected to end in “involuntary termination” in fiscal 2017. That’s more than double the number the year before.

But tens of thousands of troubled loans remain. More than 18 percent of reverse mortgage loans taken out from 2009 to June 2016 are expected to go into default because of unpaid taxes and insurance, according to the HUD report. That compares with less than 3 percent of federally insured loans that are considered seriously delinquent in the traditional mortgage market.

“You have people who have run out of money, they can’t pay their taxes, and they are awaiting a miracle,” she said.

Sarah White, a foreclosure prevention attorney at the nonprofit Connecticut Fair Housing Center in Hartford, said she went from never hearing of problems with reverse mortgages to spending a large portion of her workday helping senior citizens stave off foreclosure.

Among her clients is Dorothy Leong, 81, who is facing foreclosure on the modest two-bedroom home in Stratford, Conn., that she’s owned for decades because of a dispute over $491 in unpaid taxes and insurance. “It’s like they want me to fail,” she said. “I don’t want to lose my house.”

Rayford, who is fighting to keep her Washington home, obtained a reverse mortgage in 2008 to pay off a $41,000 traditional mortgage and refinanced in 2011 to retire that loan and cover other expenses, receiving a one-time lump sum of about $60,000.

Rayford said she knew she was supposed to pay taxes but fell behind in 2013 following family financial troubles. She sought a repayment plan from her loan servicer, which denied the application, saying she couldn’t afford the monthly payments.

Comment by Mr. Banker
2017-08-26 08:45:52

“Among her clients is Dorothy Leong, 81, who is facing foreclosure on the modest two-bedroom home in Stratford, Conn., that she’s owned for decades because of a dispute over $491 in unpaid taxes and insurance. ‘It’s like they want me to fail’” she said. ‘I don’t want to lose my house.’”

“It’s like they want me to fail.”


“Rayford said she knew she was supposed to pay taxes but fell behind in 2013 following family financial troubles. She sought a repayment plan from her loan servicer, which denied the application, saying she couldn’t afford the monthly payments.”

There it is once again: Dumb ‘em down, profit.

Comment by oxide
2017-08-26 18:02:18

How much you want bet that the “family financial troubles” are a drugged-out kid/grandkid?

Let’s just say that when I get old and crotchety, I hope I have the courage to sell the house and use the money to MOVE to a cheap assisted living facility out in the sticks, instead of wailing “but this is my ho-o-o-o-o-o-ommmee!” like old ladies tend to do.

Comment by Mafia Blocks
2017-08-26 08:46:51

Ahh yes… the reverse mortgage scam. Throw good money after bad at a house for 30 years, bank hands you 10% of that amount in cash and takes the house back. All the bad parts of a depreciating asset like a house at 3 times the cost of renting it.

Gullible people easily turned DebtDonkey/HousingHen are always wanting something for nothing. They get less than nothing for everything.

Comment by Mr. Banker
2017-08-26 08:55:23

A reverse mortgage = A thing of beauty.

Comment by Ben Jones
2017-08-26 08:49:40

‘Appraisers raise concerns over Fannie, Freddie automated appraisals’

‘Last week, both GSEs announced their new appraisal-free product for purchase mortgages, and appraisers are already raising concerns over this new step. Freddie Mae announced its Automated Collateral Evaluation will begin on September 1, and Fannie Mae announced its Property Inspection Waiver, which went into effect immediately.’

‘But now, the appraisal industry is raising concerns over the automated appraisals, even accusing the GSEs of not bearing the consequences of the risk they are taking. One commenter, Forest Miller, wrote, “Wow, cut out the appraiser and save a whopping $500? Why not cut out the home inspection and title search too? Can’t believe the stupidity.”

‘This comment, from Kim Carty JD explained the 10 days the buyers would save is just not worth it. “I don’t understand the rush to close in 10 days. Our market is so hot with so little inventory, that you can barely get through the home inspection period in 10 business days unless you want a less-than-stellar home inspector. An ounce of prevention goes a long way and throwing out a check on the system is irresponsible. EYES are needed on each property to give an approximation of value and the automated systems that I always check because I know homeowners will, are usually off - and a significant amount.”

One poster here asked a similar question about the new 50% debt to income rule the GSE’s enacted:

‘Our market is so hot with so little inventory’

Pedal to the metal, right Mel?

Comment by 2banana
2017-08-26 08:53:37

The obama legacy of Mel Watts.

It is the gift that keeps on giving.

At least until 2019.

Comment by Ben Jones
2017-08-26 09:15:29

‘President Donald Trump’s name was rarely mentioned as top central bankers and economists spent Friday mulling the fate of the global economy at a mountain lodge here. But his presence loomed large at a Federal Reserve symposium, and even without citing the man in the White House, the presentations - from Fed chair Janet Yellen, European Central Bank President Mario Draghi and a host of researchers - amounted to a broad rebuttal of many of the ideas that carried Trump to office.’

‘The rise of Trump, the vote by Britain to leave the European Union and the spread of opposition to globalization have worried central bankers and many mainstream economists who feel that the problems associated with globalization have overshadowed the benefits and morphed into broad opposition to it.’

‘Remedies for these issues may be outside the immediate sphere of monetary policy, but they are concerned that new waves of protectionism or reckless deregulation could threaten an economic system that is currently stable and that has returned to growth across the world.’

‘In a panel on trade, there was more direct skepticism of Trump’s approach, even as economists and central bankers here agreed they had ignored for too long how difficult the adjustment would be for workers. “We have lost the rhetoric on trade in terms of explaining to those who benefit why they do, such as cheaper products, while all of the focus has been on those who have lost,” said Gita Gopinath, professor of international studies and economics at Harvard University.’

They stamped their little feet in Davos too, while munching on $40 hotdogs:

‘mulling the fate of the global economy at a mountain lodge’

Ignored for what, 50 years?

‘even as economists and central bankers here agreed they had ignored for too long how difficult the adjustment would be for workers’

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Comment by 2banana
2017-08-26 09:20:03

Fed chair Janet Yellen - Another obama legacy gift that keeps on giving (at least until FEB, 2018)…

Comment by Ben Jones
2017-08-26 09:24:23

She turned in her walking papers with that speech. Mike is a sad panda today.

‘Progressive campaigners say they have no remorse over Yellen era’

‘Progressives played a key role in paving the way for Janet Yellen to become the first chairwoman of the Federal Reserve in 2014. And they don’t regret it. Left-leaning Democrats in the Senate and their allies in Washington told President Barack Obama that they would not support Lawrence Summers, his first choice for the Fed job, clearing the way for Yellen to take the helm of the central bank.’

‘Four years after a wrenching summer fight, there is no sign of buyers remorse from the left, even though Summers has turned out to be a much more forceful advocate for leftist positions than Yellen has been.’

Comment by GuillotineRenovator
2017-08-26 14:06:15

“…as economists and central bankers here agreed they had ignored for too long how difficult the adjustment would be for workers…”

That’s rich. I wonder how bankers would handle such an adjustment to their incomes? Not well, I’m guessing…

Comment by GuillotineRenovator
2017-08-26 14:08:46

Summers is bad juju, too.

Comment by oxide
2017-08-26 18:05:10

Agree. Dove or not, at least Yellen appears to be a stand-up gal; you know what you’re getting. Summers is one of those sneaky wormtongue globalists. Yet somehow he manages to slither from one high-profile position to another.

Comment by GuillotineRenovator
2017-08-26 14:04:24

Appraisers are nothing more than hit the numbers hacks. I’m not sure this even matters.

Comment by SW
2017-08-26 19:09:22

I have received multiple offers for 1% down mortgages in the last two weeks.

Comment by oxide
2017-08-27 04:58:39

the 10 days the buyers would save is just not worth it.

Nobody is skipping the inspection and appraisal to save 10 days, c’mon. They just want people to overpay for a house with unknown and possibly very expensive issues. As Mr. Banker would say, just get the stupid pukes signing on the dotted line.

Comment by clark
2017-08-26 08:26:41

‘76 percent of renters in South Florida ‘planned to settle in a new city.’ ‘

I wonder what ‘new city’ they all have in mind, cause the view from up here in the Northland is that South Florida would be a nice place to go to.

Is it all just a, ‘the grass is greener on the other side of the fence’ kind of outlook? Or, is there a better city?

Comment by Ben Jones
2017-08-26 08:31:19

Miami rents are the highest in the nation compared to incomes.

Comment by whirlyite
2017-08-26 09:54:55

I see tons of FL plates here in the nation’s soon to be third-largest city; which by the way, is currently under siege from Harvey.

Comment by Ben Jones
2017-08-26 12:28:35

I watched some live streams this morning. There were cars all over and people walking on the beach.

Comment by Ben Jones
2017-08-26 13:05:15

‘You can find the latest Hurricane Harvey rainfall totals for Corpus Christi, Texas below. All totals are in inches.’

‘According to Weather Underground, Corpus’ rainfall total for Friday, August 25 was 1.97 inches. It feels like this may be a little low, especially considering some of the footage we saw of cars underwater. However, if you look at Weather Underground’s rain predictions for the next day, you see the number increasing significantly. In the next seven hours, about 2.74 inches of rain are forecast to fall. But in 24 hours, that could grow to 3.66 inches.’

‘As of 2:15 p.m. CST, the National Weather Service shared this image showing rainfall totals in Corpus Christi in the last 24 hours. It indicates that some areas of Corpus received 4 to 5 inches, other areas 3 to 4 inches, and some may have received up to six inches.’

That’s a long way from 40. Man, the media is shameless about this kind of stuff.

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Comment by GuillotineRenovator
2017-08-26 16:44:52

The media is repulsive. I don’t even watch tv anymore.

Comment by alphonso bedoya
2017-08-26 10:19:54

They didn’t mention finding new employment, did they?

Comment by Ben Jones
2017-08-26 08:34:01

‘Here’s how many NYC buildings are vacant’

‘Brooklyn and Queens lead the pack’

‘As many as 541 properties in the five boroughs may be sitting vacant, according to an analysis of 311 calls over the past 12 months by OneTitle National Guaranty Company. “These are hiding in plain sight,” OneTitle’s Daniel Price told the Post. Brooklyn and Queens have 155 vacant buildings each, the Bronx has 110, Manhattan 63 and Staten Island 58.’

Comment by 2banana
2017-08-26 08:40:17

What is a 311 call? A spy network for reporting vacant buildings?

The numbers don’t seem to merit any statistical concern.

For example - Out of ALL Manhattan - 63 buildings vacant out of literally tens of thousands doesn’t seem out of whack. And considering no data given on these buildings, they are probably on the very small, not very usable side of the equation.

Comment by Ben Jones
2017-08-26 09:20:44

‘Ralph Lauren was the king of “experiential retail” well before the term existed. So in 2014, when Ralph Lauren opened its first Fifth Avenue Polo-branded store — complete with coffee shop, bar, and four working fireplaces — there were high hopes for it. But this April, after being beaten down by declining revenues, the company said it would shut the store, in a move it estimated would save $140 million.’

“Everyone thought the Polo store was going to be off the charts in terms of creating an environment,” said one real estate player in the know. “And it wasn’t.”

‘Manhattan wasn’t immune. The city’s priciest corridors are facing their own impending corrections, said CBRE’s Hodos, and the reason is simple: rents are out of whack. As of spring 2017, the median rent on the retail corridor checked in at $3,427 per square foot, according to the Real Estate Board of New York.’

“On Fifth Avenue rents need to come down 50 percent,” Hodos said. ”No retailer I know of can make money with that kind of rent.”

‘Take the Polo store, for example. The total deal for the 16-year lease at 711 Fifth Avenue was $400 million, starting at about $25 million a year. “They said, ‘Look, too much is being spent on this one location,’” said Mike Oliverio, who was head of real estate at Ralph Lauren when the store closed. “Yes it’s a flagship, yes it creates the aura and halo behind the brand, but it’s just gotten too expensive.”

Comment by 2banana
2017-08-26 09:30:14

Commercial rents are insane in NYC.

Especially on Fifth Avenue.

But there are also lots of empty storefronts.

And rents don’t seem to coming down as logic would dictate.


Still plenty of cheap and easy obama bucks looking for a place to die…

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Comment by Ben Jones
2017-08-26 09:35:53

I’ve posted this before:

‘Is the real estate double bubble back?’

Look at the charts. CRE is a bigger bubble than houses.

Comment by alphonso bedoya
2017-08-26 10:33:52

Ralph Lauren… Fifth Avenue Polo-branded store

IF…..that’s if open 8 hours/day, seven days a week…..needs to sell $70k/day merchandise to break even. Lets call it 175 shirts/hour…$50/shirt

What’s your neck size?

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Comment by Ben Jones
2017-08-26 10:41:20

Is that with robot staffing?

Comment by alphonso bedoya
2017-08-26 14:59:48

No one crunched the numbers, first? I assume everyone wore yellow ties at the lease signing.

Comment by MacBeth
2017-08-26 11:10:35

How idiotic are these people?

Starbucks is successful not solely because it appeals to hedonists.

Starbucks offers readily consumable products, with a sizeable number of customers visiting several times a week.

Customers do not frequent stores 2-3 times a week every week to drop $30-60 for a Polo shirt. Not even the most insecure.

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Comment by alphonso bedoya
2017-08-26 15:03:52

Starbucks sells the worse coffee. This is why they’re always pitching things to MASK the taste.
Good coffee isn’t bitter.

Comment by MacBeth
2017-08-26 18:24:00

I’ll take your word for it. I don’t drink coffee, period. Hate the stuff.

Comment by nolookpass13
2017-08-27 08:36:09

Starbucks coffee always taste burnt.
I call it Charbucks.

Comment by oxide
2017-08-26 18:09:55

“311″ is the number that you call if you want to access local government services. The most common use for 311 I’ve seen is to map out the utilities on your property so you don’t hit a pipe if you’re planting a tree. But I guess you also use it for permits or inspections or surveying or turning on gas lines etc — the kind of stuff you need if you’re going to renovate or live in a house. No 311 means probably nobody lives in the house.

Comment by Ben Jones
2017-08-26 08:44:17

‘Why Universities Are Phasing Out Luxury Dorms’

‘In recent decades higher-education institutions have tried to lure students with extravagant amenities, but some are finding that these attempts can actually threaten enrollment and retention.’

‘By the turn of this century, colleges had an increasing appetite for campus luxuries. A surge of students from the millennial generation were graduating from high schools nationwide, and many colleges found the simplest way to compete for attention in a crowded market was to build fancier facilities. Construction cranes became ubiquitous on campuses, and often the most high-profile projects involved student amenities—rock-climbing walls in recreation centers, swanky student unions with first-rate food services, and luxury “residence halls” with private bathrooms—usually financed by borrowing. Between 2001 and 2012, the amount of debt taken on by colleges rose 88 percent, to $307 billion.’

‘After building one of the country’s most-expensive student-housing projects, a $168 million complex of apartment-style residences called University Commons, in 2007, Georgia State University officials worried about the impact of pricier housing on the ability of students to earn a degree. The university found that for every $5,000 in unmet financial need, a student was 12 percent less likely to graduate.’

‘Take Indiana University of Pennsylvania as an example of a school that made a big bet on amenities to gain students but without success. Late last decade, the state school 60 miles northeast of Pittsburgh replaced all student housing on campus with apartment-style suites, at a cost of $270 million. Since 2010, its undergraduate enrollment has dropped 17 percent to just over 10,000 students.’

‘For less-selective schools like Indiana University of Pennsylvania, it is usually easier to construct new buildings than improve academic quality, which not only takes longer to achieve but is also less visible to families on tours. That’s the takeaway from a 2015 study from researchers at the University of Michigan, who analyzed a phenomenon they described as “college as country club” and the pressure on schools to cater to students’ desire for “consumption amenities.”

‘The study found that lower-tier schools “have greater incentive to focus on consumption amenities” because prospective students of less-selective colleges may care more about the “resort” experience of college than teaching and academics. The researchers drew parallels to health care, “where patient amenities are a much stronger driver of hospital demand than clinical quality.” But that analogy is not quite apt since the goal of hospitals is not to keep patients for a specific amount of time, as is the case in higher education where the goal is to keep students until they receive a diploma. Fewer than 40 percent of students enrolling for the first time at a four-year college actually graduate in four years, and many drop out never to return.’


‘may care more about the “resort” experience of college than teaching and academics’

Comment by 2banana
2017-08-26 08:49:29

2banana’s engineering degree.

Cement block room. Metal beds. Bathroom down the hall you shared with the rest of the floor.

It was fine. And affordable. And made you appreciate your first apartment when you got that first job.

These snowflakes may never live better than their few years in a luxury “dorm” room…

Comment by Mr. Banker
2017-08-26 09:02:21

“These snowflakes may never live better than their few years in a luxury “dorm” room…”

The University Experience boils down to Extended Childhood for many.

The Real World awaiteth.

What? You can’t land a job after getting your bachelors? No matter; go back to school and get your masters.

The Real World continues to wait … (tick tick tick)

Comment by Rental Watch
2017-08-26 10:18:34

Ditto here banana.

Dorms built like bunkers. 3 people in two rooms (we did build a kick-a** loft though), shared bathroom down the hall, no A/C.

“Amenities” were the university gyms and pools that you had to get on your bike to reach. Traditional dorm food, etc.

And shockingly, we all survived.

I didn’t move off-campus until my master’s year…shared apartment was cheaper than campus housing.

Comment by MacBeth
2017-08-26 11:15:12

My dorm in the 1980s was the same. Cold cinderblock walls, metal frame beds. Linoleum floors in the common areas.

In fact, I lived in what was a military barrack. When I was there, it was a co-ed dorm.

The girls had urinals in their communal bathroom.

I don’t remember anyone crying about the spare accommodations.

Comment by Ol'Bubba
2017-08-26 09:05:50

Forgive me for being vague, but I had a front row seat in a student housing construction loan not too long ago.

One of the fundamental pieces of the underwriting was comparing the cost of luxury student housing to on-campus housing.

For many years colleges and universities were charging a very high rate for a very small amount of space like deuce-’nanna described.

When you compared the costs with what was provided, the off campus housing made a compelling value proposition.

Would you rather share a small spartan space on campus or pay slightly more for new construction?

Comment by Mafia Blocks
2017-08-26 09:12:34

Interesting notion. Just the opposite of new versus existing housing stock with new construction cost being a fraction of the cost of buying a used up 40 year old shack.

Comment by Montana
2017-08-26 12:23:59

So is the rent money coming from guaranteed loans and Pell Grant?

We need to raise those maximums, stat.

Comment by oxide
2017-08-26 14:42:02

My dorm experience was much like 2banana’s. Nowadays colleges are just expensive finishing schools, if that. Today I was out shopping and was saw a couple guys at a table trying to sign up people for cable (or dish or whatever). I was ready…

Guy: Ma’am may I help you to save money today on your phone, internet, and cable?
Oxide: What did you major in in college?
Guy: uh, whut? Uh, I was a sociology major.
Oxide: WRONG ANSWER!! [walks away]
Guy: Oh, uh, what should I have majored in?

I bet he lived in a luxury dorm. Dang, that was fun. I’m gonna try it again.

Comment by Can Bubble
2017-08-26 08:45:06

Quick story from Toronto.

On Jan 1st, 2000, I moved into a narrow 3-storey house in Toronto’s Little Italy. It had four bedrooms (one quite small) and one bathroom over 2000 square feet. The house was built in the 1920’s. At the time, I think it was worth about $350,000. The rent for the four of us was about $2000. The house was owned by four Italian sister’s who inherited the house from their deceased parents.

I had friend’s in the neighbourhood so I came back frequently. A new group of friends moved in. They were young hippy’s. The new tenants wrote The MUD HAUS on the front window in mud. The house became something like a commune that within a few years had as many as 15-20 tenants. Sometimes they had a tent or two in the small backyard.

I heard that the family with young kids in the house next-door to the north of them were frightened by the constant smell of reefer. The Reverend and in his wife in the old Anglican church next door to the south weren’t very happy either.

Finally, in 2013, the sister’s had enough and managed to evict the tenants by saying they were going to renovate it and sell it. They spent over 100k on the place fixing it up.

Then the sister’s waited and kept the house empty. They went through a few different real estate broker’s over the last few years and the price kept going up.

Last spring, the sister’s were offered 1.2 million cash. They turned it down. They were offered 1.3 but refused. They wanted 1.5 million.

I was there last month and I saw some guy taking the For Sale sign from the front lawn. I asked the guy “So, did they get a sale?”. The guy angrily said “I don’t know, I’m just here to take down the sign”.

Now, the sister’s would be lucky to get 1.1 million. By the time they end up selling it, they’ll be lucky to get 800K. They’re still paying property taxes and other fees.

Comment by Ben Jones
2017-08-26 08:53:40

I mentioned the other day, why is the MSM ignoring what’s going on in Toronto? Sure they’ll run a little report here or there, but every economist (and financial reporter) in the hemisphere should be watching the most clear example of a mania/bust there’s ever been.

Comment by 2banana
2017-08-26 09:03:14

Add to the mix…

The stock market take a dive.

A hard Canadian winter.

A few upticks in interest rates.

And the rest of the Canadian housing bubble imploding.

“Hey, we are not going to GIVE it away…”

Comment by rms
2017-08-26 21:41:23

“Add to the mix…”

Canadian Crude Index basically flat.

Comment by Ol'Bubba
2017-08-26 09:11:37

I bet there’s a lot more to that story than meets the eye. Since the house was inherited, I imagine there was disagreement among the sisters about selling Mom and Dad’s house. It may well have been where the sisters grew up.

My point is that in settling an estate, there’s often a great deal of emotion which trumps logic. Perhaps one or more of the 4 sisters wasn’t ready to close that chapter and move on with their lives.

Comment by Can Bubble
2017-08-26 10:34:47

That was likely the case when the sister’s first started renting it out over 20 years ago. Now, I think they were just holding on for pure greed. One or more of the sisters what must’ve wanted a higher amount. Of course, the higher the market would’ve went the more reluctant they would’ve been too sell when they think they could’ve gotten more.

Comment by 2banana
2017-08-26 08:56:10

Hurricane Harvey hitting Texas.

The may be up to 40 inches of rain in some areas.

Houston will be flooded.

200,000 without power.

All in all, not a bad hit as it could have been.

However, sometimes events like these are the catalyst for change…

Comment by Ol'Bubba
2017-08-26 09:15:03

I topped off my car’s gas tank last night in advance of the hurricane. In times like this, prices rocket upward and feather downward.

Here in NC the early predictions were for gas prices to spike about 5-10% in the aftermath of the hurricane.

I hate hurricanes.

Comment by Ben Jones
2017-08-26 10:12:17

‘Effective rents in downtown Portland, Ore. have been gradually drifting downward throughout the past year, and Denver’s urban core has been losing pricing power throughout 2017. Furthermore, Central Portland occupancy of about 94 percent is off roughly 300 basis points from the level recorded a couple years ago, and downtown Denver’s occupancy rate of about 91 percent is down even more drastically.’

Time for the Denver Post to turn out another spin on how rents just keep going up.

Comment by 2banana
2017-08-26 10:22:46

But, but…mountains and weed…

Comment by In Colorado
2017-08-26 14:52:41

At Denver Comic Con this year at every celebrity panel I attended, the celebs cracked a joke about the “dispensaries”

At last year’s Denver CC, one of the panelists was Katee Sackhoff (Starbuck in the Battlestar Galactica remake). She was 20 minutes late for her panel. Garrett Wang (Ensign Harry Kim in Star Trek Voyager) was the panel host and he entertained us until she finally arrived … stoned out of her mind. I guess she found a dispensary.

Comment by sleepless_near_seattle
2017-08-27 01:22:45

Took a quick roll through some of my old haunts here in Portland today and saw 7 new buildings going up, one in a place I’d hoped would make it through this mess without being developed. I’d guess about 750-1000 new units. Meanwhile, all the ones in the same areas finished last year have for lease signs, plenty of vacant balconies, and vacant first floor retail.

Comment by palmetto
2017-08-27 10:08:19

Yah, I’ve been working on a project that takes me on short trips around the state (Florida). Wow. Just, wow. Corporate housing everywhere, both rental and residential development. Ugly, gulag architecture in many, if not most, cases. Basically warehouses for bodies.

Lots of pennants and flags out front. Now Leasing! Now selling! C’mon in and get hosed. Whiff of desperation.

And Florida has a sort of wilted, dispirited air to it, although that’s not unusual for August/September, after a brutal summer season. But it just seems worse this year somehow.

Comment by Mafia Blocks
2017-08-26 10:22:47

Boulder, CO Housing Prices CRATER 5% YOY

Comment by Taxpayers
2017-08-26 10:34:19

Are rents going up anywhere?
Seattle,portlandia ?

Comment by Jingle Male
2017-08-27 06:03:54

Sacramento rents are increasing.

Comment by rms
2017-08-27 06:25:51

Are wages rising there too?

Comment by palmetto
2017-08-27 08:43:40

I dunno, but the waters are rising in Houston.

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Comment by Mafia Blocks
2017-08-26 12:33:24

“Real estate exec kills his family in double-murder suicide”

Maybe guilt got the best of him.

Comment by Ben Jones
2017-08-26 12:39:44

‘The family’s own house — a 4,551-square-foot home with five bedrooms, 4¹/₂ bathrooms and a giant backyard — is on the market for $1.7 million.’

I saw this article elsewhere:

‘Neighbors told NBC 4 that the house was up for sale and that no one knew the family too well…Pound Ridge is on the eastern part of Westchester County. It’s bordered by Bedford to the west and Stamford, Connecticut, to the south. It’s a town of less than 30 square miles with sprawling, multimillion-dollar homes for sale.’

Comment by palmetto
2017-08-26 12:53:31

Bad ju-ju in that area. It’s part of the Devil’s Triangle of Chappaqua (home to Hillary Clinton), Katonah(home to George Soros) and Pound Ridge at the third point. Don’t live there if you value your sanity.

Comment by rms
2017-08-26 21:51:16

“Their daughter, Caroline, 18, was a talented student-athlete at Sacred Heart Greenwich.”

What selfish bastard… she was just getting started.

Comment by palmetto
2017-08-27 04:46:18

I would venture a guess that some serious pharmaceuticals were involved.

Comment by palmetto
2017-08-26 13:17:25

Speaking of rentals, the big thing here in Florida and other Southeastern states is “Rent to Own”. They must be giving seminars on this, because the small-time RE infestors (mom and pops trying to eke out some return on their money) seem to have it down to a science. Craigslist is a huge source for this scheme.

From what I can figure out, it’s a way of being a landlord without all the headaches. Get a tenant to sign a Rent to Own agreement and all maintenance is on them, from roof leaks to plumbing to appliances. No phone calls from tenants! Beauty! And you can still put any restrictions on the tenants you want to put, (no pets, smoking, etc.) Plus you get an upfront chunk of $$ that’s more than first, last and security. 15-25 year agreements. Just let the bux roll in and let the tenant worry about fixing stuff.

I don’t know all the details, just came on my radar recently. It doesn’t sound like a lease option, just a way of avoiding the usual tenant headaches. Seems like the penny-ante investors pumped to the max about it.

Comment by In Colorado
2017-08-26 14:54:59

I wonder what percentage of RTO renters wind up buying the house. Very few, I suspect

Comment by palmetto
2017-08-26 16:16:04

That’s the whole idea. Like I said, I don’t know a whole lot about it, we have a friend moving down from up Nawth (or thinking about it) who was looking to rent a modest house. Hard to say which is scummier, Craigslist or the “property management” realtors. I really hadn’t been following much of this until she brought it to our attention.

Comment by clark
2017-08-27 02:30:01

Imho, RTO came about around the year 2002 as a way to avoid having newly created department city inspectors demanding to enter rental properties as if they were Sargent Shultz and your rental house was not your home. If it wasn’t such a rip-off deal price wise I would have loved to do it to escape having a stranger walk through every room in my rental house as if it were a hotel room. The only other options were to move to a city which didn’t inspect [where's that?] buy a mobile home, or sign up with Mr. Banker to buy an overpriced house and add tax revenue to the city, which I think was the plan all along. Like a deer drive.

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Comment by palmetto
2017-08-27 06:18:39

I did not know that, clark. What part of the country is this? I haven’t heard of this happening in Florida, although I’ve pretty much lived in unincorporated areas where that is not as likely to happen.

I was, however, visited by members of the local constabulary (and a couple of bounty hunters, lol) back during the first bubble pop. They were looking for the former occupants of the apartment I had rented. The bounty hunters were very respectful and realized their mistake and apologized. The two members of the local constabulary, however, were thugs and demanded access to the apartment under threat of arrest. They knew I wasn’t who they were looking for, but were bored and decided to have a little fun.

I’ve told this story before, at least a couple of times. I learned a good lesson that day. Could’ve been worse.

Comment by clark
2017-08-27 19:13:18


Comment by Taxpayers
2017-08-26 17:04:07

Houses in My hood sell for 200 x rent

How many years ago was the ratio 120 x rent?

Comment by Mafia Blocks
2017-08-26 17:18:08


Comment by oxide
2017-08-26 18:21:06

120x rent is probably a relic from the days of 7% interest rates. Back then, prices were lower but interest was higher, so PITI would have been the same. So 120x was a rule of thumb, just like 2.5x income. With lower interest rates, and the rule of thumb being 3x income, 120x might be too low.

For reference, my house cost about 140-150x rent. And that was considered the bottom of the market.

Comment by Taxpayers
2017-08-27 04:46:29

1990s for 120x

Comment by Jingle Male
2017-08-27 06:08:34

I bought houses for 125 X’s rents in 2009-10. Rents have gone up 20% since then.

Comment by Senior Housing Analyst
2017-08-26 18:41:26

Bradenton, FL Housing Prices Plunge 8% YOY On Falling Rents

Comment by Mike
2017-08-27 06:22:54

just finished watching “Banking on BitCoin” and thinking about what made it go over $4K.

1 - a rising tide of printed money floats all asset classes.

2 - it is reflective of social mood, i.e., a latent distrust in financial
institutions as we enter the late (perhaps last) phase of this mega bubble.

3 - BitCoin is the most accurate gauge of the actual devaluation
of the dollar due to printing. Since all major currencies are have been
subject to printing, their relative values have not changed much.
In other words, if only one country been printing, the devaluation in relation to other currencies
would have been more obvious.

Or maybe 1, 2 & 3

Comment by tj
2017-08-27 08:46:13

4- it’s a speculation bubble, similar to what dutch tulips were. as such, you can never know how long it will last, nor how high it will go.

Comment by Mafia Blocks
2017-08-27 08:49:34

Or maybe none of the three.

Remember….. nothing collapses demand like grossly inflated prices at unaffordable levels. Nothing.

…… Which is precisely what we’re seeing.

Comment by alphonso bedoya
2017-08-27 09:52:17

Let me give you number 4, since you have covered 1 to 3. I like to watch charts. So two months ago my son tells me about Bitcoins. What do I think ? he asks. (Note–I traded currencies in the early 1990’s.)
I need time to watch the ebb and flows. My biggest problem is that I can’t find any of my favorite FREE technical indicators that I can hook on to BTC. I do know, however, that predators hunt at night. I’m there at 2am to 4am waiting for the Chinese to hit it. “Easy money,” the young ones are saying, while they’re sleeping on their couches or playing games on their phones, occasionally looking up at the monitor that’s making them rich.
Then a few days back BTC begins to rise at 3am, Florida time. (It’s 3am in Mongolia.) In three hours it’s up $200. ONE PROBLEM !!! No volume. Then at 6am the volume starts to show up.
So the machines took it up, using an external manipulation and at 6am people chased the price. Impressive and I really don’t care how it was done.
There’s a clown in Mongolia who is telling the camera it will rise to 100,000. Yeah, go for it. The IRS is already “asking” for disclosures of trading.

Comment by Mike
2017-08-27 12:09:50

makes sense - maybe its getting goosed at night to excite the “momo” (momentum) traders during the day. Wash, rinse, repeat

Comment by palmetto
2017-08-27 10:22:57

The entire Gulf Coast is scrude. Get ready for the Gulf Texodus to other states. Think the rental market was expensive and tight? You ain’t seen nuthin’ yet.

Comment by Mafia Blocks
2017-08-27 16:55:48

Mountain View, CA Rental Rates CRATER 9% YOY

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