A Huge Wave Of New Supply Could Do Some Real Damage
A report from Mortgage News Daily. “New home sales were down again in August, following a 9.4 percent plunge in July. The U.S. Census Bureau and the Department of Housing and Urban Development said sales of newly constructed homes sold during the month at a seasonally adjusted rate of 560,000 units. This is a 3.4 percent drop from the revised rate of 580,000 (from 571,000) in July and is 1.2 percent lower than the August 2016 rate of 567,000. At the end of the reporting period there were an estimated 284,000 new homes available for sale, a 6.1-month supply.”
From National Real Estate Investor. “Nothing good lasts forever. Apartment sector experts are scanning the horizon for problems that could hurt their properties. Here are a few of the top worries for today’s multifamily investors: Luxury apartment building owners worry about competition from new class-A developments. ‘The delivery volume is the biggest concern in the class-A property niche now,’ says Greg Willett, chief economist for RealPage Inc., a provider of software and analytics to the real estate industry. Developers plan to open more than 100,000 new apartments per quarter starting in the third quarter and continuing through the middle of 2018. That’s up from the roughly 80,000 new units per quarter that opened over the last year.”
“‘A huge wave of new supply brought on-stream during the seasonally slow leasing period that is seen in the fourth quarter and the first quarter of 2018 could do some real damage to overall occupancy,’ says Willett.”
The Kansas City Star. “‘In reality there are only two flavors that new apartments come in,’ said Jim Thomas, a partner in Indianapolis-based Cityscape Residential, which is building hundreds of luxury units around the metro. ‘Luxury and low-income.’ Both types of housing are apt to garner government support. So far there appears to be no shortage of demand for the new luxury apartments shaping KC’s downtown skyline. But as more units go up, developer Thomas predicted, the supply of housing eventually will cause the market to soften and rents to stabilize.”
The Columbian in Washington. “Drive along state Highway 503 between Brush Prairie and Battle Ground and the land tells a story of more apartments to come. Signs staked out in pastures advertise commercial land. Though building of single-family homes continues at a rapid pace, right now it’s the construction of apartments and other multifamily dwellings that is red hot. For the first time in many years, more multifamily units are under construction in the city of Vancouver than single-family homes. In unincorporated Clark County, the share of multifamily housing is 42 percent, more than double 2016.”
“Roni Battan, a manager with the assessor’s office, said the homebuilding trend today resembles the 1970s and 1990s. ‘Since 2011 and moving forward, I’ve seen a huge increase in multifamily development,’ she said. ‘I mean, they can’t break ground fast enough to get these developments going.’”
“Still, the business cycle suggests that Clark County eventually will reach critical mass with multifamily housing. With plenty of apartments in the pipeline, it could happen within a couple of years, said Jon Spikkeland, senior associate of consulting firm Johnson Economics. Developers see what’s happening and they will start to pull back. When that happens, landlords will start sweetening the pot. Some will offer the first month of rent free or other promotions and amenities. Union Park developers built in a fitness center, playground, basketball court, a barbecue and patio with covered gazebo to try to separate it from the pack. It also touts amenities like keyless entry, parking for electric vehicles with charging stations and more.”
“Those amenities, developer Sam Scheuble said, make them more competitive for whatever turmoil the future may bring. ‘If we can be better than others, we’ll survive it,’ he said.”
The Seattle Times in Washington. “Seattle rents are rising at their slowest pace in more than five years and the slowdown is likely to continue as a record number of new apartments open, a new survey shows. Some hot neighborhoods have cooled way down. In Ballard, rents are up just 2 percent over the past year — the smallest increase in at least a decade. Capitol Hill’s average rents are up just $35 from a year ago, about the same as inflation. And Rainier Valley rents dropped a bit since the spring.”
“The report lays out how the market, which has long favored landlords, is finally starting to shift toward giving more power to renters. Seattle has opened more new apartments in the past five years than in the previous 25 years combined. But until recently that surge hadn’t affected rents, as all the expensive new buildings were quickly snatched up by the many people moving to the region. That story is changing. The number of new renters has begun to drop considerably, and the number of new apartments continues to grow, with another record-setting year for construction set for 2018.”
“‘Investors should plan for higher vacancies and fewer rent increases,’ Dupre + Scott wrote in its report.”
From KATU in Oregon. “After seven years of strong economic growth, real estate experts say Portlanders may soon notice prices are dropping. Mixed-use buildings have sprung up all over Portland, primarily on the city’s east side. Real estate broker Vinny Small says the increased supply has led to an increase in vacancy rates for both retail and residential units.”
“‘When I do throw a two-bedroom apartment out there, I’m not getting the response that I used to,’ Small said. ‘I’m actually having to do incentives, where you’ll give a free month of rent or lower the price, which wasn’t the case last year.’”
From Banker and Tradesman in Massachusetts. “Plans to build two residential towers above the Massachusetts Turnpike in Back Bay have been scaled back with elimination of a 182-unit apartment tower and reduction in a proposed condo tower from 160 to 108 units. In January 2017, Boston-based Weiner Ventures filed plans to build 182 apartments and 160 condos in a pair of towers rising 586 and 301 feet on a 1-acre site above the Turnpike and MBTA rail lines just west of the Hynes Convention Center.”
“The revised plans filed Monday with the Boston Planning and Development Agency are the latest in a series of pullbacks by multifamily developers in Boston after several years of blistering construction. Equity Residential said it’s delayed groundbreaking of its 44-story apartment tower at the Garden Garage site in the West End, citing rising construction costs. Boston-based Samuels & Assoc. last month dropped plans for 550 apartments at the Landmark Center in the Fenway in favor of a proposed 506,000-square-foot office and lab building called 401 Park.”
“And Boston-based HYM Investment Group said in July it will eliminate 118 apartments in favor of 55 condos at its 45-story Bulfinch Crossing tower under construction at the Government Center garage property.”
‘Those amenities, developer Sam Scheuble said, make them more competitive for whatever turmoil the future may bring. ‘If we can be better than others, we’ll survive it,’ he said.’
We’ve heard this mentioned before Sam. Thing is, amenities don’t produce revenue. Some of them create expenses. I don’t want to be negative, but the very thing you are counting on might trip you up.
To further the thought: A lot can depend on the local economy. In a downturn, a lot of people are going to be choosing an apartment largely based on what’s cheapest. Pimped out luxury apartments will be at a disadvantage trying to keep full in that environment.
‘At the end of the reporting period there were an estimated 284,000 new homes available for sale, a 6.1-month supply’
Oh dear, the dreaded 6 month thing. And amid all this talk of a shortage too.
But…but…hurricanes.
Realtors wanted supply, realtors now have supply. Go shake that moneymaker and close some deals!
A-B-C. A-always, B-be, C-closing. Always be closing! Always be closing!! A-I-D-A. Attention, interest, decision, action. Attention — do I have your attention? Interest — are you interested?
I know you are because it’s f— or walk. You close or you hit the bricks! Decision — have you made your decision for Christ?!! And action. A-I-D-A; get out there!! You got the prospects comin’ in; you think they came in to get out of the rain? Guy doesn’t walk on the lot unless he wants to buy. Sitting out there waiting to give you their money! Are you gonna take it? Are you man enough to take it?
Easy for you to say. I’ve gotta get those leads!!!
A-B-C.
A! B! C!
America!
Be!
CLOSING!
da bear
“I tried to walk away, but I couldn’t get a ride.”
Bend, OR Housing Prices Crater 19% YOY
http://www.movoto.com/bend-or/market-trends/
Realtors are liars.
…. and every closing a crime scene.
A financial suicide for the “buyer.”
This never happens on HGTV…
************
3 Women Arrested in South Bay Burglary, Identity Theft Spree
KRON4 | September 25, 2017 | Vince Cestone
They are accused of targeting real estate open houses and stores. One of the women would look for female employees working by themselves and distract them by plugging the toilet or creating some other diversion, police said. The others would then steal cash and/or credit cards from the employee’s purse as she was being distracted, according to police.
Another woman would then drive the getaway car to Safeway or CVS to buy gift cards using the stolen credit cards, police said. Their spree involved crimes in Sunnyvale, Cupertino, Los Gatos, Palo Alto and Santa Clara.
‘The revised plans filed Monday with the Boston Planning and Development Agency are the latest in a series of pullbacks by multifamily developers in Boston after several years of blistering construction.’
And nary a mention from the Boston Globe.
is your county gov spending like mad?
new trucks, raises
the last of the summer wine…………
Riddle me this taxpayer. I’ve never understood why property taxes should go up from a mathematical perspective. For example new houses pay connect fees, impact fees, etc as well as new property taxes at the current millage. One would think as the number of developed properties increases that a county should find economies of scale such that increasing taxes should not be necessary.
Me thinks realtors aren’t they only liars.
“.. I’ve never understood why property taxes should go up from a mathematical perspective…”
It’s for this exact reason why I have always thought government municipalities silently cheer on the real estate bubble.
It just means more money for already inflated six-figure pensions.
What’s there not to like?
mostly pension math
they get colas, step increases and guaranteed income
you get to pay for it
“…mostly pension math…”
Oh, it gets even better.
For your daily shocker, check out:
http://transparentcalifornia.com/
Type in the name of someone you know that works/worked in California government.
Why work for a living if you don’t have to?
“…mostly pension math…”
Oh boy, it gets even better.
For a good shocker, check out
http://transparentcalifornia.com/
Type in someone you know who works in California government.
Why work for a living if you don’t have to?
“Guaranteed’…. We shall see.
Apparently some people don’t like the idea of retirement. Everyone should just work until they drop dead.
You can retire too but you’re going to have get a job first and work for it. Nobody is going to hand it to you.
Plenty of people with rich parents will inherit a big pile of wealth right around the time that they reach retirement age.
Work for it. Earn it. Then you can retire.
Irrelevant - When policy makers are faced with several thousand public sector retirees vs 1,000 X voters, there will be decisions made which may not align with the original agreements made between disinterested or [low time preference] government representatives and Union negotiators.
Personally I find the way these negotiations were done and the promises made along with highly suspect growth projections, to be criminal. Hopefully employees will be more diligent about their own retirement decisions along with their government entities becoming more frugal such that these folks will not be faced with pension cuts.
The fact that a government entity needs an employee union to negotiate in the first place is crazy. Who are members bargaining against? Not a corporation so I suspect against taxpayers themselves?
Personally I find the way these negotiations were done and the promises made along with highly suspect growth projections, to be criminal.
Would that be a state law or federal being broken?
The fact that a government entity needs an employee union to negotiate in the first place is crazy. Who are members bargaining against? Not a corporation so I suspect against taxpayers themselves?
They bargain with the entity on the other side of the table, who signs the contract, the state or local government.
Of course, it’s no surprise that a corporate shill would make such statements about ordinary working class and middle class people. It’s just class warfare.
Mike I’ve been lurking for years or long enough to know I won’t change your viewpoint but I probably agree with you on fat corporate salaries for execs (not owners) and stock buy backs being a scam vs spending on salaries, RD and cap improvements for the long term. I just don’t have any faith that government can solve problems. BTW corporations are creatures of the state which get their life from the USC.
I’m an ordinary working class code monkey that comes here to gain perspective on the RE market…. and for the laughs. Definitely the laughs.
I love the idea of retirement.
I just don’t like the idea of paying for my own, AND for other people’s retirement when they are so clearly being unjustly enriched (see pension spiking, “high three” pension formulas combined with revolving door “management” schemes, bogus pension fund return assumptions, etc.).
I’ve never seen a rational defense of any of these egregious practices, yet they remain. Why?
Because “a deal’s a deal”, and it’s not “fair” for politicians to close these loopholes for existing employees.
Let’s talk about fairness, shall we? Is it fair that I’m limited to $5,500 per year to save for my own retirement in a tax advantaged way, when public employees get a massive multiple of this, not to mention returns guaranteed by the taxpayer?
–Increase what the private sector can save on their own (without the overhead of a corporate retirement plan).
–Eliminate egregious pension practices that are manipulated to maximize individual’s pension payouts.
–Make public employees pay more into the system to cover the “unfunded” portion of their retirement.
I’d be a lot less pissed off about public pensions if these things were done, but in the meantime, we are all fully justified in our rants against public union pensions.
You use a lot of words to express your opinion that some people are overpaid. They get a package - salary, pension, and other benefits. It’s the total that’s important.
“It’s the total that’s important.”
Now that’s a gross oversimplification now, isn’t it?
The true long term cost/value of these benefits were never honestly discussed with the people who were paying for them (ie. the taxpaying public), but instead negotiated between politicians, who only cared about getting re-elected (ie. short term), and unions who in many cases provided campaign contributions to those politicians.
The pension agreements and their egregious loopholes were the result of a corrupt system.
If the public knew the true cost of these benefits and loopholes at the time the deals were struck, they would have screamed bloody murder long ago, and never allowed their politicians to make these deals.
And now that the true cost of these promises are literally bankrupting communities and states, future pensions are being reduced accordingly. This is effectively acknowledgement by both politicians and the unions that the “total”, as you so blithely put it, was too high.
HOWEVER, there is no discussion about cutting back the clear loopholes in the prior agreements that are still being exploited to drive pension costs higher at the expense of the public. And that’s wrong.
“I’d be a lot less pissed off about public pensions…”
Some localities are already scrimping on fire and police pension payouts due to lack of funds, and this is predicted to become widespread as the promises made assumed higher returns than were possible during ZIRP times.
There was an article in the local rag about how Palo Alto has a multi-hundred million dollar unfunded pension liability, and it’s going up to perhaps up to $800MM.
This is a substantial multiple of the annual budget.
Multiply this times many, many states and municipalities around the country.
The money has to come from somewhere–and increasingly it’s coming out of taxpayers pockets, not payments into the system from government employees.
I don’t know if this is true in other states, but a meaningful amount of property taxes in CA go into the General Fund (ie. used for all sorts of sh*t).
“I don’t know if this is true in other states, but a meaningful amount of property taxes in CA go into the General Fund (ie. used for all sorts of sh*t).”
General Fund = Ethnic Survival Plan. Realize that many people will never be able to stand on their own feet.
Downtown Denver is a toilet:
http://www.thedenverchannel.com/news/local-news/they-sh-everywhere-man-says-rino-neighborhood-has-become-a-public-toilet
And the Bay area is a sewer treatment plant
“The Streets of San Francisco Are Covered in Human Shit”
http://justice.gawker.com/the-streets-of-san-francisco-are-covered-in-human-shit-1679930931
Piling on!
http://www.khou.com/news/local/museum-park-neighbors-fed-up-with-public-pooping-problem/448196439
This is a big problem with the homeless - no bathroom. When you’ve gotta go, you’ve gotta go!
More doo to do in DTLA:
http://www.latimes.com/local/lanow/la-me-ln-homeless-toilets-20170926-story.html
I recall similar permanent pee palaces being installed in the early 2000’s. They are vandal-resistant affairs that took years and cost a few $100k each to install.
But all the hipsters looooove working downtown. I interviewed at one of those places. It looks like a college dorm, I was wondering if they were gonna roll out a keg or break out the bongs.
“…I was wondering if they were gonna roll out a keg or break out the bongs.”
That’s terrible having to decide between two things that really honestly belong together.
Hmmm……
Any correlation between distress and home cost? That is not a rhetorical question - I am really wondering if there is a correlation……
http://wallstreetonparade.com/2017/09/new-economic-study-presents-a-disturbing-map-of-the-united-states/
Looking at the map it appears to be strongly correlated in California. In the middle of the country where there aren’t so many congressional districts it would have been nice if they had broken it up by county instead of by congressional district. I think it could be a little misleading in places like the northern mountains and plains.
I don’t think that there is a pure correlation, i.e. high house prices = high stress. Look how the Deep South and Appalachia are distressed and they are hardly in a house price bubble. Meanwhile high-price DC area is comfortable. Nah, the correlation is to the number of stable career jobs.
Mill Valley, CA Housing Prices Crater 15% YOY
http://www.movoto.com/mill-valley-ca/market-trends/
https://www.populationpyramid.net/united-states-of-america/2017/
Demographics are destiny….interesting to look at the US vs. other countries.
warren buffet is still bullish on america!
Warren Buffett is 87 years old.
You have to wonder if he will live long enough to view the collapsed Housing Bubble through the rear view mirror.
I wonder what motivates someone that old to continue amassing wealth. “Retirement” doesn’t seem to be a word in his dictionary. Especially since his wife died, you’d think he might prefer to use his wealth to travel and experience the world, but then again, when you are that wealthy you can’t go anywhere without bodyguards, and even that is risky so maybe he realizes that retirement is pointless.
Who knows?
Englewood, CO Housing Prices Crater 5% YOY
http://www.movoto.com/englewood-co/market-trends/
Oh oh, media not getting the narrative they want:
http://www.zerohedge.com/news/2017-09-26/sam-zell-calls-retail-real-estate-market-falling-knife-says-not-time-buy-anything
Stevie Wonder could have seen this coming the last few years.
Remember…
https://www.youtube.com/watch?v=w_vgu4ewxVc
Long After Protests, Students Shun the University of Missouri
By ANEMONA HARTOCOLLIS
JULY 9, 2017
COLUMBIA, Mo. — In the fall of 2015, a grassy quadrangle at the center of the University of Missouri became known nationwide as the command center of an escalating protest.
Students complaining of official inaction in the face of racial bigotry joined forces with a graduate student on a hunger strike. Within weeks, with the aid of the football team, they had forced the university system president and the campus chancellor to resign.
It was a moment of triumph for the protesting students. But it has been a disaster for the university.
Freshman enrollment at the Columbia campus, the system’s flagship, has fallen by more than 35 percent in the two years since.
The university administration acknowledges that the main reason is a backlash from the events of 2015, as the campus has been shunned by students and families put off by, depending on their viewpoint, a culture of racism or one where protesters run amok.
Before the protests, the university, fondly known as Mizzou, was experiencing steady growth and building new dormitories. Now, with budget cuts due to lost tuition and a decline in state funding, the university is temporarily closing seven dormitories and cutting more than 400 positions, including those of some nontenured faculty members, through layoffs and by leaving open jobs unfilled.
Students of all races have shunned Missouri, but the drop in freshman enrollment last fall was strikingly higher among blacks, at 42 percent, than among whites, at 21 percent. (A racial breakdown was not yet available for this fall’s freshman class.)
Black students were already a small minority. They made up 10 percent of the freshman class in 2012, a proportion that fell to just 6 percent last fall.
https://www.nytimes.com/2017/07/09/us/university-of-missouri-enrollment-protests-fallout.html
No one could have seen it coming.
Imagine turning 35 years old, and your greatest accomplishments in life are $100K in student loan debt, a barista job, and being a member of Antifa.
Sad
And being part of the “hope and change” revolution…
‘In reality there are only two flavors that new apartments come in,’ said Jim Thomas, a partner in Indianapolis-based Cityscape Residential, which is building hundreds of luxury units around the metro. ‘Luxury and low-income.’ Both types of housing are apt to garner government support’
Isn’t this lovely. And we know from numerous reports that 90-95% is luxury.
I found that “luxury and low-income” very interesting. It’s sort of indicative of the elimination of the middle class.
+1
I mentioned yesterday that I interviewed with a tech firm in downtown Denver. As I walked to the interview site I noticed this stratification downtown. People were either bums, suits or tech hipsters. The tech hipsters (AKA “Brogrammers”) live nearby in those infamous $4000 a month apartments. The place I interviewed at was crawling with them and we ended the interview early as it became clear that I would not fit in, not by a long shot.
I was laughing as I walked back to my car. The office looked like something out of a sitcom.
Sounds like a perfect fit for you.
The place I interviewed at was crawling with them and we ended the interview early as it became clear that I would not fit in, not by a long shot.
I was part of the LSI->Netapp group in Boulder before they bought Solidfire. I was interviewing with Solidfire before the purchase and had a similar experience. I told them I really wanted to get a better look at their RAID hardware and they said “Uhhh…we don’t actually have any hardware…we just write software to manipulate the storage on someone else’s hardware”. I said “oh”. And the interview was basically over.
“…or tech hipsters.”
Critical infrastructure and SCADA… haven’t seen a hipster yet.
A lot of this “luxury” is more hype than anything. It’s nothing more than lipstick on a pig.
https://www.usatoday.com/story/money/2017/09/26/yellen-fed-may-have-misjudged-inflation-keeping-rates-lower/703920001/
‘Federal Reserve Chair Janet Yellen conceded Tuesday that inflation may be weaker than Fed officials have anticipated, a development that could lead to a more gradual rise in interest rates.’
‘While several Fed policymakers have raised that possibility, Yellen’s remarks represent her most detailed and explicit acknowledgment that the Fed may have been too confident in its long-held view that inflation will soon pick up and move toward the Fed’s annual 2% target.
“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation,” Yellen said in prepared remarks at a meeting of the National Association for Business Economics in Cleveland. She added that “downward pressures on inflation could prove to be unexpectedly persistent.”
‘My colleagues and I may have misjudged…even the fundamental forces driving inflation.’
QE is deflationary Janet.
I don’t understand how printing money can be deflationary.
It collapses demand.
Why do you think housing demand is at 20 year lows?
‘how printing money can be deflationary’
We’ve had a few weekend topic about this. Here’s a new angle: how is money creation inflationary?
More money chasing the same amount of goods and services. As long as that money is in circulation, the prices must go up. Hence, inflationary.
Which prices go up depends on who actually has the extra money.
If it is just the rich, then the stuff they buy (luxury goods, real estate, stocks) will go up.
If the money is distributed equally, then regular stuff (food, energy, clothes, rent) will probably go up.
Currently we appear to be in the first scenario.
Well not really but it’s been explained before.
Printing money and co-occurring low interest rates leads companies to invest in labor saving tech, which 1) reduces costs and allows for lower pricing 2) reduces demand for labor. Both are deflationary
‘Federal Reserve Chair Janet Yellen conceded Tuesday that inflation may be weaker than Fed officials have anticipated, a development that could lead to a more gradual rise in interest rates.’
Wasn’t it just a couple of days ago that you couldn’t figure out why markets had stopped reacting to your promises?
What!? They’re gonna dial back on rate increases and reducing their balance sheet?
Knock me over with a feather.
Exactly. And they were to start reducing the balance sheet in October. What a bunch of bullshit this criminal cartel is full of.
‘A huge wave of new supply brought on-stream during the seasonally slow leasing period that is seen in the fourth quarter and the first quarter of 2018 could do some real damage to overall occupancy,’
Typically, short squeezes eventually give way to a glut. This is one of the defining characteristics of a bursting bubble.
It’s too soon to be sure but in California it feels like things may be locking up just in the last week or two…suddenly nothing new seems to be coming onto the market and there are more price drops than usual in the stuff that’s been there the whole time. Maybe it’s a late September thing?
School is starting, etc.
+1 Families with k12 aged kids are settled-in.
The wackos from Waco are calling it quits.
http://www.msn.com/en-us/tv/news/its-official-chip-and-joanna-gaines-will-end-fixer-upper-after-5th-season/ar-AAsuiKg
I watched this for the first time last night. 40 acres and a fantastic new country home for 500k. I want to move to Waco.
Good, I couldn’t stand Chip’s excessive PDA. (public display of affection). Fully scripted of course. Those HGTV shows are just awful. Lots of happy-couple imagery (guests and hosts alike), interrupted by commercials for e-harmony. Social engineering at its finest.
This Old House is much better. At least they show actual working guys doing actual work. (not so for the magazine. A woman editor took over and it’s gone all schmaltz.)
This Old House is much better. At least they show actual working guys doing actual work.
I actually really liked the show with the Canadian contractor who went in and fixed up shoddy work that previous contractors had done. Forget the name, but he seemed like he really cared, and it also showed what it takes to do things “right”.
CondoVulturesRealty @CondoVulturesRE 17h17 hours ago
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Nearly 155 Hollywood-Hallandale Beach Luxury Condos - About 54 Months Of Supply - For Sale In SFla As Of 09/26/2017: http://www.condovulturesrealty.com/info/blog/post/hollywood-hallandale-beach-faces-54-month-supply-of-luxury-condos-listed-for-sale/ …
The MID is sacrosanct and permanent.
Pending Home Sales Plunge; NAR Admits “The Housing Market Has Essentially Stalled”
http://www.zerohedge.com/news/2017-09-27/pending-home-sales-plunge-nar-admits-housing-market-has-essentially-stalled
Toldya. I’ve had a front row seat to this freeze. Reminds me of autumn of 2005. And then it was stalled until 2008.
“Seattle has opened more new apartments in the past five years than in the previous 25 years combined. But until recently that surge hadn’t affected rents, as all the expensive new buildings were quickly snatched up by the many people moving to the region.”
I’m calling bullshit on this “quickly snatched up” thing. They’ve been sitting empty because of the price, and these liars know it.