They Are Whispering: ‘Just Give Me An Offer’
A report from the Colorado Real Estate Journal. “Interest rates that continue to creep up have not had a major impact on Front Range lending activity. With an unprecedented amount of money on the sidelines, there remains too much money chasing too few deals. Nowhere is this more evident than in the disparity between interest rates and cap rates. To the casual observer, they appear disconnected, if not unhinged. Factoring in too much money chasing too few deals handily reconciles the difference.”
“The loosening of these lending standards may not bode well for multifamily landlords in softer markets. A slowdown in construction for pricey, Class A multifamily products may prevent this problem from spiraling out of control in some submarkets, particularly ones that already are saturated with elite housing options where affordability is experiencing various forms of obsolescence from rent concessions to outright vacancy.”
“While multifamily remains popular, the ratio of income to housing costs creates an intuitive nervousness: How long residents can spend more than 50 percent of their income on rent or mortgages? Traditionally, rents could not exceed 30 percent of a tenant’s income. Now it is closer to 50 percent. None of this is lost on bank regulators, some of whom are privately expressing concerns about today’s renter being no different than the overleveraged 2006 sub-prime homeowner.”
From KGTV in California. “A new study from the Public Religion Research Institute paints a grim picture of people struggling to make ends meet in San Diego. It says 45% of San Diegans fall into an auspicious category: people who work full time and still struggle with poverty. On the low end, the Bay Area had just 27% of people in that category. Los Angeles was at 49%. The San Joaquin Valley had the highest percent at 68%.”
The Des Moines Register in Iowa. “Des Moines has many complexes that have fallen into deep disrepair, local property managers say. ‘It’s pretty simple. Slum landlords exist throughout the U.S. because it’s a very profitable business to be into,’ said Jim Conlin, who has owned and managed properties in Des Moines for 50 years.”
“‘There’s been so much money chasing the acquisition of these kinds of apartments. People buy something that is not well maintained and then try to flip it for $10,000 a unit,’ he said. ‘When the music stops playing … there’s going to be an adjustment. And those with deteriorated properties, unqualified tenants and negative cash flow aren’t going to be standing when that adjustment is over.’”
“A mix of research shows Des Moines residents enjoy a high standard of living and a glut of higher-income rentals downtown, but the housing crisis afflicting lower-income families and minimum-wage workers is growing worse.”
The St. Louis Business Journal on Missouri. “Commercial lending in St. Louis isn’t keeping pace with other markets, and apartment construction may be reaching the saturation point, according to local banking professionals. ‘We talked with our Atlanta Fed colleagues who did a proprietary study that looks at all lenders — banks, insurance companies, REITs, pension funds,’ said Julie Stackhouse, executive vice president of the Federal Reserve Bank of St. Louis. ‘What it showed is exactly what the bankers are saying: CRE lending has flattened in St. Louis. Commercial multi-family lending grew solidly in 2016 and 2017. Thus far in 2018, it is slightly down. Is St. Louis overbuilt? We’re somewhere in that vicinity.’”
The Daily Texan. “West Campus is notorious for ever-expanding growth, and the past year was no exception. Four new student housing projects were completed in 2018 and have recently opened for students. There are 10 more slated for completion in 2019. The abundance of new units for rent does not necessarily correlate to lower prices, said Laura Cochrane, an Austin-based realtor with REspace Realty.”
‘Cochrane, who has worked with students in West Campus for 25 years, said newer developments would rather have vacancies than drop their rental rates. Instead, Cochrane said students should stay away from high rises and look for older, individually owned condos and houses. ‘Even though they’re older, they’re almost as nice as the newer stuff,’ Cochrane said. ‘They might not have all of the amenities, but (they are) a quarter of the price marked down. These developments are just shooting themselves in the foot.’”
From Bisnow on New York. “Two years after the luxury market began to slow down, some New York City developers are finding the only way to get a pricey condominium sale done is to offer a compromise. ‘There’s only one tool in the toolbox — it’s called the price,’ said Olshan Realty President Donna Olshan, whose firm tracks contracts signed on units priced at or above $4M. ‘2013, 2014 and 2015 were the golden years of new development in New York. We are past that … Rarely have I seen buyers be so aggressive and make such low offers.’”
“In 2015, the uber-luxury craze had developers rushing to build ritzy towers to capitalize on the hot demand. Flash-forward three years, and the city is awash with new development options, and buyers are nervous about paying too much. The last week saw 24 contracts close on all types of Manhattan units over $4M, a stellar number for late August, according to Olshan’s report. But her figures indicate that units at that price point are sitting on the market for an average of 439 days, the highest rate in 12 years.”
“Meanwhile, prices are being cut by an average of 9% before going into contract, she said, which means the units are selling for at least a 15% discount. It is a challenging set of realities for those selling new units. ‘[Sponsors] are discounting. They are whispering in the brokers’ ears: ‘Just give me an offer.’”
“Sources told Bisnow that while some developers may have patient equity partners that are able to let them hold out for a certain price, many are under pressure to get product sold. Complicating matters is that, with interest rates rising, political uncertainty and fears that tax law changes will squeeze some of New York City’s wealthiest residents, a sense of insecurity is spreading among high-end buyers.”
“‘There’s oversupply, there’s just way too many choices. People are wondering what’s going to happen and they pause,’ said Corcoran Group broker Vickey Barron, who is marketing a condo at Magnum Real Estate’s 100 Barclay St. for $59M.”
“In the first half of the year, there were 303 sales of condominiums priced at $5M and above, a 39% fall from the year before, according to the half yearly report from Stribling private brokerage. ‘These first-half numbers were really shocking,’ Stribling Vice Chairman Kirk Henckels said. He believes the improved co-ops numbers are the result of sellers in that sector seeing the writing on the wall and cutting asking prices. ‘It’s really the consumer saying ‘this is enough,’ he said. ‘New developments showed a huge decline, falling 54% while resale condos only fell 25%.’”
“Already steep competition could be set to steepen. Manhattan’s new condo inventory is projected to hit 7,900 next year, The Real Deal reported earlier this summer, citing data from appraisal firm Miller Samuel. That is a significant increase on the average from the last few years — which has sat between 3,000 and 4,000 units — and means it would take about four-and-a-half years to sell all the units.”
“‘There is lot of inventory but it’s not meeting the buyers’ need,’ Compass President Leonard Steinberg said. He said the right product at the right price will still attract plenty of interest. He noted that many of the steep discounts are the result of overpricing when the listings first came to market. ‘After excess there is pullback,’ he said.”
‘a challenging set of realities for those selling new units. ‘[Sponsors] are discounting. They are whispering in the brokers’ ears: ‘Just give me an offer.’
Hey Donna, these guys wouldn’t undercut their previous buyers would they? Cuz then they’d be fooked!
‘the disparity between interest rates and cap rates. To the casual observer, they appear disconnected, if not unhinged’
Been saying that for years.
‘How long residents can spend more than 50 percent of their income on rent or mortgages? Traditionally, rents could not exceed 30 percent of a tenant’s income. Now it is closer to 50 percent. None of this is lost on bank regulators, some of whom are privately expressing concerns about today’s renter being no different than the overleveraged 2006 sub-prime homeowner’
Except it isn’t the renters who hold the loan. I wonder what’s going to happen?
I’m by no means a genius, but I would move to a place where the cost of living is more affordable.
Problem solved… BOOM!!!
move to a place
or decades ago!
Currently camped at Peaks of Otter. $10 for a secluded level RV site in a mature forest.
Do you have access to electricity somewhere?
Not purchased electricity. I have a generator aboard though.
Got it. Cool.
rising rates ? que
‘It’s pretty simple. Slum landlords exist throughout the U.S. because it’s a very profitable business to be into,’ said Jim Conlin, who has owned and managed properties in Des Moines for 50 years.’
‘There’s been so much money chasing the acquisition of these kinds of apartments. People buy something that is not well maintained and then try to flip it for $10,000 a unit,’ he said. ‘When the music stops playing … there’s going to be an adjustment. And those with deteriorated properties, unqualified tenants and negative cash flow aren’t going to be standing when that adjustment is over.’
This guy nailed it. I’ve been saying the majority of these deals have been cash flow negative for years. The industry is in a speculative orgy of denial. They think because there is a bunch of cash willing to buy these money losing apartments, there always will be.
I said it multi-family was a bubble in 2014 because I could see their motivation was in the flip, not running a business.
“This guy nailed it. I’ve been saying the majority of these deals have been cash flow negative for years.”
Pick any arms length SFR transaction from the last 20 years and you’ll find the same thing. They’d have defaulted long ago had they been in it for the cash flow. Instead they bought it for twice the monthly rental payment.
Foolish DebtDonkeys.
Beverly, WA Housing Prices Crater 12% YOY As Ballooning Seattle Area Mortgage Defaults Expand
https://www.movoto.com/beverly-wa/market-trends/
All these price drops and nobody even cares. I should go check to see if my house dropped any… Nah.. ain’t going anywhere anyways. Like most folks, I bought the place for the long term because that is how you gain wealth in Ameruka. My rental pays the mortgage so I enjoy getting that home paid for too.
“But what about maintenance, taxes, HOA fees and PMI? You’re going to die!”
“Bwahahaha!”
Ebola
There is NO evidence of a nation wide housing bubble.
But ‘ebola’ is so clever and catching, it ‘bears’ repeating…
This time is different LOL
There is NO evidence of a nation wide housing bubble…just a global housing bubble.
“There is NO evidence of a nation wide housing bubble.”
These sorts of neanderthal-brained comments from Johnnie-come-lately’s help reassure the fact that not only is there a massive bubble, it’s topped out.
That’s how you lose wealth.
which means the units are selling for at least a 15% discount. It is a challenging set of realities for those selling new units’
On top of 2016-17 slashing.
‘Sources told Bisnow that while some developers may have patient equity partners that are able to let them hold out for a certain price, many are under pressure to get product sold’
But inventory loans? You mean paying interest on unsold inventory can’t last forever? Poof!
‘Complicating matters is that, with interest rates rising, political uncertainty and fears that tax law changes will squeeze some of New York City’s wealthiest residents, a sense of insecurity is spreading among high-end buyers’
If they haven’t bought, I imagine there’s a growing sense of low balling.
‘Rarely have I seen buyers be so aggressive and make such low offers’
And of course this blog was saying it would end like this back in the day:
‘In 2015, the uber-luxury craze had developers rushing to build ritzy towers to capitalize on the hot demand. Flash-forward three years, and the city is awash with new development options’
I bet the trolls are besides themselves.
“beside oneself, almost out of one’s senses from a strong emotion, as from joy, delight, anger, fear, or grief: He was beside himself with rage when the train left without him.”
https://bit.ly/2MMhixw
An out-of-body experience.
Realtor trolls on this blog will be mercilessly mocked.
Just because you were sold a lie doesn’t mean anyone here is buying it.
Castro Valley, CA Housing Prices Crater 5% YOY As Sellers Beg For Offers…. Any Offer
https://www.movoto.com/castro-valley-ca/market-trends/
The S$an Joaquin Valley had the highe$t percent at 68%.”
63% of the 68% are accustomed to high densitie$ & $mall $quare foot $helters … they is able to adapt to $hack $tre$$e$ … The other 5%? Well drug$ may help to ea$e the lo$$ …
It looks as if Wolf Richter is catching up with Arizona Ben …
“The Most Splendid Housing Bubbles in America | Wolf Street”
https://wolfstreet.com/2018/08/28/the-most-splendid-housing-bubbles-in-america-2/
I saw that one too.
Total no-brainer… anyone who buys in those cities is a fool. Fortunately there are PLENTY of other places across the country where buying makes lots of sense.
Translate = Now is the best time to buy!
Grow a spine you millennial cowards! I need my commission checks so you need to buy at near bubble peak prices so I can afford my luxury cars and mortgage! Hurry up!
The ol’ mountain man $ayeth: “ye wind$ blow$ up the mtn in the day, & blow$ down$ the mtn @ night”
Denver sure a great set of mountains due we$t.
(Woody’s wright, ya don’t need a weather$ person to tell ya which way the wind is a blowin’, but iffin’ yer near Ben’s HBB barn, glance up @ hi$ Roo$ter vane!)
OK, this is wright up there’s with L. Rust Hills, “Nobody has all the answers”
Taco Tuesday!
“If market reporters were ‘totally honest,’ their stories would look more like this.”
By Shawn Langlois /Published: Aug 28, 2018 / MarketWatch
https://www.marketwatch.com/story/if-market-reporters-were-totally-honest-their-stories-would-look-more-like-this-2018-08-28
(For those who care to read the 2006 HBB post of Mr. Hill):
http://amisharesuffering.blogspot.com/2006/11/nobody-has-all-answers-l-rust-hills.html
I just had a sign from Realtor(R) (not God, who doesn’t work miracles in the housing market anymore) yesterday that I thought I’d share.
Back in the heady days of 2006 I had signed up for some pop-up web-based listing service that served a certain SoCal area since I was renting and looking to buy. Emails came in droves; prices were out of my reach. Sometimes an agent would even call me with a juicy new listing.
2008 came and went and the emails and calls stopped. They started fitfully again in 2012…maybe 1 email a week. Traffic declined to 1 email every 3-4 weeks. I never unsubscribed since it was fun to look at the area I was interested in back in the old days.
Yesterday I got a call from an agent of that listing service. Classic cold-call: he had 5 new listings that were coming on market and wanted to know if I, or anyone I knew, were looking to buy. I was just about floored.
If we got guys calling 10+ year-old contacts I have to wonder just how slow things have become and what the market’s doing to get people flipping to the back of the rolodex?
This eerily resembles early 2007.
This is interesting because I got a cold call for an apartment complex in one of the crappy bordering cities of San Diego recently. I haven’t lived in that area for over 5 years and it was probably 7 or 8 years ago when I inquired. They never called me back at the time. It was weird getting such a nice voice mail offering me up to 1000 bucks in moving assistance plus some other incentives. Frankly, I don’t think even 10k in moving assistance would keep me from immediately deleting them. CA just isn’t much of a value proposition unless you’re already rich or get some sort of state subsidy.
I’m getting lots of emails from turnkey vendors all of a sudden. Previously they had no shortage of buyers. Now it seems they are marketing very attractive properties at a good discount to ARV. It smells fishy. At least two of these properties have been in Indianapolis and Houston. Ben showed recently these areas are showing increased foreclosure starts.
30 Year US Treasuries just popped above 3%
10 Years at 2.88%
The great QE unwind continues…
Mel Watt days are very numbered.
“If interest rates are going up because the economy is improving, that can be positive for REITs because landlords can raise rents to cover the rate increases,” said Brian Cordes, a senior vice president at Cohen & Steers, an investment company focused on real estate. He expects the U.S. economy to grow by 2.9 percent this year. “We see the recent pullback as an attractive entry point to the asset class.”
No Comment
Interest rates going up - positive for REITs
Interest rates going down - positive for REITs
Did I get that right?
“Interest rates that continue to creep up have not had a major impact on Front Range lending activity. With an unprecedented amount of money on the sidelines, there remains too much money chasing too few deals. Nowhere is this more evident than in the disparity between interest rates and cap rates. To the casual observer, they appear disconnected, if not unhinged. Factoring in too much money chasing too few deals handily reconciles the difference.”
The Fed waited way too long. They should have been raising rates 4 years ago. Now the world is still awash in liquidity while the everything bubble is topped out. It’s too late, the seeds are sown.
They should have been raising rates 4 years ago.
Sure. But in 2014 we were only a couple of years off the false bottom. If they took away the punch bowl then we’d have gone right back to the “bottom” again and everybody would have screamed bloody murder and claimed they were just out to get Obama. Now that everybody is good and drunk they know they deserve what they get next.
But that would POP Obama’s bubble? The MSM and wall street can’t let that happen.
d$trumb own$ thee bubble$ … Make.America.Greed.Again!
Fer someone who has guillotine’$ in there name, you $ure i$ complacent.
“The Fed waited way too long.”
“Off with there head$!!!” … $eems more appropriate … Why i$ you $o $hy?
Centreville, VA Housing Prices Crater 7% YOY As Fairfax County Housing Bust Deepens
https://www.movoto.com/centreville-va/market-trends/
“A new study from the Public Religion Research Institute paints a grim picture of people struggling to make ends meet in San Diego. It says 45% of San Diegans fall into an auspicious category: people who work full time and still struggle with poverty. On the low end, the Bay Area had just 27% of people in that category. Los Angeles was at 49%. The San Joaquin Valley had the highest percent at 68%.”
Proof that goosing asset prices, namely housing, only hurts the population.
This “roaring eCONomy” that the Fed created has done nothing to pick people up off of the floor. In a time of supposed historically low unemployment (yeah, right) wages have stagnated and the cost of living has risen so high that there’s no way for people to save for a rainy day.
When this sham of a cheap money everything bubble implodes, the ordinary citizens of this country, and the world, will be crushed into oblivion, once again bearing the brunt of the irresponsible policies due to the avarice and greed of the moneyed set.
There was a class war - the wealthy won handily. Further, the game was set up so that the taxpayers are now on the hook for all of the losses, unlike last time when the banks bore the brunt of it (at least initially until the bailouts began).
ordinary citizens of this country, and the world, will be crushed
Maybe not. When the price of all necessities falls back to reality they may be uplifted. The class war isn’t over, the supposed victory is merely a mountain of sand.
Mortgage rates at my credit union today
15 year 4.00
20 year 4.375
30 year 4.50
30 year jumbo 4.675
Not sure where these rising mortgage rates everyone keeps talking about actually exist. Rates rose early this year from record lows, all the way up to near record lows and have stayed constant since March. Tell someone who took out a mortgage in 1982 about the “rising to 4.5%” rates, lol.
Yet another reason why the Fed waited too long. These rates are still stupid low, hence the search for yield that is pulverizing the quality of living of the masses.
You get a solid 9/10 for hyperbole. I didnt realize allowing people to own their homes equals pulverizing them. You learn new things every day. That, or maybe you just need to chill a bit?
Own their own homes? You mean own their own mortgages (maybe more than one at a time)?
Home ownership is at the lowest level in I think 70 years. Hyperbole this, mutherfawker.
Apologies for the profanity. Please delete, Ben, and it won’t happen again.
Seeing more foreclosures and short sales coming to market. Some are dumps, some are pretty nice with little work needed. The latter seem to have been used or an attempt to turn into a vacation rental but are not in locations that might get a lot of interest.
Curious how long it took to get some of these for sale. Theres a couple beat down places that have been on the market for over a year and they dont cut the price. Theyre too junky for anyone but a builder and builders probably have better opportunities now as the last projects get built. Thats the other thing - seeing a few developments and even a new shopping center finally getting underway in my neck of the woods where it takes an act of jah to get approvals so very few big developments get done, mostly just custom houses here and there. Right at the top, where’s my fat lady?
Pre-foreclosure zillow numbers near me (central MS) have gone up 12-14% in the last few months. Median home list prices are about 3.4x median incomes which isn’t terrible vs nationally but are still higher than they should be based of historical price to income ratios.