The Bursting Of A Rental Market Bubble
A report from the Banker & Tradesman in Massachusetts. “The real estate market in Greater Boston may be on a record roll when it comes to home and condominium prices, but there’s trouble brewing on the horizon. And as we move into 2017, until now, simply irksome issues – the flood of new luxury apartments hitting the market, rising mortgage rates and, at the other end of the market, a dearth of single-family homes for sale – are poised to take on greater significance. In the case of the increasingly glutted luxury apartment market, we could very well start to see the bursting of a rental market bubble as developers and bankers alike start to pull back.”
“How many of these, overpriced, cookie-cutter high-rises and boxes do we need? Banks were skittish about lending on new condo projects coming out of the recession but, for a few years anyway, were more than happy to finance less risky apartment projects. Developers rushed in with the belief that just about every street corner needs hundreds of new $3,000 and $4,000 a month apartments.”
“Now, five years and thousands of new apartments later, the luxury rental boom is poised to go bust. Worrisome signs are coming out of previously red hot markets like Miami and New York, where there has been epic overbuilding of both deluxe apartments and condos. Sales of co-op apartments in New York worth $4 million and up recently plunged 25 percent amid fierce competition from new units, while Miami has its own growing luxury apartment and condo glut.”
“Meanwhile, construction starts on new apartment projects have also started to drop in the Boston area, another sign that developers may be starting to get cold feet. Bankers have been growing wary as well for more than a year now. Add to that all sorts of freebies being used by developers to fill up these empty towers, from ‘free rent’ to gift cards, and you get the picture. Yes, we desperately need more housing, especially the kind middle and working class families can afford, not more outrageously priced apartments.”
The Star Tribune in Minnesota. “With apartment developers hammering their way into a new year, the rental market in the Twin Cities is about to shift. Construction this year will outpace 2016, but it will move from the cities to the suburbs. While the vacancy rate is still below average, there are places where it’s becoming a renter’s market. ‘I’m pushing rents this year,’ said Mark Jensen, president of Steven Scott Management, which operates rental properties throughout the metro area. ‘But there are pockets where there’s too much supply.’”
“The coming shift in the market is also expected to have an impact on investors in the Twin Cities. For three years in a row, apartment building buyers — mostly institutional investors from out of state — have paid record prices for Twin Cities properties, but some brokers expect transaction volume to fall this year. ‘We will continue to see increased demand,’ said Gina Dingman, president of NAI Everest, a commercial real estate brokerage. ‘But increased interest rates and overall transaction costs will cause buyers to offer less for the same property they may have paid more for a year earlier.’”
The Seattle Times in Washington. “Seattle is set to see almost 10,000 new market-rate apartments open in 2017, nearly twice as many as in any other year in the city’s history. The magnitude of the construction is remarkable. The city is on pace to see more apartments built this decade than in the previous 50 years combined — and the vast majority of the new units haven’t opened yet, according to the Dupre + Scott research firm.”
“The suburbs aren’t far behind in the building spree: The entire Puget Sound region, from Tacoma to Snohomish County, is slated in 2017 to have its second-busiest year in history for apartment construction, just shy of a suburban building boom in the late 1980s. Those who build and bankroll apartments remain concerned about a possible oversupply bubble, especially for luxury units.”
“Tom Parsons, executive managing director of apartment developer Holland Partner Group, notes that costs for building apartments have surged 35 percent in the last half-decade, lowering profits and making Seattle less attractive for big investors. ‘Given the increase in the overall cost of housing over the past five years, we believe that capital has reached the tipping point and many of the projects being planned will be unable to be financed,’ Parsons said. That last happened when the market tanked during the recession and barely anything got built.”
The Washington Post. “The Bartlett, a 22-story apartment tower in Arlington’s Pentagon City, will start daily rentals for 50 units Jan. 13, just in time for the inauguration. There have been 39,000 new apartments placed on the market in the Washington region since 2014, and an additional 25,000 are being built, said Max Peker, a market analyst with CoStar, which studies the commercial real estate market. Apartment demand has been resilient because of strong job and population growth, but the rise in competing properties means landlords have limited opportunities to raise rents.”
“Erik Gutshall, the planning commission’s vice chair, said the hotel-style usage will benefit the county by generating tax revenue and enlivening the streetscape in Pentagon City. ‘We need to keep innovating,’ he said. ‘And we can’t get hung up on zoning laws built for the 1950s.’”
The Dallas Morning News in Texas. “With over 55,000 apartments under construction in North Texas, Axiometrics and other apartment market watchers are predicting a slowdown in rent growth. ‘D-FW has been one of the few markets to maintain its strength in the past year as moderation hit the nation as a whole,’ Axiometric’s Jay Denton said in the report. ‘But new supply is expected to reach its peak for this cycle in 2017 while demand in terms of job growth will remain steady. It’s that influx of new construction that could cause rent growth to decrease.’”
“More than 29,000 apartments being built now are scheduled to open next year. Nationwide apartment rent growth is already slowing. ‘Though the market has moderated, it’s important to stress that we’ve seen a very strong market for more than six years,’ Denton said. ‘Axiometrics had predicted this moderation, since the market could not sustain the peak of 2014 and 2015.’”
The Press Democrat in California. “For renters, the search for housing this year was hindered once more by a lack of available units. Two private companies that track county apartment data put the vacancy rate this fall at less than 3 percent. The rent for the average two-bedroom, two-bath apartment in the county has increased 49 percent in five years to $2,122 a month, according to Real Answers, a Novato company that tracks data from large rental complexes.”
“Looking ahead, Scott Gerber, managing director of Bradley Commercial Real Estate in San Rafael, predicted the county will get some relief in the coming year because of an apparent oversupply of new rentals coming on the market in San Francisco, the Peninsula and Silicon Valley. In time, some county residents will move south to take advantage of that housing and landlords will seek more modest rent increases. ‘The rental market is certainly settling down,’ he said.”
‘For three years in a row, apartment building buyers — mostly institutional investors from out of state — have paid record prices for Twin Cities properties…’But increased interest rates and overall transaction costs will cause buyers to offer less for the same property they may have paid more for a year earlier.’
I’d predict a commercial real estate bust, but it’s already here.
I personally think the Commercial bust never went away from bubble 1.0. Builders thought they could build it and they would come, and in a small percentage of cases people did, but for the most part I dont think they penciled out and in many cases they just cannabalized existing commercial RE, so net-net its a big fat zero for this eCONomy. My neck of the woods there is a new shopping center - about 2 years old - that still has yet to find tenants to fill a number of spots. Just down the street is the county’s “main” shopping center, and its got the same problem - sears left, sports authority died, some businesses rarely have customers and I know from talking to a business owner there that they got offered big incentives to move into the new shopping center but it would be tough with them as they’re a UPS store with customer mailboxes.
“…as they’re a UPS store with customer mailboxes.”
Back in my repo days I had some debtors who had more than one of these “addresses” each forwarding to the next… trying to shake-off the skip-tracers dogging them. The hardscrabble underbelly of this country was growing with each recession back then; must be enormous now.
You, sir, are peddling fiction. Obama, the Fed, and our scrupulously honest financial media all inform me that our economic recovery is robust and expanding.
Sunday funnies from TBP. Enjoy!
https://www.theburningplatform.com/2017/01/01/sunday-funnies-144/
Globalists vs. nationalists - who will prevail?
http://www.telegraph.co.uk/business/2016/12/31/political-earthquakes-could-shake-europes-economy-year/
Factory farming is globalism and corporate greed at its most odious.
https://www.theguardian.com/law/2016/dec/22/farm-fresh-foods-alabama-workers-rights-abuse
A great read.
And a great warning.
And a hearty welcome to 2017!
—
HOW THE COLLAPSE OF THE USSR FELT FROM THE INSIDE
Frontpage Mag ^ | December 30, 2016 | Oleg Atbashian
Then, all of a sudden, the USSR disappeared from the map. How did that happen? Political scientists have and will continue to write, with varying degree of accuracy, about the details of it. What I’m attempting to do here is describe how it looked and felt from the inside - as seen by me, who at the time happened to be a voiceless, powerless Soviet citizen trying to make sense of the universe.
Our teachers kindly taught us that individual liberties resulted in crime, violence, and depravity. The Communist Party was the only thing that kept us alive, separating us from chaos and certain death. Individual people couldn’t be trusted to make the right choices, which was why we needed a caring government. It was a matter of common knowledge that should the government stop regulating society, the world would almost immediately end in a terrible bloodbath.
At the same time our teachers told us that the Communist ideology was “historically optimistic.” And I remember thinking to myself then that a capitalist society that trusted people with their freedoms was a lot more historically optimistic than the bunch of misanthropic curmudgeons in the Kremlin who taught us to fear freedom and took everything away from us in exchange for a vague utopian promise. Not in these exact words, but that was the general idea.
Just as it was in the USSR, American media now publishes articles that read like Pravda’s updates on this week’s current truth. American entertainers and moviemakers are consistently pushing the politically correct party line. Social media giants are seriously considering political censorship. Indoctrination in American schools and colleges is worse than what I’ve seen in the Soviet Union, where getting a real education was actually important. And finally, just as it was in the USSR, more and more people begin to resent the “progressive” establishment and mock the lying media.
The way I see it, the proliferation of socialist ideas is largely a consequence of the decades-long Soviet meddling in American affairs, aimed at demoralizing the public and promoting the “correct” people and opinions in places where it mattered most. According to KGB defectors, only about 15% of Soviet intelligence activities here focused on actual espionage; the rest were influence operations. Their seeds have now blossomed, long after the “gardeners” have left this earth. Today’s left-wing radicals in the Democratic Party owe Russia a large debt of gratitude for their unearned power. Seeing Russia turn against them in the last election must have felt excruciatingly scary and painful; they still seem to be in shock.
Dear Gawd…
—-
3 Ways You Can Pay Off Your Student Loans
Brian Kuhn - Yahoo Finance - December 31, 2016
Having student loan debt can seem overwhelming, especially when your loans have large balances, high interest and repayment time frames that can feel endless. What may be most disheartening to student loan borrowers is, unlike other types of loans based on tangible assets like cars and houses, all graduates have in exchange for all the debt is a diploma, a piece of paper that may or may not be helping them earn more money. There may not be many clear answers, however, here are some options to consider if you find yourself trying to map out your life while dealing with student loans.
Maintain Patience
In the meantime, focus on making the debt payments on time and in full. Also, student loans are installment loans and they are considered good debt. That means the lender and the credit bureaus really want to see that loan paid off over the full length of the loan, not necessarily early.
Buy a House
People typically pay off debt in one of two ways: through their regular cash flow or with a lump sum they’ve somehow obtained. A newfound lump sum of money could be the result of an inheritance, a gift or a legal circumstance, though these occur rather rarely. Another example of finding a sum of money would be developing an asset that has value. Starting a business, perhaps? Starting a business is difficult, though, and developing equity in the business that can be extracted from it is even more difficult. Buying a house, on the other hand, is a natural step most people want to take anyway.
There is a generation of homebuyers in America now who represent a dramatic change from prior generations. This generation already has student loan debt on their record when qualifying for a home purchase. The data is mixed on whether this is holding back the housing market, but for student loan borrowers who are able to buy homes, the new asset presents an opportunity. As far as a planning strategy, once you have the house, unless you do an interest-only loan, every payment creates additional equity. As time goes by, houses generally go up in value. (Not always, as we have learned, but generally.) By making the payments on time and having good fortune with maintenance, among other factors, it’s possible over time to develop equity in that home.
If you find yourself in a position to have such an asset, it gives you options. You can sell the property and use the proceeds to pay off education debt. Or you can take an equity line at perhaps a lower interest rate than the student loan and pay off the student loan with it. It’s an unusual approach, but it could be an option for you.
Seek Forgiveness
There are a few ways in which federal student loans can be forgiven, canceled or discharged. One of the scenarios that might be a viable option is public service student loan forgiveness. You can read more about strategies for paying off student loans here.
I totally disagree if we treat it as an asset it makes sense to cancel the degree in exchange for cancelling the debt, it will be on your credit report for years and most importantly if the job requires you to have a valid 4 year degree you cant even apply or keep it, for it because you dont have one anymore,
unlike other types of loans based on tangible assets like cars and houses, all graduates have in exchange for all the debt is a diploma, a piece of paper that may or may not be helping them earn more money.
This is rich. Pay off student debt by buying a house to flip.
A house is typically wildly more expensive than a rental apartment. After 20 or 30 years, sure, it’ll be less expensive than an apartment on a monthly basis. But the amount of money spent on it will likely be more than what was spent on an apartment (of course, if you decide to sell, you’ll get money back, the “equity”, i.e. the amount of the loan you’ve paid down, not possible with an apartment). But how exactly this helps the student debtor now or ever is unclear.
It used to be that if you wanted to save money, you’d rent. Now, don’t get me wrong, I have no warm and fuzzy about renting, I don’t like dealing with landlords or relentless rent increases or other tenants BUT - from an economic perspective, from experience, renting will help the student debtor’s net worth much more so than plunging into a house purchase with the intent of flipping it in the near or longer term.
Buy a house to flip and make a profit - it’s like recommending one get started in day-trading stocks to pay off student loans. As if that goober with his ScottTrade account is going to be able to arbitrage better than Goldman or JP Morgan. Because those are his counterparties competing for the same arbitrage opportunities. Sure, day to day he can make paper profits. But when the SHTF and the market turns and it’s time to lock in profits, the big players are going to be ones able to execute on their purpose-built networks and software while he’s getting a 404 error on his web browser and home computer, i.e. he’s going to be the bag holder.
I think my favorite was the local casino, “Maryland Live”, which had a billboard in 2013 which said:
“WIPE OUT HOLIDAY DEBT
EARN NOW THROUGH JAN 25
$750,000
CREDIT CARD WIPEOUT”
I’m looking at a picture of it right now. I’ll have to find an image host to post this sort of thing.
It made me realize that giving people rope to hang themselves was one thing. They would need to slip their head in the noose.
And, I have no issue with adults carrying on their own affairs as they see fit. However, what I have an issue with is when the PTB decides they’re going to put me on the hook for paying for the losses incurred by a participant in the transaction, be it the individual or the company.
“As far as a planning strategy, once you have the house, unless you do an interest-only loan, every payment creates additional equity. As time goes by, houses generally go up in value. (Not always, as we have learned, but generally.)”
Weasel words…
dont take loans you cant pay back. if you are broke, do 2 yrs community college, 2 yrs state college….get good grades go to grad school for free as a TA. easy peasy. stop crying. Or be an apprentice in a high paying trade, skip college.
There are no “high paying” trades Lola.
I predict that traffic in Denver will get even worse.
Ditto Tampa.
heh, they’re packin’ ‘em in like sardines here.
During the height of bubble 1.0, I had this saying “They’re on the move, they’re on the march!” Seemed like people all over the place, to-ing and fro-ing, scrambling for their little piece of the American dream, trying to find a place to settle.
We got enuf economic refugees from the Northeast and Mid-Atlantic.
Uh, Palmy…
Aren’t you an economic refugee from the Northeast?
No. I saw all my friends toiling away in the dreariness of Boston and NY so they could retire to Florida, so after two years of doing the same, I just decided to cut to the chase. Got here just in time for the 80s in South Florida. What a ride.
Gonna Airbnb my apartment for the national chamapionshipa game.
Hope to make enough moola to take my ole lady to Berns.
https://www.youtube.com/watch?v=NhtBWgFENJc
https://www.youtube.com/watch?v=AGWiZLy0YuI
Just don’t ask… How did you get that cat up there?
https://www.youtube.com/watch?v=7eabz4V-tvU
Mead, WA Housing Prices Crater 9% YoY
http://www.zillow.com/mead-wa/home-values/
Chevy’s 0% Financing For 72 Months Problem
http://finance.yahoo.com/news/chevy-0-financing-72-months-134645732.html
their sh@t is grossly overpriced.
“Several federal agencies are accelerating hiring in the final days of the Obama administration to ensure that as many new employees as possible are in place before President-elect Donald Trump imposes a promised hiring freeze.
Leaders at these agencies are filling open positions with transfers and outside hires and are making internal promotions before Trump takes office Jan. 20, according to internal documents and interviews.”
https://www.washingtonpost.com/powerpost/federal-agencies-rush-to-fill-job-openings-before-trump-takes-office-jan-20/2016/12/30/de0c1030-cdd8-11e6-a747-d03044780a02_story.html?utm_term=.67b8218287ba
But all parties are the same…
All candidates are the same.
But why does the establishment and globalists fear one?
Looks like Trump’s team is eager to drain the “climate swamp.”
‘How many of these, overpriced, cookie-cutter high-rises and boxes do we need? Banks were skittish about lending on new condo projects coming out of the recession but, for a few years anyway, were more than happy to finance less risky apartment projects. Developers rushed in with the belief that just about every street corner needs hundreds of new $3,000 and $4,000 a month apartments.’
Consider this: Banker and Tradesman is a RE analysis firm, the most well known in and around Massachusetts. This is all they do. And they completely flubbed it. Meanwhile I’ve been saying this was going to happen for two years. So how did I get it right and they didn’t?
‘The coming shift in the market is also expected to have an impact on investors in the Twin Cities. For three years in a row, apartment building buyers — mostly institutional investors from out of state — have paid record prices for Twin Cities properties’
I identified that the motivation wasn’t true demand. It was the Yellen bucks chasing yield in a ZIRP environment. The longer it went on the more comfortable they became with this “low risk” market. When land prices bubbled over, they invented a new story, after the fact, to explain why all they could build was luxury. Sure rich renters are willing to spend 70% of their income on apartments, as long as they have a glass bottomed pool over looking a brew pub and a bocci ball court.
It would be difficult to conjure up a more bull-sh*tty tale. But they dove right in, all over the country. What cities are we talking about? Manhattan, Miami Beach, Boston, DC, Dallas, Denver, Houston, Austin, Minneapolis, Seattle, San Francisco, LA and yesterday we can include Nashville. What do they have in common? These were the fastest highest rent growth this country has ever seen. Why did they tip over and fall first? Because that’s where this bubble started. Then the luxury boom fanned out to practically every burg and hamlet in the US. Those markets will pop too, all the way down to Wichita Kansas.
Some of you reading this today believe you are going to retire and you won’t as a result. That’s how serious this is.
“Some of you reading this today believe you are going to retire and you won’t as a result. That’s how serious this is.”
Illustrating your point:
https://mishtalk.com/2016/12/31/criminal-witch-hunt-in-dallas-pension-fiasco/
“The fund is on the verge of a potentially catastrophic collapse that could leave public safety workers, taxpayers and the City of Dallas on the hook for billions of dollars. And the reason stems from abuses under the former administrator Richard Tettamant, who was ousted in 2014.
The fund’s former managers bet heavily on risky investments such as luxury homes in Hawaii, a resort and vineyard in California and Dallas’ Museum Tower itself, and promised its hardworking police and fire employees unrealistic returns while enjoying lavish perks.
Those returns didn’t materialize, saddling the retirement fund’s new managers with $2 billion to $5 billion in unfunded liabilities. Frightened police officers and firefighters began a run on the fund, pulling more than $500 million out of it in recent weeks at a pace that would have drained the fund’s cash to dangerous levels.”
That’s what the editorial says. Mish has a different take:
“Taxpayers should not be on the hook for this mess. The promises were bound to fail from the get go.
The fault for this mess is squarely in the hands of politicians, not those running the fund.
Nearly every public pension plan in the nation is severely underfunded. There is nothing special about Dallas.
However, politicians will never point the finger at themselves. So the witch hunt is on.
The only realistic solution to this mess is massive haircuts on pension assumptions, one of two ways: Voluntary or in bankruptcy court.”
Pensions (and life insurance companies) need compounded returns for years. Who decided interest rates should be pinned to the mat and stay there? Who printed 4 trillion dollars to make that happen? Yes, we can say the politicians should have made the central banks back down. But we can also say there is plenty of greed and blame to go around.
BTW, how is that “they had to do something” argument looking now?
“Who decided interest rates should be pinned to the mat and stay there? Who printed 4 trillion dollars to make that happen?”
The FED. And it has got to go.
“Yes, we can say the politicians should have made the central banks back down.”
We can, and should. Central banks came about as a result of the politician acquiescing to their creation.
“But we can also say there is plenty of greed and blame to go around.”
Yes. But in the end, it is up to the politicians to make the FED go away. And they probably will, eventually, as the pressure becomes so great that they have no choice. Yes, the Dallas mayor is rather craven getting up on his hind legs pointing to the fund managers. But I see it as a good thing, a possible “trickle-up” to politicians on the federal level, if you will, wherein the FED is finally targeted for the misery, and eliminated.
It’s just as easy to say something like, “the people get the government they deserve.” It’s more constructive to identify policy mistakes and learn from them.
You can identify all the policy mistakes you want, but when more than half the electorate are voting themselves benefits someone else has to pay for, and when millions of indescribably stupid sheeple believe a candidate backed by Soros and Goldman Sachs will bring “change we can believe in” or is “fighting for us!” then we are indeed going to get the government we deserve.
What does such a conclusion solve? I got over the blame threads around 2007.
Who said it solves anything? It’s just stating objective reality.
But in the end, it is up to the politicians to make the FED go away.
It is up to the voters to elect politicians who will end the Fed and its swindles against the 99%.
It’s only 40%.
Lemme see. Your permitted pension shortfall is 20 purrcent and then add to that another QUESTionable 40 purrcent and life starts to get intereSTING.
http://www.investopedia.com/ask/answers/061115/how-much-institutional-pension-funds-portfolio-typically-investing-real-estate.asp
‘Pension fund investments continue to grow, as real estate is increasingly viewed by fund managers as representing a very favorable risk-adjusted return on investment. Additionally, real estate is seen as an inflation hedge. The current low yields available on bonds are another factor driving fund managers toward increased asset allocation to real estate investments.’
‘Pension funds are a very important factor in the overall investment market, as they make up the largest part of institutional investments. As of 2014, they are estimated to account for nearly 40% of professionally managed assets, and their combined holdings add up to over $10 trillion in total investment capital…In the past, pension fund managers have often seen real estate as mainly a high-potential, capital-appreciation investment. That view has recently become augmented with a perspective on real estate as a steady income-producing asset.’
Dont diss the bocci ball Ben, thats the only way an anglo like myself can dress in all white threads and not get arrested for suspicion of pimping.
1. Ban public unions
2. Ban them collecting any dues
3. Allow all these cities to go bankrupt
4. Start new. Only 401ks. 40 years until retirement.
5. By law, public servants total compensation package can only be 80% of the average in their city.
6. By law, they cannot aid or contribute to any political organization or candidate
Problem fixed.
“5. By law, public servants total compensation package can only be 80% of the average in their city.”
Sounds like a great recipe for guaranteeing ineffective government.
Sounds like a great recipe for guaranteeing ineffective government.
As opposed to what we have now?
So you are saying we don’t have ineffective government NOW?
At least it won’t bankrupt us.
No. I’m saying your proposal to cap government employee pay at 80% of the area average would make things worse.
there are what …..a million people on waiting lists for government jobs, just make it easy to fire them Turn and burn
they will get the message soon enough.
Do you seriously believe the Democrats are going to let their patronage and graft rackets - their entire business model - be blocked by something as inconsequential as fiscal reality?
The Democrats look increasingly like a headless horseman. This country will always have two parties, but right now they are in search of a reason to exist. The adults have to clean up this mess. Here’s a start: a wealth effect is no substitute for wealth.
A wealth effect is a wealth transfer.
Disagree - Erie, PA is pretty safe from any housing or rental bubble…
https://erie.craigslist.org/search/apa?query=free+rent&availabilityMode=0
Several units available in this one, looks new:
https://erie.craigslist.org/apa/5932391686.html
$580 / 1br (with water and trash included) in the nicest part of town doesn’t sound like a bubble…
Opinions may vary…
What do you think the return on that unit is? After financing and management, maybe 5%? Less?
“What do you think the return on that unit is? After financing and management, maybe 5%? Less?”
I would say it is positive. Which is more than I can say for most of the rest of the country with new apartment construction.
I only brink up Erie because ans lived and worked there back in the day. The place never seems to change. Bubbles and crashes never seem to affect the place.
AND - it is a decent place to live 3 out of 4 seasons…
How much do they pay you to live in Erie?
@Ben Jones:
“Some of you reading this today believe you are going to retire and you won’t as a result. That’s how serious this is.”
Thanks for this post. I live in the Boston area, have been watching the luxury building boom that is also happening in the surrounding area and wondering WTF is going on. Can you please elaborate on your above statement? Thanks!
Like most large construction projects, much of the financing is done by institutions like pensions and life insurance companies. I’ve documented that a lot of this has been going on willy-nilly. Pretty much everyone involved has considered it a sure thing.
IMO, there will be a large number of defaults. They paid so much for the land and misjudged the market in the euphoria. These loans needs rents way above what the market can provide. They have also misjudged the size of it, and are oversupplied. Rents are falling at a time when their margins were low to begin with. Throw in the inevitable recession and many will fail. Pensions will be damaged like the one in Dallas (also a real estate gambler that lost).
Pensions will be damaged like the one in Dallas (also a real estate gambler that lost).
But gamblers should lose occasionally—as part of reminding everyone that there were real risks involved; the system should emerge stronger for it.
‘predicted the county will get some relief in the coming year because of an apparent oversupply of new rentals coming on the market in San Francisco, the Peninsula and Silicon Valley’
This one cracked me up: an apparent oversupply.
There is a crap ton of shadow inventory in the Bay area that was never cleared from 2008. Would be interesting to know how many mortgages are actually current. I would suspect 20 to 30 percent are delinquent.
About six months ago I posted a Bloomberg report that had a bay area property manager saying tenants were telling her what the rent would be - for condos she was managing for investors. Lots of foreclosures to come there. And we all know how foreclosures work out in condo towers: missed HOA dues that get piled up on those remaining, more defaults, common areas go to hell, and down we go.
July 13, 2016
The North Bay Business Journal reports from California. “After a few years of hot sales activity, the market for multifamily properties in the North Bay appears to be slowing, not so much from lack of interest among investors but for lack of buying opportunities and pricing uncertainties, according to local experts. In Marin County, there are a number of properties with more than five units awaiting buyers, an unusual amount for the market, according to Katherine Higgins, an apartments specialists with Paragon Real Estate Group in Greenbrae. ‘I’m not sure if it’s the price point or that the prices do not make sense,’ she said. ‘Last year, almost everything that came on market was snapped up in weeks.’”
“Buyers of institutional-level properties, typically with more than 200 units, seem to be getting less aggressive in chasing prices and more cautious about overpaying, said Scott Gerber, another longtime apartment broker, now with Bradley Commercial. ‘It’s no secret rents in San Francisco — one of the major drivers for the North Bay as activity radiates this way — were down in the fourth quarter and moderating at best because of the huge supply built there in last five years,’ Gerber said.”
“There has been such a hunger for properties and competition between buyers that a number of deals have gone into contract before inspection reports were completed and at sale prices that the properties’ rents didn’t seem to justify, Higgins said. ‘It’s been an absolute feeding frenzy for the past two years,’ Higgins said. ‘It’s a bubble in the making. Then the buyers get in and realize they have put in more money to get the property to where they want it to be.’”
The Orlando Sentinel in Florida. “Even with a slight uptick in residential construction, at least a few builders have turned to incentives to lure buyers. Even as MetroStudy reported a 3 percent increase in housing starts for Central Florida in the first quarter from a year earlier, Minto Communities offered $35,000 in incentives of some of vacation homes at the Festival development south of Celebration, according to a release. In Winter Garden, salesmen for Meritage Homes wave signs offering free pools at a nearby development and the builder markets ‘free’ pools at Nova Grove near St. Cloud.”
From Crain’s Chicago Business in Illinois. “Homes in Lake Forest aren’t selling. The average time a home in the quintessential North Shore suburb spends on the market is one of the highest in its peer group: for homes that sold in May, it was 186 days. ‘It’s been slow up here,’ says Marina Carney, a Griffith, Grant & Lackie agent. ‘We’re all feeling it,’ says Sue Beanblossom, a Berkshire Hathaway Home-Services Koenig-Rubloff Realty Group agent in Lake Forest. ‘It takes a long time to get something sold in Lake Forest today.’”
“At the end of May, Lake Forest had enough homes on the market to supply 14.5 months’ sales, according to Midwest Real Estate Data. The problem lies in Lake Forest’s aged housing stock, high asking prices, unmotivated sellers and a long commute to downtown, real estate agents say. But the market may be telling those sellers to stop waiting. A mansion on Mayflower Road came on the market recently with an asking price of $4.9 million, or less than three-quarters of the nearly $6.6 million the sellers paid for it 15 years ago.”
“The owners of a 10-year-old house on Kennicott Drive listed a four-bedroom in January at just under $1.8 million, or about 85 percent of their 2007 purchase price. They closed the sale in early June at about $1.47 million. ‘That was disappointing for my sellers and for me,’ says Beanblossom, who handled the sale. ‘But they wanted to get it over with.’”
The Aspen Daily News in Colorado. “In his Aspen Snowmass Market Report real estate analysis for the first half of 2016, Sotheby’s broker associate Andrew Ernemann referred to Snowmass Village as the upper valley market’s ‘unexpected bright spot.’ However, he said Aspen’s slowdown could potentially impact its neighbor this year. It’s the tippy-top of Pitkin County’s real estate market that has taken a huge hit this year. In 2015 there were 30 residential properties sold for $10 million or more. This year that segment is off by more than 60 percent, according to Tim Estin, who published his most recent market analysis on July 8. And he said the trend is by no means unique to this market.”
“‘The luxury sales declines correspond with what one hears about other high end real estate markets around the country,’ Estin wrote. ‘Sales are either off considerably or have stopped — foreign buyers have dried up, uncertainty prevails and there is an abundance of high priced inventory.’ Ernemann concurred that, ‘Many of the world’s luxury real estate markets have experienced a drop in sales activity and/or prices in 2016.’”
The New York Times. “New York City’s ultraluxury real estate frenzy — with its sky-piercing condominium towers and $100 million price tags — has finally come to an end. Even with every conceivable amenity, the eight- and nine-digit prices attached to trophy homes with helicopter views and high-end finishes never bore much relation to actual value. Rather, a class of superrich investors primarily drove the market, choosing high-priced real estate as their asset of choice, because it was less volatile than other investments and they could use shell companies to hide their identities.”
“But today a four-year construction boom aimed at buyers willing to spend $10 million or more has flooded the top of the market just as global market turmoil has caused wealthy investors to pull back and the federal government has moved to scrutinize some all-cash transactions. In and around West 57th Street, known as Billionaires’ Row, ‘it’s not just slow — it’s come to a complete halt,’ said Dolly Lenz, a broker to the superrich. She attributed the lack of activity along the Midtown corridor to oversupply, little differentiation among glassy ultraluxury units and peak pricing. ‘That’s a death knell,’ she said.”
“New York is not alone. After the global financial crisis hit in 2008, investors turned to high-end real estate around the world as a safe place to park their millions. But since the middle of 2014, prime property values have dropped in Paris, Singapore, London, Moscow and Dubai, said Yolande Barnes, director of world research at Savills, a global real estate firm. In the Miami area, 216 homes and condos priced at $10 million were on the market at the end of June, a 43 percent jump from a year ago, according to data compiled by Esslinger-Wooten-Maxwell Realtors. ‘By anyone’s measurement, that’s more than you’d like to have,’ said Ron Shuffield, president of that firm, pointing out that only 26 houses and condos in that price range sold in the 12 months through June.”
“‘The global misperception was that the demand would be endless,’ said Jonathan J. Miller, president of Miller Samuel, a real estate appraisal firm. ‘The reality was the market was not as deep as what was thought.’”
http://thehousingbubbleblog.com/?p=9687
From the predictions post:
‘From one year ago. “At the end of The Big Short, they revealed that new irresponsible bets on housing were introduced in 2015. If that is true, the bubble in housing has not fully even reignited yet. There is no way we are anywhere near the mania I saw in 2015, so nobody here has an ounce of proof that housing is in the process of crashing.”
‘new irresponsible bets on housing were introduced in 2015′
It was actually in the fall of 2014, and became a drip, drip thing for a year and a half. If you look at some charts you’ll see this was done just as many markets were headed back down, only to take off again.
There is a crap ton of shadow inventory in the Bay area that was never cleared from 2008. Would be interesting to know how many mortgages are actually current. I would suspect 20 to 30 percent are delinquent ??
LOL. I see that you have over indulged in our new MJ law as of today.
And keep in mind there are foreclosure moratoriums in effect in all 50 states. In CA case, the “homeowners bill of rights” has effectively shut down all foreclosures since 2008.
Happiest New Years to you & yearns Mr. Ben & the entire eclectic HBB gang!!!!! ( iffin’ ya see a 20# trout ’bout to smack ya, duck!)
http://www.businessinsider.com/marijuana-mansion-party-marijuana-don-2016-12
‘The Bartlett, a 22-story apartment tower in Arlington’s Pentagon City, will start daily rentals for 50 units Jan. 13…There have been 39,000 new apartments placed on the market in the Washington region since 2014, and an additional 25,000 are being built…the rise in competing properties means landlords have limited opportunities to raise rents.’
‘Erik Gutshall, the planning commission’s vice chair, said the hotel-style usage will benefit the county by generating tax revenue and enlivening the streetscape in Pentagon City. ‘We need to keep innovating,’ he said. ‘And we can’t get hung up on zoning laws built for the 1950s.’
See how deep the denial is? Why don’t you just rent them long term? Why the change after the fact? You guys have been screaming shortage for 5 years! And you have 25,000 more on the way?
“…Arlington’s Pentagon City, will start daily rentals for 50 units…”
They should send complimentary tickets to Petraeus and Broadwell who I thought were a good looking match. Certainly had NRE.
A very unfortunate name for her book:
https://www.amazon.com/All-Education-General-David-Petraeus/dp/B00F6IM5CW
I just heard last night from mutual friends a guy who used to work at my company who is a couple months away from retirement was planning to move to Florida but is now afraid with Trump being elected that it will be underwater due to sea levels rising, so instead he’s looking at a place in the mountains.
Florida, you dodged yourself a bullet. Thats one less stupid person y’all have to contend with, and every little bit helps!
Please don’t vector this libtard dumbazz to the Rocky Mountains. We’re all stocked up on stoopid thanks to the California equity locusts fleeing the mess they voted for.
Yeah, and we don’t need anymore MA or NY transplants either.
Can we just brand ‘em at the state line, then bar them from ever resettling here?
Democrats are really good with science when it supports their political agenda.
Do NOT go to Guam. One more person and it could tip over…
Congressman Hank Johnson (D) fears Guam will tip over, March 25, 2010
https://www.youtube.com/watch?v=v7XXVLKWd3Q
There is so much d@m community around my neighborhood the neighbors dont even say hello or acknowledge your alive.
If you’re able to worry about such things, that means you’re alive.
Profound. You really missed your calling as a modern day Plato. Still time though, get out there and illuminate the world with your deep thoughts Jack Handey!
UHS send me these things:
3195 E John L Ave, Kingman, AZ 86409
4 beds 3 baths 2,210 sqft
For Sale
$39,900
Zestimate®: $124,631
‘This home has so much potential to offer! This 4 Bed/ 2 Bath home is 2210 sf. This home is an investors/handyman dream! Put your own touches in this home and make it your own.’
‘Built in 2003 Last sold: Mar 2014 for $26,000′
http://www.zillow.com/homedetails/3195-E-John-L-Ave-Kingman-AZ-86409/64953059_zpid/
Check out the photos.
looks like a prison
After the Great Housing Bubble collapse of 2017, you and your fellow FBs can form your own little squatters’ colony here, since the off-ramps, bridges, and tunnels are already spoken for.
Houses are prisons. Especially when you pay in excess of construction costs($55/sq ft for lot, labor, materials and profit) for a run down 20+ year old shack.
I’m not familiar with that part of Arizona, so I’m wondering if there are folks there that would see the pictures of this place and say “Dayum, she purty!” as they elbow their friend to get them to look. Friend responds with a slight nod and a snort.
High thermal mass makes a lot of sense in the desert; I rather like the look, myself.
After much agonized deliberation, I must decline. I will counter-offer $5K for the lot AFTER you’ve razed and removed this eyesore.
Built for the Zombie Apocalypse?
“Check out the photos.”
Not much curb appeal, eh?
probably a lot safer then this place to have a all night party
https://www.facebook.com/The-Oakland-Ghost-Ship-Fire-204159393376318/
Business
After helping a fraction of homeowners expected, Obama’s foreclosure prevention program is finally ending
By Renae Merle
December 30
Joseph Barratt, 55, and others demonstrate outside a HOPE NOW homeownership preservation workshop at the University of Pennsylvania in Philadelphia in 2008. Demonstrators hoped to draw attention subprime mortgage crisis.
(Matt Rourke/AP)
When the Obama administration announced a massive effort to help distressed homeowners in 2009, it set high expectations. The program, government officials said, would keep up to 4 million borrowers out of foreclosure.
“It will give millions of families resigned to financial ruin a chance to rebuild,” President Obama said at an event announcing the effort. “By bringing down the foreclosure rate, it will help shore up housing prices for everyone.”
Nearly eight years later, Obama is preparing to leave office and the Home Affordable Modification Program is scheduled to accept its final applications on Friday having helped a small fraction of the homeowners government officials initially expected. About 1.6 million borrowers have seen their mortgage payments lowered through the program so far, but about a third of those people eventually fell behind on their payments again.
“The president set out an ambitious goal that wasn’t met,” said Kevin Stein, deputy director of the California Reinvestment Coalition, a housing advocacy group. “It was definitely a step forward and step in the right direction, but it didn’t [reach its goal] and a lot of people ended up falling through the cracks.”
…
It’s kinda sad to see blacks who voted for a black president just because he is black by margins of up to 95%+ (textbook definition of racism) come to the sad panda realization they were only used.
Obama destroyed the black family incomes, jobs and wealth.
But obama was black so we can’t blame him.
If the black vote wasn’t so racist they would support a candidate that wants to:
1. Break up the banks
2. Deport every illegal
3. Give them school choice
4. Shrink the size and scope government
5. Shrink regulations
6. Put thugs in jail
Etc.
“Obama destroyed the black family incomes, jobs and wealth.”
He continued discriminatory minority housing policies which were already in place under GWB, and most likely set in motion much earlier (I’m thinking of CRA, for instance).
It’s kinda sad to see blacks who voted for a black president just because he is black by margins of up to 95%+ (textbook definition of racism)
That’s clearly false. Black voters usually give Democratic candidates at least 90%, so very few voted for Obama simply based on race. You’ve now clearly falsely accused a large number of Americans of being racist. Let’s see if tj comes along and condemns you.
“It’s kinda sad to see blacks who voted for a black president just because he is black by margins of up to 95%+ (textbook definition of racism) come to the sad panda realization they were only used.”
I know several successful black men, and I’d bet my paycheck that the LAST person they’d trust would be a black solicitor.
or more importantly honor MLK again, and judge all people not just some people on the content of character, and thugs have a horrible one.
my neighbors are so frickn awesome that they stole my xmas presents on the porch.
That’s another problem with the Amazon model.
Amazon eats it, right or VISA or UPS/FEDEX?
people are the worst….
If only we could harness the kinetic energy released by Sweet William’s frenetic stamping of little feet, first in rage over Trump’s victory, and now in joy over his beloved Bitcoin soaring to new highs, we could power a small city.
http://www.zerohedge.com/news/2017-01-01/bitcoin-soars-above-1000-china
I wish we could harness the love between Putin and Trump. Deep love.
Reagan is pizzed!
Be afraid Trumplings…the precious snowflakes are mobilizing for battle, as soon as their Mao caps arrive from China.
http://www.sfchronicle.com/news/article/Local-activists-are-eager-to-make-a-New-Year-s-10828128.php?cmpid=gsa-sfgate-result
“But you can also feel a kind of strange euphoria in progressive enclaves like the Bay Area — the growing fierceness of soldiers eager for battle.”
BWHAHAHAHAA!! These are same hothouse orchids who took time off work and wailed out their anguish on YouTube when Trump won. Fierceness? Soldiers? Sorry, cupcakes: I’m a veteran, and you will never, ever have the toughness, discipline, constancy, or leadership to ever be anything remotely approaching “soldiers” - so if you venture out of your safe spaces and come mincing into the Red Zones and start up with your libtard crap, you will get your pansy a$$es handed to you posthaste.
Who exactly are you talking about?
We’re talking about falling housing prices. It is The Housing Bubble Blog afterall.
“Who exactly are you talking about?”
Couch surfing progressive soldiers from Facebook land who sleep in lounges and are eager for battle.
Local activists are eager to make a New Year’s revolution
By David Talbot January 1, 2017 Updated: January 1, 2017 6:00am
“A great cloud of melancholy has settled over Facebook land, or at least over those regions I inhabit. The coming ascension of Donald Trump has deeply darkened the usual year-end winter blues. But you can also feel a kind of strange euphoria in progressive enclaves like the Bay Area — the growing fierceness of soldiers eager for battle.”
“I have students who are homeless, and I’ve never encountered that before. One student, who is very bright, broke down in my office. He has two jobs but can’t afford anywhere to live. He’s been couch surfing and sneaking into lounges on campus to sleep.”
PS
The couch surfing students that he had never encountered before should be saying…
Thanks Obama
So one of these people is working two jobs and sleeping on friends’ couches. That sounds rather admirable, not worthy of being called an orchid or a snowflake.
Nonsense.
“A great cloud of melancholy has settled over Facebook land, or at least over those regions I inhabit.”
Now that’s what I call man made Climate Change.
LOL—great one, phony!
The Narrative is as scripted and fake as professional wrestling.
http://variety.com/2016/tv/news/kkk-leaders-allege-producers-paid-them-to-fake-scenes-in-canceled-ae-documentary-exclusive-1201950078/
Mr. Ben Jones, 2017 finds uncertainty again in the housing industry. Although I don’t have the time to post much anymore I do check in on your blog and your continue to do a thoughtful and fact driven analyst of housing not only in North America but world wide.
I have disagree and agreed on housing with you and other bloggers over the years but overall most who are long time posters are just trying to figure out where this country is headed in 2017 and beyond.
Have a safe and healthy 2017, lets hope the housing industry prospers for most and our nation survives the onslaught of hate towards this flawed but better than any other country on earth.
Thanks and it’s always good to hear from you.
I also would like to thank Ben Jones and those who post here regularly. I rarely post comments to this blog, but I read it often and seem to learn something each time.
Me too.
Every time I read some MSM crap, I come here for a dose of reality.
C’mon in. Pull up a chair. Make yourself at home.
Garden City, ID Housing Prices Crater 14% YoY
http://www.zillow.com/garden-city-ny/home-values/
While all Democrat municipal administrations are based on patronage and graft rackets, the pension plan of El Monte in East LA makes these corrupt officials look like rock stars to their envious fellow Democrats.
http://www.zerohedge.com/news/2017-01-01/its-corruption-steroids-look-inside-el-monte-california-public-employee-pension
I’m not old enough to have witnessed a “better time”, but I’ve been thinking about this kind of thing a lot (in a slightly different context).
The root of the problem here seems to be a lack of feeling of accountability to one’s community and the individuals in it. Without direct, personal relationships with the individuals affected by one’s actions, it’s easy to adopt a “not my problem” or “I got mine” mentality. And if you don’t have to face the folks who are paying the cost of your behaviors/actions, they can’t hold you accountable, make you feel uncomfortable, or question your actions.
I’ve seen this as my company has grown significantly over the past 7 years…people behave differently when everyone knows everyone and you have to face the people affected by your mistakes or shortcuts. Folks are more diligent, in general, and try to do the right thing. But at some point, you get so big that one can rationalize “this is someone else’s problem” and “not my job” and you don’t have to think about the individual who will have to clean up after you. At that point, behavior changes for the worse.
Is this just a fundamental flaw of larger organizations? An inevitable effect of larger and larger municipalities? Those in positions of government don’t know most of ‘the people’, and so don’t care? And when they retire, they go elsewhere and don’t have to face those who are paying the cost?
That’s a stretch. You’re comparing the questionable use and blatant mismanagement of public funds with a private enterprise.
Spending taxpayer$$$ to rig markets and fix prices at grossly inflated prices is our problem.
That’s a stretch. You’re comparing the questionable use and blatant mismanagement of public funds with a private enterprise.
I’m not comparing the activity of the organization, but rather the mindset of the individuals. Mainly that personal ties/relationships lead to accountability, whereas size and distance undermine it. IMO a totally valid comparison to make.
I thought it was an interesting and insightful theory, drummin…. My anecdotal professional experience in both small and large teams does tend to align with what you described.
Not directly housing related, but here’s another update on the helicopter money experiments. The universal basic income. They are moving forward with it in Finland, and it looks like Scotland is next.
https://www.theguardian.com/politics/2017/jan/01/universal-basic-income-trials-being-considered-in-scotland
““But it is also about solidarity: it says that everyone is valued and the government will support you. It changes the relationship between the individual and the state.””
“The momentum is there, he says, and once it is framed around a desire for greater social justice “then you get away from the stale debate about whether if you give people the basic income then they will be lazy”.”
““People relate to the idea that everyone should have a social dividend. Everywhere I go, it’s the communities that feel left behind by globalisation that are most interested [in the idea of a basic income]. We have seen a sea-change in attitudes.”
“This sense of alarm about populist rightwing politics has brought more people to thinking we need to do something to provide better security for people. We are risking our economic and political stability if we don’t do something about it.””
USA Today, the newspaper for people who can’t read without moving their lips, says the housing outlook is bright for 2017. And my shoeshine boy is giving me stock tips.
http://www.usatoday.com/story/money/2017/01/01/housing-outlook-brightens-despite-higher-rates/95953932/