February 9, 2017

A Future Spike In Demand That Has Yet To Materialize

A report from the Chico Enterprise-Record in California. “Dozens of apartment buildings will be popping up across the city the next few years, many geared toward student living. This year, at least 758 apartments and about 275 single-family homes will begin construction. Developer Kevin Kramer said there is a lot of apartment activity and it’s a ‘head scratcher’ as to whether all of it is going to get filled. Now all the builders are deciding to invest in apartments. At some point, the market for multi-family building, much like the brick-and-mortar retail market, could get saturated, he said, and vacancies could go up. ‘It’s a pendulum that swings back and forth,’ he said. ‘But I think right now we’re OK.’”

“Meriam Park developer and business owner Dan Gonzales said his primary focus is on jobs. Meriam Park is a live-work development designed to appeal to the millennial generation, which he believes is changing the look and function of multi-family housing. ‘That’s my biggest concern about the amount of housing,’ Gonzales said. ‘I don’t see the job growth happening to sustain it into the future.’”

The Loveland Reporter-Herald in Colorado. “Loveland’s average rent costs are among the highest in Colorado, according to a report released by the Colorado Division of Housing. However, Loveland’s vacancy rate has gone up to 8.7 percent from a vacancy rate of 8.4 percent in the third quarter. For perspective, Loveland’s vacancy rate in the fourth quarter of 2010 was 3.6 percent. City of Loveland Community Partnership Office administrator Alison Hade said she wasn’t expecting the results for Loveland, especially with rent costs at some of the highest in the state.”

“‘I am very interested in watching it over time,’ Hade said. ‘I’m thinking with a vacancy rate that is that high, I would hope to see some pressure relieved in our rents,’ she said.”

The Duncan Banner in Oklahoma. “College students want to live near campus, but the proliferation of large-scale student housing in core Norman has city leaders concerned. They recently enacted a six-month moratorium, and preliminary discussions to update the R-3 multi-family zoning ordinance began Thursday. Since November 2015, the city has known Norman’s student housing market is becoming oversaturated, based on a report by RKG Associates Inc.”

“Mike Buhl of Commercial Realty Resources Co. (CRRC) also sees a soft market ahead for Norman’s student housing as other factors continue to drive the building and the buying and selling of apartments. ‘Strong investor demand, low interest rates and falling capitalization rates were once again the trends that made 2016 so busy in the multi-family sector,’ Buhl said. Buhl, a Norman resident, and Tulsa associate Darla Knight recently released CRRC’s 2016 Apartment Report. Buhl believes the low interest rate ‘has been the single biggest factor in helping to fuel apartment acquisitions.’”

In addition to building new apartments, investors are buying older apartments with the intention of upgrading them. ‘This year was very active in terms of apartment sell,’ Buhl said. ‘We’re seeing a lot of new construction on the conventional and the student side. There’s about 4,000 bedrooms that are being added to the market.’”

“University enrollment numbers indicate the student population is not increasing at that same pace as investors are building new apartments. ‘In order for those new properties to fill up, they’re going to have to get more occupants from other places,’ Buhl said. The Monnett Garden apartment complex is in the Boyd corridor, where many R-3, super-sized duplexes have been built. ‘They’re going after the same market,’ Buhl said. ‘They’re going after a student who is going to rent the bedroom. Norman probably hasn’t quite felt the effects of all the new per-bedroom, multi-family housing that has come online. They’ve added a lot of those, in addition to the new apartments.’”

The Real Deal on New York. “Leaner times may be coming for doormen and pet groomers. New York’s rental market is in the doldrums and the luxury market has taken the worst of it, new research shows. Luxury rents have fallen or stagnated in most neighborhoods while non-luxury rents continued to rise, causing the price gap between them to shrink. In recent years, developers have been flooding the market with high-end rental buildings targeted towards yuppies and equipped with amenities like gyms, game rooms, and pet spas. But the supply surge means renters now have a wealth of options to choose from, and landlords can’t expect to command the same premiums they could just a year ago.”

“On a neighborhood level, some of the biggest decreases in the price gap between luxury and non-luxury were recorded in West Harlem and Astoria. Shane Leese, a data scientist at RentHop, said developers in these neighborhoods have been building luxury rentals in anticipation of a future spike in demand that has yet to materialize. ‘People are willing to to stay in their non-luxe apartments, and pay the 7 to 10 percent increase, for now,’ he said.”

The Houston Chronicle in Texas. “Houston’s apartment market is facing a sluggish year as demand struggles to keep up with a growing supply, panelists said Wednesday morning to members of the Houston Apartment Association. The markets most concerning to multifamily analyst Bruce McClenny include Montrose, the Galleria, the Texas Medical Center area, downtown and Tomball/Spring. Rents were down last year near the Galleria, the Medical Center and Montrose, an Inner Loop neighborhood where more renters moved out of apartments than moved in.”

“Rents for high-end apartments will continue to soften this year as the supply grows. Overall occupancy is expected to be at 88 percent by year-end, data shows. ‘2017 in Houston is going to be a lot of hand-to-hand combat,’ Camden Property Trust’s Keith Oden said Wednesday during the company’s fourth-quarter earnings call. He called Houston’s apartment market ‘vastly oversupplied.’”

“Merchant builders, who sell developments after constructing them rather than holding them for the long term, are offering as many as three months of free rent to lure tenants. As many as 12,000 new apartments are expected to open this year, while job growth is expected to be modest at best.”

RSS feed


Comment by Ben Jones
Comment by butters
2017-02-09 17:46:42


Rents always go up. Some luminaries here have told me so.

Comment by oxide
2017-02-10 08:24:29

I’m one of those luminaries. :razz: In my almost two decades of renting, at best I got a concession the first year, then a rent bump, and then rent stayed the same.

But Ben said it himself yesterday. We have never seen such a run-up in rental units coming online in, well, ever. Of course this unconventional inventory is going to break the conventional wisdom.

Comment by Albuquerquedan
2017-02-10 08:49:30

Except the demographics are different. The simple if somewhat inconvenient truth for people trying to sell single family homes, if racial groups still buy homes at their historical rates, there will always be more renters and less homeowners than previous generations in the aggregate.

(Comments wont nest below this level)
Comment by Carl Morris
2017-02-10 10:45:08

If supply and demand were allowed to run its course I would expect excess supply in some segments to have an effect on the historical rates. But that would cause powerful people to lose money.

Comment by Ben Jones
2017-02-10 09:01:03

‘never seen such a run-up in rental units coming online in, well, ever’

Modern history anyway. They say the most in Boston in 60 years. The most in San Francisco in 72 years. When has greater Dallas constructed 50,000 units at one time? And that doesn’t include the 20-30,000 SF. Look above: Houston is “vastly oversupplied” with 12,000 units under construction, not counting SF. It’s going on all over the country. Yet I’ll page through hundreds of articles a day going on about a shortage! Here’s the logic: prices/rents are high = we aren’t building enough. Clearly it’s just the prices are too high, why? The land, there’s your bubble.

What we are witnessing is the “build your way out of a bubble” thinking which can only end in massive defaults.

(Comments wont nest below this level)
Comment by Rental Watch
2017-02-10 13:12:58

It’s going on all over the country.

But it’s not. If it was happening all over, we would not be at only 1.2MM housing starts per year.

Overall, there are some places that are building historically high numbers of housing units (as you correctly note), but that is more than counterbalanced by places that are building way less than normal.

CA is the simple example…despite SF and LA with their large number of housing starts, the state as a whole is only building 100k per year–and 200k per year are needed.

Does SF need more luxury apartments? Not a chance.

Does Santa Rosa need more 1,500-1,800 square foot single family homes and apartments? Desperately.

Comment by oxide
2017-02-10 13:56:48

Does Santa Rosa need more 1,500-1,800 square foot single family homes and apartments? Desperately.

You silly goose. Don’t you know that 1500 sq ft SFH are the *least* profitable dwelling to build? Next thing we know you’ll be asking for “yard” too. :roll: (mumble mumble ingrate mumble :mad: )

Comment by Mafia Blocks
2017-02-10 14:48:48


Production rate doesn’t much matter given the massive excess empty housing supply in the US.

Comment by Professor Bear
2017-02-10 09:26:54

Since rents have gone up steeply every year in the QE3 Fed-funded housing reflation period, they are certain to continue doing so into the indefinite future. Because real scientists know that everything that cannot continue forever is nonetheless certain to continue forever.

(Comments wont nest below this level)
Comment by Albuquerquedan
2017-02-10 10:18:50

True it cannot continue forever, but if house prices fall to 2010 levels or below, will you be ready to buy or ready for the nursing home? That is the key question.

Comment by oxide
2017-02-10 12:53:09

An even more immediate question is how much money you’re going to pay in rent waiting for this supposed fall. You could easily spend 10 years of rent waiting for house prices to fall the equivalent of 10 years of rent.

Comment by Albuquerquedan
2017-02-10 14:15:01

True. Due to refinancing I am paying less now per month than I was in 2010, I do not think many people can say the same about their rent. I used that date above because that is about the time you and I bought a house, I did it early 2010 I cannot remember when you bought but I know it was around the same time. We both took some heat for the purchases with most on the board saying what idiots we were since there was an imminent drop going to happen. I enjoyed the $8000 tax credit too, I thought is was a bad idea but I deposited the check anyway.

Comment by BearCat
2017-02-10 11:45:13

Total B.S. After the dot-bomb crash, my rent went down 30% (SFBA), and when the app/cloud bubble crashes, expect something similar (or worse, given all the building) here.

(Comments wont nest below this level)
Comment by Albuquerquedan
2017-02-10 11:54:40

I do not disagree with that. I just do not see the same excesses all over the country.

Comment by Albuquerquedan
2017-02-10 15:16:37

Do you see any difference between the price to rent ratio now and in 2006?


Comment by Albuquerquedan
2017-02-10 15:27:20

Sorry this link does not get you where you need to go and I cannot seem to find out how to fix it. However, I went looking for the Economist since it was one of the few publications that talked about the bubble in 2006 and then it was one of the few publications that saw the recovery around 2009. Here is an excerpt, it is worth seeing the whole article believe me:

WHAT a difference a decade makes. In 2006 house prices in America hit an all-time high, after rising unabated for the previous ten years. The crash that followed brought the entire global financial system to its knees. As our cover leader this week explains, despite efforts to fix the plumbing of the American mortgage market, housing in the United States remains a dangerous menace to the world economy. In the meantime property prices in the country, underpinned by low interest rates, forge ahead. On average, American home prices have recovered nearly all their losses from the 2006 crash, but when adjusted for inflation they are still 20% below the 2006 peak.

Could another correction be just across the street? To gauge the frothiness of America’s housing market, The Economist looks at two measures of affordability: the ratio of price to income and price to rent. Encouragingly, across America prices appear to be at fair value when compared to their long-run averages. Yet in some cities, such as San Francisco, affordability looks stretched when compared against income—prices in the City by the Bay are 40% above their long-run average when compared to income. Theory suggests that they should eventually fall back down to earth.

Comment by Albuquerquedan
2017-02-10 15:30:08

When you click on the link I did give just go down the page a little to you reach “American house prices: reality check”

Comment by Albuquerquedan
2017-02-10 15:39:43

Actually, I just retried the link and it works, it is great you can find a city near you and compare it to historical averages.

Comment by NYchk
2017-02-10 15:56:00

The difference with a prior bubble is that back then, it was much cheaper to rent. Nowadays, the rents shot up so much that in many cases it pencils out to buy.

The remaining question is, which one will prevail: the proposed inflationary policies and economic revival, or their incompetent implementation resulting in a (global?) crisis.

Comment by Albuquerquedan
2017-02-10 16:06:37

True the rent ratio is the biggest difference but even in relation to incomes, the bubble is much smaller this time.

Comment by Raymond K Hessel
2017-02-09 17:51:15

Dropping rents? Inconceivable!


Comment by 2banana
2017-02-09 21:23:18

Since Philadelphia has been controlled for the last 60 years by democrats…

It has lost half of its population…
It has the highest wage tax in the nation…
It has some of the worst schools in the nation despite spending more than $16,000 per student per year…
Public union corruption beyond measure…
Is beyond bankrupt…

Philadelphia is never coming back as long as these conditions exist.

And no one is going to pay big bucks to live there. Even millennials that want to walk home from the bars.

With half of its housing stock abandoned…

Comment by taxpayers
2017-02-10 04:44:49

Remember the bussed in buyers of 2005?
Philly is nasty

Comment by Albuquerquedan
2017-02-10 07:46:01

Yes, but as many people as ever will still vote. They might have 110 percent of the voting population voting pretty soon.

Comment by Senior Housing Analyst
2017-02-09 17:43:15

Takoma Park, MD Housing Prices Crater 25% YoY


Comment by Senior Housing Analyst
2017-02-09 18:23:59

Correction: 16% YoY decline

Comment by Professor Bear
2017-02-09 23:45:19

‘Tis a mere flesh wound.

Comment by taxpayers
2017-02-10 04:54:25

According to your source I’m up 16% yoy

Comment by Mafia Blocks
2017-02-10 07:31:20

Aren’t you in zip 22151? Says prices are down YoY and falling. See for yourself.


Comment by taxpayer
2017-02-10 08:34:32

movoto doesn’t have enough data to be relevant

even Springfield w pop o9f 100k+ doesn’t have many data points

(Comments wont nest below this level)
Comment by Mafia Blocks
2017-02-10 08:36:41

Sure they do. Their data is culled directly from transactions.

Comment by Ben Jones
2017-02-09 17:45:20

‘Rents ticked up across Southern California in the fourth quarter of 2016 as limited vacancies kept demand high, according to property data firm Reis Inc. In all, 2016 marked the sixth straight year of steady rent hikes in the region, reports by Reis and others show. Apartment rents are up 15 to 25 percent since 2011.’

‘Vacancies remained low despite new apartment construction, noted Reis Chief Economist Victor Calanog. In some cases, landlords are offering rent concessions – such as a move-in allowance, a free-month’s rent or reduced deposits – to keep vacancy rates low. Still, “effective” rents, or the amount collected after concessions, increased in 67 of the 82 markets Reis tracks.’

“The most expensive superstar markets like New York, San Francisco and San Jose are the ones registering declines in effective rents,” Calanog wrote.’

Comment by sleepless_near_seattle
2017-02-09 23:52:08

‘Vacancies remained low despite new apartment construction, noted Reis Chief Economist Victor Calanog. In some cases, landlords are offering rent concessions – such as a move-in allowance, a free-month’s rent or reduced deposits – to keep vacancy rates low. Still, “effective” rents, or the amount collected after concessions, increased in 67 of the 82 markets Reis tracks.’

See? Proof right there that you *can* have it all.

Comment by CHE
2017-02-10 14:04:42

Wrong. LA is starting to feel the squeeze.

I was chatting with a neighbor who likes to snoop around to find out what the potential tenants are being asked to pay and it was down $300 from when I had a friend looking at the building last year.

In addition, there is a lot of turnover from the new residents.

Over New Years there were signs posted everywhere informing people that even though the 1st and 2nd were holidays, rent was to be paid by the 3rd or Quit or Pay Notices would be dispensed.

The building manager makes it a point to thank my roommate and me for paying rent on time.

People are struggling to pay rent, the rents have hit a wall and tons of $3000+ a month 1 bedrooms in brand-new new luxe buildings sit empty with hundreds more coming online.

This is in West Hollywood, CA and doesn’t include the thousands of luxe units in Downtown Los Angeles or regular Hollywood in the pipeline.

Oh another hot bed of empty apartments is Glendale, CA which has half a dozen luxe mid-rise buildings all trying to fill with people who can afford $3000 a month.

This won’t end well.

Comment by Ben Jones
2017-02-09 17:53:14

‘In addition to building new apartments, investors are buying older apartments with the intention of upgrading them. ‘This year was very active in terms of apartment sell,’ Buhl said. ‘We’re seeing a lot of new construction on the conventional and the student side. There’s about 4,000 bedrooms that are being added to the market.’

‘University enrollment numbers indicate the student population is not increasing at that same pace as investors are building new apartments. ‘In order for those new properties to fill up, they’re going to have to get more occupants from other places,’ Buhl said. The Monnett Garden apartment complex is in the Boyd corridor, where many R-3, super-sized duplexes have been built. ‘They’re going after the same market’

‘University enrollment numbers indicate the student population is not increasing at that same pace as investors are building new apartments’

OK, so how does this happen?

‘The good news for borrowers is that capital is still relatively cheap and readily available for new loans and refinancing, even with an uptick in interest rates and more evidence that the market is marching closer to a peak. The Mortgage Bankers Association (MBA) is projecting that originations of commercial and multifamily mortgages will grow by 4.0 percent to $537 billion in 2017. Another 2.0 percent increase is expected in 2018, with originations forecast to reach $546 billion.’

‘According to the MBA, mortgage debt held by banks and thrifts accounted for about one third of the $3.1 trillion in total amount of commercial/multifamily debt outstanding in 2016, or $1.2 trillion.’

‘Barring any unforeseen events or an interest rate shock, bank lending volume is expected to be flat in the coming year. Commercial real estate finance industry leaders believe that overall capital markets will remain favorable in 2017, according to the annual survey of Commercial Real Estate Finance Council members released in January. About half of survey respondents (52.7 percent) predict that bank lending will remain the same in 2017 as in 2016, while 28.4 percent predict an increase and 18.9 percent think there will be lower origination volume.’

‘A pullback in multifamily construction financing, a less frothy investment sales market and higher capital costs are all factors contributing to a fairly conservative lending estimates for this year. The outlook for 2018 is also a little more uncertain, because the wall of loan maturities should start to come down and the market will be one more year farther into what has already been a very prolonged recovery cycle, adds Gerken.’

‘And while the multifamily market might not be as white hot as it has been over the past six or seven years, some bankers are expecting another good year ahead for multifamily lending. “Fannie Mae and Freddie Mac in particular have been doing a ton of business,” says Bassin. “If there has been any slight cooling, it might be in construction loans for multifamily, but even with that there is still an active group of construction lenders in the market.”

Comment by oxide
2017-02-10 08:44:00

These idiot developers are 5 years behind the times. Both waves of Millenials are all out of college, and from what I can see, the next large wave of kids is in elementary school. But the investors keep building.

It’s the same 5-year tardiness for these “mixed-use” Millenial apartment complexes like that Meriam in Chico. The first wave of Millenials have already outgrown the Sbux and craft beer vibrant city culture. In fact they are the ones with the elementary school kids and subsidies from Boomer Dad who can’t retire, and want the house in the burbs. The second wave is living in mom’s basement. In other words nobody should be planning ANY new apartments and definitely not luxury.

It’s really too bad that these investors chasing high yield and not lower yield. There’s probably more stable profit in doing needed upgrades to Grade B apts, and upgrading Grade C and blighted housing. Or better yet, going back to building Levittown-style starter homes.

Comment by Raymond K Hessel
2017-02-09 17:57:53

To public employee unions: arithmetic is not your friend. The Faustian bargain of voting for and enabling municipal corruption in return for a gold-plated retirement turns out to be pie in the sky - who’d have thunk it.


Comment by Ben Jones
2017-02-09 18:41:42

It was real estate investments that busted that pension, as we’ve discussed before. That and the excessive payouts.

Comment by taxpayers
2017-02-09 19:13:15

They’ll ding taxpayers
See UK for results

Comment by In Colorado
2017-02-10 08:04:52

Maybe Texans will finally have the gumption to vote in TABOR,

Comment by Mafia Blocks
2017-02-10 08:26:49

“Maybe Texans will finally have the gumption to vote in TABCRATOR“

Looks like they already did.

Houston, TX Housing Prices Crater 7% YoY


(Comments wont nest below this level)
Comment by palmetto
2017-02-09 19:36:03

It doesn’t like my ad-blocker. But I did get a chance to see the photo. Now that’s what I call a bunch of sad sacks. “You lose. No soup for you”.

We used to have a guy around here who collected a pension from the NYPD, Social Security AND a pretty decent salary from a local “charity” organization. Not a bad triple dip. For a while anyway, I heard he checked out and went to that great non-profit in the sky.

Comment by rms
2017-02-10 13:57:18

“To public employee unions: arithmetic is not your friend.”

They pulled this off in San Jose, CA. The result 13 patrol units for a city of 1-million. The potential new hires sign-on with the neighboring cities, not San Jose. In short, keeping the 47% in-line sucks. And it’s damned difficult to work this sort of job past 45-yrs of age.

Comment by Ben Jones
2017-02-09 18:40:31

‘After a year of rising rents, Greeley residents can expect a difficult time trying to find affordable rentals in the city. A survey from the Colorado Department of Local Affairs Division of Housing shows the rental market in Greeley is tight, with a vacancy rate of only 3.7 percent at year’s end.’

‘With 85 new multi-family units under construction in Greeley today, renters may hope the market will loosen up. Last year, there were just nine multi-family units being built in January. While the city gained an extra 333 multi-family units in 2016, the vacancy rate in Greeley remains tight, only lessening slightly throughout the year. Several more multi-family units are set to go up this year — 186 units are in design through the city of Greeley now; another 200 or so are in varying phases prior to construction.’

‘But a closer look reveals Greeley’s pricier apartments — likely part of the 449 that were added to the inventory in 2015 — skew the city’s vacancy rate. Rentals in the $1,226-$1,250 range have the city’s highest vacancy rate at 14.1 percent. Meanwhile, Greeley’s lowest vacancy rate is for apartments in the $600 to $650 range, which is at 0 percent, according to the state survey.’

‘Greeley’s average rental price is $1,000 per month. Apartments in this range have a vacancy rate between just 2.4 percent and 2.6 percent.’

‘Greeley Director of Community Development Brad Mueller said Greeley is not alone in that trend.’

A 14% vacancy rate at the high end. And I’d bet that doesn’t include concessions and the like.

Comment by Carl Morris
2017-02-09 19:38:19

So how much pain has to happen on the high end before it makes more sense to build the cheaper housing that’s needed instead of the luxury housing? Or does it have to crash and then the new luxury housing becomes the old cheap housing?

Comment by Ben Jones
2017-02-09 20:24:05

That’s a good question, and it was answered by a report out of North Dakota:

December 23, 2015

Most Were Greedy And Ran For The Roses

The Crosby Journal in North Dakota. “While vacancy rates in Tioga soar, rents stubbornly sit well above rates normal for a rural community with a sparse population. With nearly half of rental units empty, a lot of people are wondering why rents haven’t fallen to meet the affordable range. Dean Dovolis, an architect who worked on the Annabelle Homes and Cenex station projects, said a collapse could be just around the corner.”

“While it may mean affordable rents, he said the situation could be ‘brutal.’ Dovolis, who has a master’s degree from Harvard, said when the boom hit, developers rushed to get financing for their projects and capitalize on $3000 per month apartments. ‘They were willing to accept risky terms, such as five-year paybacks and high interest rates. Most were greedy and ran for the roses….They built a lot of pro forma on $100 per barrel oil,’ he said.”

“This leaves them locked into loan terms that cannot be satisfied without high rents. It may explain why housing owners have been unwilling to lower rents to normal levels and have aggressively lobbied to shut down man camps. If rentals continue to see vacancy rates climb, the result could be widespread foreclosures. Apartments, townhomes, and other rental properties will then be sold at auction. New owners will be in a much better position to lower rents.”


Comment by phony scandals
2017-02-09 21:08:54

Sounds like North Dakota might be right in the sweet spot for picking up rentals on the cheap you were talking about the other day.

(Comments wont nest below this level)
Comment by redmondjp
2017-02-10 00:36:05

You mean those half-finished OSB-clad shacks underneath the snowdrifts?

Comment by phony scandals
2017-02-10 07:17:50

Did they have a very rare and exciting event in North Dakota?

Given that, the snowdrifts are no higher than they were when it was booming in North Dakota a few years ago.

According to Dr David Viner, a senior research scientist at the climatic research unit (CRU) of the University of East Anglia,within a few years winter snowfall will become “a very rare and exciting event”.

“Children just aren’t going to know what snow is,” he said.

Comment by Albuquerquedan
2017-02-10 07:39:03

They have been saying that for decades, I think it increases their government grants.

Comment by oxide
2017-02-10 09:09:43

Yup palmetto, the other day I suggested that to Ben to check out the oil bust housing. Ben did say he would be swinging through Midland.

Oil booms don’t care about snow. Look at Alaska.

Comment by Professor Bear
2017-02-10 00:39:53

“This leaves them locked into loan terms that cannot be satisfied without high rents. It may explain why housing owners have been unwilling to lower rents to normal levels and have aggressively lobbied to shut down man camps.”

There’s those sticky prices the macrogeekonomists love to puzzle over.

(Comments wont nest below this level)
Comment by Albuquerquedan
2017-02-10 07:44:39

The Bakken play is largely played out, the sweet spots have been drilled. There was some recovery in the rig count when the price increased into the 50s but the last few days I have noticed the daily rig count is back to 36. I few years ago it was around 200. The way they are hitting the Permian it will not take long to drill out the sweet spots.

(Comments wont nest below this level)
Comment by oxide
2017-02-10 09:10:53

So what would be the next sweet spots?

Comment by Albuquerquedan
2017-02-10 09:29:32

Oklahoma might have a new play and if the price of oil goes up substantially all the existing plays have geological areas that may be brought on line. The critical thing to remember with oil is the difference between reserve and resource, people often confuse the two. Oil that can be counted as a reserve is oil that we have the technology to produce at present oil prices. As I said in the last few days the total oil reserves of the U.S. conventional and shale oil is less than the world uses in one year. However, resources tend to much higher and it really means oil that it is in the ground. Thus, when people say just let the price of oil rise and we will have plenty of oil, they are right but not because oil companies are committing fraud but because as logic would dictate the cheapest oil gets produced first, except where governments control the oil.

Comment by Senior Housing Analyst
2017-02-10 09:38:05

$15 or so.

Comment by Albuquerquedan
2017-02-10 09:45:03

No Senior Housing Analyst I do not think gasoline will be $15 a gallon, although $3.50 in the not too distant future is possible.

Comment by cactus
2017-02-10 10:39:49


Apache (APA) revealed the huge find this week after more than two years of stealthily buying up land, extensive geological research and rigorous testing.

The Houston company estimates the discovery, dubbed “Alpine High,” could be worth at least $8 billion.

Comment by Albuquerquedan
2017-02-10 11:18:05

It is in the Permian and it does not say whether it is the reserve or the resource. However, when it does not say it usually means resource which means a lot less than three billion barrels. However, even we assume three billion barrels that is enough to feed the world’s demand for one month. That is why fracking was never the reason for Saudis decision to lower oil prices, it was an intent with Obama’s backing and urging to take out Putin instead the president that could not shoot straight took out Hillary. Fracking cannot supply the oil needed in the next few decades although it will help.


Comment by Albuquerquedan
2017-02-10 11:33:13

Almost half the oil rigs drilling in this country are drilling in the Permian. We are talking about 300 rigs. In contrast, there are 37 rigs drilling in the Bakkens.

Comment by Mafia Blocks
2017-02-10 12:03:37

$15 a barrel is about right. Keep in mind production costs are $6 a barrel.

Comment by Albuquerquedan
2017-02-10 12:53:46

Not even close. Oil sands costs are close to ten times that, hence the end of investment.

Comment by rms
2017-02-10 13:59:42

“$15 a barrel is about right.”

Ahem… tack-on another $45 for Soros Global Investments.

Comment by Albuquerquedan
2017-02-10 14:21:15

Saudis are cutting oil production even more than they promised. Yes, that happens when your fields are in terminal decline but hey buy their IPO if you don’t believe me:


Comment by Mafia Blocks
2017-02-10 14:45:34

Don’t worry…. Oil sands merely added to the global glut.

Comment by Lurker
2017-02-10 10:29:05

“widespread foreclosures. Apartments, townhomes, and other rental properties will then be sold at auction. New owners will be in a much better position to lower rents.”

Golly, that almost sounds like capitalism. It’s been so long it’s a wonder people remember what it looks like.

(Comments wont nest below this level)
Comment by Steve N.
2017-02-09 21:45:25

My god, have you ever been to Greeley, seriously. Where’s my fox hole.

Comment by In Colorado
2017-02-10 08:07:02

A 14% vacancy rate at the high end. And I’d bet that doesn’t include concessions and the like.

I still can’t get over the high rents in Greeley. The place is an armpit.

Comment by phony scandals
2017-02-09 19:11:07

I can’t find it, has the Mortgage Forgiveness and Debt Relief Act of 2007 been extended again through 2017?

Mortgage Debt Relief Act Extended Through 2016….Finally

Published on January 11, 2016

When a Lender “forgives” debt e.g. it waives pursuing a deficiency in a short sale or elects not to sue for deficiency after a foreclosure sale, the debt that is forgiven is, in most circumstances considered by the IRS to be ordinary income and taxable as such. Under the Mortgage Forgiveness Debt Relief Act of 2007 taxpayers can generally exclude income resulting from the discharge of debt on their principal residence.

This latest extension will continue this tax protection for homeowners through the 2016 tax year. This means that if you relinquished your home in a foreclosure, short sale or deed in lieu, or had a loan modification resulting in debt forgiveness in 2015, or if one of these unfortunate events happens to you in 2016, you may be able to take advantage of this latest extension of the Act.


Comment by phony scandals
2017-02-10 08:14:21

I remember DBLL number 1 lied about principal residence and took advantage of this and were still shocked they had to pay $15k in property taxes after pocketing the $105,000 rent I had paid them from 2006 to 2010

Extension of the Mortgage Debt Relief Act

The Act initially covered a three-year period between 2007 and 2010, but was extended four times, to 2012, 2013, 2014 and then to 2016. This can also apply to debt that is discharged in 2017 provided that there was a written agreement entered into in 2016.


Home Foreclosure and Debt Cancellation

Update Jan. 5, 2015 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in calendar years 2007 through 2014. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.


Comment by oxide
2017-02-10 09:14:41

Here’s the latest, phony. It’s a goner.

Note: The U.S. Congress adjourned for 2016 without extending the Act. In a recent interview, William E. Brown, the National Association of Realtor’s president, offered some context on the failed extension, including the fact that not all hope is lost for short sellers looking to avoid IRS taxes on their forgiven debt: [blah blah realtor crap]


Comment by phony scandals
2017-02-10 09:31:46


I couldn’t fins it and I’m really quite surprised they let it go. Evidently not as surprised as some people will be that it is gone or was ever needed in the first place judging by the first question from the link you posted.

“Our lender agreed to the short sale and reduced the amount of the mortgage loan by $100,000 in order to close the sale of our home. Although we never thought of any income tax consequences, our accountant said that we may have income tax liability for this debt forgiveness of $100,000. Is that possible?”

Comment by phony scandals
2017-02-10 09:41:30

I couldn’t find it but I probably couldn’t fins it either.

(Comments wont nest below this level)
Comment by rms
2017-02-10 14:07:01

This likely means that most of the mortgage debt held by the investment banks has been transferred to fannie, freddie and other taxpayer liable entities.

No more foaming the runway?

Comment by rms
2017-02-10 14:24:44

“Mortgage Debt Forgiveness Law Expired in 2016″

Wonder if the Realtors mention this tidbit at the closing table? :)

Comment by new attitude
2017-02-09 20:18:16

Whole Foods in trouble:

In the meantime, here are all the stores that will close by April:

Santa Fe, New Mexico
Boulder, Colorado
Colorado Springs, Colorado
Salt Lake City (Draper)
Davis, California
Augusta, Georgia
Prescott, Arizona
Encinitas, California
Chicago (South Evanston)

Comment by rms
2017-02-10 00:25:15

So where are the progressives grocery shopping?

Comment by redmondjp
2017-02-10 00:37:30

Trader Joe’s.

Metropolitan Market.

Whole Foods.

Plenty of overpriced grocery stores still out there.

Comment by In Colorado
2017-02-10 08:08:54

Sprouts has been expanding here in the Centennial state.

I remember when Trader Joe’s was a great place to get bargains. Not anymore. Now it’s just a Whole Foods clone.

(Comments wont nest below this level)
Comment by Albuquerquedan
2017-02-10 08:46:22

Sprouts is all over Albuquerque too. Still love Trader Joe’s for its chocolate bars. Previous post did not post about it.

Comment by Professor Bear
2017-02-10 09:31:08

My daughter works at a local Sprouts, but doesn’t like it. I have tried over the years to get her to work for Trader Joe’s, where rotational assignments reduce the tedium, but she has chosen to ignore my fatherly advice.

Comment by new attitude
2017-02-10 09:34:16

Santa Fe has 2, one is all they need in a town of 65k. The main one is always packed on weekends.

(Comments wont nest below this level)
Comment by Professor Bear
2017-02-10 09:35:14

Trader Joe’s is not consistently high priced. For example, they have one of the best wine selections under $5 a bottle for overtaxed middle class Californians to choose from.

I didn’t realize grocery stores came with political affiliations, but I guess you have researched this point.

(Comments wont nest below this level)
Comment by new attitude
2017-02-10 10:25:05

+1 to Pro B.

Kids should try to work for Costco, while finishing their education.

Comment by oxide
2017-02-10 10:40:43

Standard-issue grocery stores are usually not political, but it’s very well known that natural foods stores are as liberal as can be. Whole Paycheck was in trouble the moment that they held their IPO. They then had to make decisions based on maximizing profit, instead on their original values such as saving the environment, paying good wages, or carrying only high-quality organic foods. That’s also when they started constructing high-end chocolate counters, in-store bistros, specialty nut-roasting, and wine tastings. In other words, WH was looking arrogant and profit-chasing.

Then in 2010, CEO John Mackey wrote a high-visibility op-ed denouncing Obamacare and praising Bush policies. With that, Mackey drove off quite a bit of his original yuppie customer base, who had already grown suspicious of the bistros and chocolate. With other stores already carrying high volume items like rice milk and organic produce, there really is no reason to make a special trip to WH.

I’m surprised they’re still around. Probably because WH serves as a Millenial anchor in dense areas of cities.

Comment by Albuquerquedan
2017-02-10 11:38:59

I mean listen to NPR. LOL

Comment by Albuquerquedan
2017-02-10 11:53:16

Comment above does not make sense without other comment posting. My point is that when someone is trying to figure a voting preference for a get out a vote drive, if he or she finds someone that owns a Prius, shops at Whole Foods and listens to not watches NPR, there is a 99% chance they will vote a certain way. I am staying away from certain terms because they may lead to the post being blocked.

Comment by Neuromance
2017-02-10 17:08:16

Regarding Whole Foods, I’ve sensed an element of green-washing with their products. People may be catching on, and they’re losing their cachet, and are simply being reduced to being another player in the upscale grocery market.

Comment by oxide
2017-02-10 09:27:34

So where are the progressives grocery shopping?

Roots Market, but they are expensive.
Fresh Market, but they are more hoity-toity than WH.
MOMs Organic Market, about a dozen stores in the DC area. They seem to be the best.

And don’t forget regular chain grocery stores! 10 years ago, I shopped at a Big Box in the Midwest which devoted a section of each aisle to the natural-food equivalents.
Giant Food (DC area) carries some organic produce and devotes an entire aisle plus some freezer space to natural foods.
I’ve even seen natural items at Wal-Mart and Costco, but very few. It just doesn’t fit their demographics.

The truly progressive, with the time and money, shop at farmers market or at the farms themselves.

I have spent a penny in WH for 8-9 years now. They lost me when they started hosting Friday evening wine tastings.

Comment by MightyMike
2017-02-10 10:08:31

I think that Whole Foods grew by buying up a lot of smaller chains. They need to get their hands on some Yellen bucks and reduce some of that profit-killing competition.

(Comments wont nest below this level)
Comment by Albuquerquedan
2017-02-10 10:33:16

I’ve even seen natural items at Wal-Mart and Costco, but very few. It just doesn’t fit their demographics.

I don’t see many at Wal-Mart but I do see plenty of items at Costco. Of course, I really don’t look for them in Wal-Mart, I usually run in and out for a quick item but I was actually burned once by buying organic milk by mistake, I did not think they even carried it.

(Comments wont nest below this level)
Comment by Carl Morris
2017-02-10 10:53:06

Boulder, Colorado

Whoa…I’m having a hard time believing that. It wasn’t long ago that everybody who was anybody went there and the place was always packed with crunchy Boulderites. I’m going to need to ask around…

Comment by Carl Morris
2017-02-10 18:47:32

Asked around…turns out there was a second store on the south side of town that not so many people used…that’s the one being closed. It all makes sense now.

Comment by new attitude
2017-02-09 20:23:52

Supply and demand

the amount of a commodity, product, or service available and the desire of buyers for it, considered as factors regulating its price.

Comment by Mike
2017-02-09 21:14:00

I promise this isn’t personal, New Attitude, and I’m just going off on a tangent here…

I’m really sick of the “earth is flat”, roundly accepted notion of supply and demand. It’s not nearly as absolute as it’s made out to be.

Markets can be highly irrational. My favorite example is “My Pet Rock” from the 60’s.

This blog’s existence is due to the fact that our real estate market is highly irrational.

So, I don’t ever assume a strong relationship between supply and demand.

Comment by Ben Jones
2017-02-09 22:28:03


Comment by Professor Bear
2017-02-10 00:55:47

With so much market distorting intervention, it is no surprise to see the fundamental laws of economics fail to hold.

Comment by azdude
2017-02-10 08:25:29

a big central bank orgy!

japan, UK, US, Swiss, Sweeden, ECB, etc

All designed to prop up asset prices.

(Comments wont nest below this level)
Comment by Mafia Blocks
2017-02-10 08:35:36

…. and collapse demand.


Comment by Blue Skye
2017-02-09 21:27:15

“The carnage continues in the U.S. major oil industry as they sink further and further in the RED. The top three U.S. oil companies, whose profits were once the envy of the energy sector, are now forced to borrow money to pay dividends or capital expenditures. The financial situation at ExxonMobil, Chevron and ConocoPhillips has become so dreadful, their total long-term debt surged 25% in just the past year.”
Their profits were the envy of everyone. When I worked for one of these in the early 80s they were the biggest, most profitable, most liquid company in the world.
My own perverse view of the economic world is that oil production is the bottom layer of the whole pyramid. Most people think that driving their car to Wallymart or taking a holiday is the main independent driver of energy consumption, but it’s not. It is construction. Construction driven by cheap credit and human shortsightedness (greed). Global.
The big oil companies are on the long black train. This started in 2013. Ben has easily convinced that the top end of construction is at a rolling over activity point. The top and the bottom of this pyramid (in my imagination) are pancaking. Slow motion, but having watched half a century of this it is not so “slow”.

We’ve had a big inflation along the way. What comes next (in my imagination) is something different. Welcome in many ways, but it will bring inconvenience. Hell, the inflation was also inconvenient.

I’m occupied with the pre-flight checklist on my Airstream. In a month I plan to be on a Southeastern beach. A month or so from that I’ll be back to river rat status in NY and Ontario. It is an absolutely fantastic time to disconnect from the credit world. “There is still time” LOL Palmy from your reference to “On the Beach”.

Comment by Blue Skye
2017-02-09 21:29:25

Approaching 10,000 posts on the HBB. What a work Ben.

Comment by xstate
2017-02-09 21:51:09

Rents are a function of housing prices. When housing prices rise, so do rents and when housing prices fall, rents fall as well. If housing prices fall down to below 5 digit figures then renting will become obsolete in many cities. I don’t see how it is a surprise to people that rents can fall.

Comment by Senior Housing Analyst
2017-02-10 03:46:19

Midtown Manhattan Rental Rates Crater 10% YoY


Comment by Professor Bear
2017-02-10 05:08:32

Is it just me, or does it seem to others like we are in the nascent stages of another real estate bust?

Comment by phony scandals
2017-02-10 09:51:33

Professor Bear

I have been meaning to ask you, what the general feeling is in San Diego about the Chargers leaving town?

I’m pretty sure you live in San Diego, right?

Comment by cactus
2017-02-10 10:46:00

heard on the radio Median home buying affordability in CA is at 30%

Need income of 100K

Let me know when it gets to 10%

Comment by rms
2017-02-10 14:19:06

And then there’s Coastal California. For a family of four that $100k income on the coast means old cars, bad teeth and a sickly 401k.

(Comments wont nest below this level)
Comment by MightyMike
2017-02-10 14:47:30

And that salty air by the coast means that they’ll be rusty old cars.

Comment by rms
2017-02-10 20:11:05

We used to put our books in gallon-baggies to prevent mold.

Comment by cool cats
2017-02-10 07:35:45

more like meltdown manhatten

Comment by Raymond K Hessel
2017-02-10 06:07:23

But…but…our late, unlamented “anarcho-capitalist” Sweet William in his constant harangues to trade all our dollars for Bitcoin or forever be counted as Yellen’s bitchez said that Bitcoin was a way to circumvent government meddling in the currency markets. I…I don’t understand, then, how our heroic Bitcoin “investors” can be left holding the bag.


Comment by Albuquerquedan
2017-02-10 08:01:39

It has been my major problem with bitcoin, with governments able to hack the encryption and block the Internet when you need to move the money the most it will either not be there or will not be available.

Comment by Blue Skye
2017-02-10 09:06:38

Interesting article from the sidebar on that scmp page…

“We shall assume that Primary One did not constitute the two most difficult years of your life. Thus here is an example of a country that has the world’s largest foreign reserves but no real savings in them at all. You guessed it. This country is China.”

I guess it is OK, since they owe it to themselves.

Comment by Albuquerquedan
2017-02-10 09:42:01

They owe it to themselves and the economy continues to surge. They may look like Japan years from now but if that is so, they will be a very rich country.

Comment by Albuquerquedan
2017-02-10 09:49:01

These are not the numbers of a collapsing economy:


China does seem to be stockpiling commodities which tells you where it thinks the prices are heading, if it thought it was facing an imminent crash it would not be doing this.

(Comments wont nest below this level)
Comment by Albuquerquedan
2017-02-10 10:10:30

Plus, as I said before China takes a twenty year view of things, I do not believe a planned economy is the best economy but there are advantages to both the capitalist system and a planned economy. In the U.S. we do not plan cities thus we often have to expand existing infrastructure and rip out roads, bridges and demolish housing in the way of the new roads. China plans a city of two million, the infrastructure needs etc. on a twenty year timeframe and caps the number of inhabitants. The city may be largely unoccupied for ten years which is wasteful too, but it doesn’t mean it does not become eventually occupied, I posted this late yesterday so I think most of the Eastern posters missed it:


Comment by Albuquerquedan
2017-02-10 10:41:32

Now this is funny, China bragging about how many “green cards” its issues. Around 1.4 billion people and issuing less than 1,600, I wish our immigration laws were as strong.


Comment by Blue Skye
2017-02-10 10:44:01

Yeah, the Chinese are so smart. I read of a lot of companies who lost their shirts having stockpiled commodities at peak bubble prices. They may find that today’s stockpiling is also overpriced. We’ll see.

Some say the “reserves” will be vapors in about 1 year. I’m betting that borrowing oneself into great wealth won’t work for China any better than it has ever worked elsewhere in the world.

Comment by Albuquerquedan
2017-02-10 10:51:31

If you mean their reserves will be down to 2.25 to 2.5 trillion dollars in the next year and some say it should not be lower that that, I agree it might happen. But at that point it calls for devaluation of the Yuan and still does not mean a collapse of China anymore than the devaluation of the pound caused a collapse of Great Britain.

Comment by oxide
2017-02-10 11:47:35

China takes a 20-year view of things?

Yeah, that’s what my high school econ class said when we lost money the DOW stocks that we had chosen as part of our semester project.

Comment by Albuquerquedan
2017-02-10 16:37:20

So China might sell almost five times as many new energy cars as the U.S. this year. While the Sun will not run out for billions of years, where is all the cobalt and lithium going to come from? We are only trading a shortage in one commodity for a shortage of other commodities:


Comment by Raymond K Hessel
2017-02-10 17:27:00

Is your Mao cap one-size-fits-all?

Comment by azdude
2017-02-10 06:17:17

the stock market is feeling like a bunch of morons are running the show.

notice another short covering rally yesterday.

Comment by taxpayer
2017-02-10 07:37:22

save Ben’s bandwidth
just post about markets where rents n prices are going up

see that was easy

Comment by new attitude
2017-02-10 09:42:26
Comment by NYchk
2017-02-10 15:45:05

I checked Streeteasy. The few rent decreases I found in my neck of the woods were “$15 decrease on a $4K+ one-bedroom” and similar, offset by a similarly few increases of “$55 increase on a $3K”, etc. The only big decrease of $500 was on a $15K two-bedroom. Another two-bedroom also shows a “big decrease” of $190, on $7.5K ask.

I.e., nothing to get excited about, slim pickings as always. Looking at their price history, rents are still way up, about a 30-40% increase from 2010.

Comment by Senior Housing Analyst
2017-02-10 08:10:30

Bonita Springs, FL Housing Prices Crater 6% YoY


Comment by In Colorado
2017-02-10 08:21:02

Loveland’s average rent costs are among the highest in Colorado, according to a report released by the Colorado Division of Housing. However, Loveland’s vacancy rate has gone up to 8.7 percent from a vacancy rate of 8.4 percent in the third quarter

They’ve been building a lot of new, “high end” apartments here.

Unfortunately, there aren’t a lot of high end jobs in Loveland. I’ll bet the older, cheaper complexes have low vacancies while the new posh ones have double digit rates.

I’ve seen new 3 bedroom places in Centerra asking for $1600. The Lincoln Place apts downtown (which have been around about 10 years) are also pretty pricey.

Comment by azdude
2017-02-10 08:40:19

I guess eddie lampart of SHLD is trying to blow out the shorts today with some bogus restructuring plan.

Name (required)
E-mail (required - never shown publicly)
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post