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We Truly Had An Incredible Price Correction

A report from the Post and Courier in South Carolina. “Construction cranes dot the Charleston skyline for new apartment buildings while other complexes rise in the suburbs, and supply is now outpacing demand in the region. The glut of new units could be a welcome development for renters as new landlords compete to sign up tenants.”

“Because of new projects coming online during the past six months, the increase in units pushed the vacancy rate up to 10.6 percent throughout the Charleston area, according to Charlotte-based apartment research firm Real Data.”

From The Gazette in Colorado. “Colorado Springs-area apartment rents dipped late last year, although one local multifamily housing expert says it’s too soon to know if rental costs are leveling off after a string of record highs over the last few years. Rents began climbing five to six years ago — setting record highs for nine consecutive quarters from 2015 through early 2017.”

“In 2018, 1,135 apartments were added to the area’s overall supply. Another 4,000 apartments are under construction, and roughly 8,000 units proposed or planned, which could help increase competition and keep rents in check, said Laura Nelson, the Apartment Association’s executive director. If supply increases, ‘I definitely think things are going to start to flatten out,’ she said.”

The San Francisco Chronicle in California. “On a quarterly basis, one-bedroom apartments in many neighborhoods are down considerably. Outer Mission/Excelsior saw the biggest change—dropping nearly 10 percent between November 2018 and February 2019. Glen Park and Lower Haight were right behind with around 8.5 percent and 7.5 percent drops, respectively. The Tenderloin, Outer Sunset and North Beach all saw drops greater than 5 percent as well.”

“‘In general, there seems to be a cyclical effect when it comes to growing/decreasing rents in different neighborhoods in the city,’ said Zumper’s Crystal Chen. ‘About a year or so ago, we saw the outermost neighborhoods rising the fastest, like Outer Mission-Excelsior and Glen Park, while those two areas just happened to see the largest rent dips this quarter.'”

From Crain’s Detroit Business in Michigan. “Slimmer-than-anticipated profit margins caused by increased construction costs have shelved two anticipated Detroit condominium projects — at least for the time being — and other for-sale multifamily projects have also been delayed in getting out of the ground.”

“The changes illustrate the changing landscape of commercial real estate development in today’s Detroit market, which has not only caused for-sale multifamily projects to be re-evaluated, scratched altogether or postponed, but also apartment projects and other mixed-use efforts that would bring more density to the city.”

“The latest project being ‘re-evaluated’ is Cass and York, a development by Detroit-based The Platform LLC, which planned 56 luxury condominiums plus apartments. Peter Cummings, executive chairman for the development company, said the vacant site other than the office space is being put on hold. The for-sale units were listed at $430 to $501 per square foot, a high-water mark for new multifamily for-sale construction.”

“‘We established that we could sell units at $450 a square foot. That’s pretty much what we were averaging in our contracts. What we didn’t establish was that we could make money at $450 a square foot,’ Cummings said.”

The Wall Street Journal on New York. “While the New York real-estate industry fretted about the potential impact of new state taxes on expensive real estate, the Manhattan residential market deteriorated further in the first quarter of 2019, as sales slumped to the slowest pace in six years.”

“‘There is this sentiment that you could just slam high-end buyers and they will sit down and take it and keep buying,’ said Pamela Liebman, president of the Corcoran Group. ‘They will not.'”

“Brokers said that sales haven’t fallen further because some sellers have already substantially cut individual asking prices. Investors are circling some new developments offering to buy blocks of apartments at a 30% discount, said one broker, who noted that so far they have had no takers.”

“The inventory of apartments on the market rose 21.4% in March compared with March 2018, according to Halstead Property. Apartments took 33% longer to sell, 8.8 months at the current sales pace, than a year earlier. Larger condos with at least three bedrooms were lingering on the market for nearly 15 months, and prices fell on these larger apartments, said Gregory Heym, chief economist for Halstead and Brown Harris Stevens.”

“‘The data is screaming ‘overpriced,’ said Donna Olshan, a broker who tracks sales in the luxury market. ‘Until that changes, the market will not move efficiently. The longer it takes, the worse it will be for sellers and everyone else.'”

“Diane Ramirez, president of Halstead, said the slowdown began among the most expensive properties, and eventually reached the entry market. ‘We truly had an incredible price correction that we have been living with sadly for over two years,’ Ms. Ramirez said.”

This Post Has 39 Comments
  1. ‘The glut of new units could be a welcome development for renters as new landlords compete to sign up tenants. Because of new projects coming online during the past six months, the increase in units pushed the vacancy rate up to 10.6 percent throughout the Charleston area’

    This same paper reported less than a week ago that the “model” for these guys was double digit gains in 3 years from flipping. Ooops!

  2. ‘In general, there seems to be a cyclical effect when it comes to growing/decreasing rents in different neighborhoods in the city,’ said Zumper’s Crystal Chen. ‘About a year or so ago, we saw the outermost neighborhoods rising the fastest, like Outer Mission-Excelsior and Glen Park, while those two areas just happened to see the largest rent dips this quarter.’

    This clown also says, “better get it while you can!” Start looking for a job Crystal, the day of innumerable internet real estate hucksters is drawing to a close.

  3. ‘The for-sale units were listed at $430 to $501 per square foot, a high-water mark for new multifamily for-sale construction’

    ‘We established that we could sell units at $450 a square foot. That’s pretty much what we were averaging in our contracts. What we didn’t establish was that we could make money at $450 a square foot’

    So the highest price ever, and they can’t make money. Paid too much for the land.

    1. land prices in Michigan have jumped bigtime, it’s really sort of unfathomable to me.
      Those sorts of outrageous /sf prices spread like measles in an anti-vaxxer zip code and asking for little shacks throughout the state have gone up as a ‘bargain’ at only 250-300$/SF when they sold for 150/SF just a couple years ago.
      It feels so unsustainable but isn’t going away so far…and rents are stuck at high as well.

      1. 450k for 1000 sq ft condo in Detroit? Is that in Detroit or just the developer is in Detroit and the condos are elsewhere? I was under the impression you could buy several city blocks in Detroit for half a mill.

      2. Agreed. I looked up my hometown – a tiny burg a couple hours outside of Detroit, and the asking prices to local wages just doesn’t compute.

        1. I don’t understand what’s up but it is— Ann Arbor has always been obscenely overpriced but that has been explained by the captive student market and the need to be near the almighty University and the oasis of culture that AA represents. But prices have skyrocketed for tiny towns and suburban sprawl anywhere near anything in the state, between and in Detroit and Ann Arbor, all the burbs, just everything .

    2. “What we didn’t establish was that we could make money at $450 a square foot”

      You’ll make it up on volume.

  4. ‘the Manhattan residential market deteriorated further in the first quarter of 2019, as sales slumped to the slowest pace in six years’

    Hey Redfin, this is how it works. Enjoy the bust Seattle.

  5. “‘We established that we could sell units at $450 a square foot… What we didn’t establish was that we could make money at $450 a square foot,’ Cummings said.”

    Oops! LOL @ Peter.

  6. ‘Canada is shifting its focus on immigration by reinforcing border security and getting its asylum process under control, two years after Prime Minister Justin Trudeau said his country was open to people fleeing war and persecution’

    ‘A sharp increase in the number of asylum seekers has tested Mr. Trudeau’s welcoming stance. The prime minister faces a tough re-election bid at a time when polls and regional election results suggest the issue could be a political vulnerability’

    ‘Canada has reached out to Washington for help, looking to renegotiate a 2002 immigration pact to make it harder for people to leave the U.S. and file an asylum claim in Canada. People entering on foot from the U.S. now make up more than a third of new asylum claims in Canada’

    ‘The Canadian budget released last week authorizes 1.05 billion Canadian dollars ($784 million) in funding to improve border enforcement and accelerate asylum processing over the next three years, a sizable jump from the C$173.2 million allocated in the previous year’s annual budget’

    https://www.wsj.com/articles/in-shift-trudeau-begins-to-tighten-canadas-welcoming-stance-on-refugees-11553878130?mod=hp_major_pos2

    Wa? Canada is racist?

    1. They’ve only got 30 million population and are the 2nd largest country in the world, they can easily absorb the entire populations of El Salvador, Guatemala, and Honduras.

    2. HA HA HA HA HA

      This is priceless. Canucks drone on and on how raycis Trump is. And all of a sudden they want Trump’s help in keeping out brown people.

      You can’t make this stuff up.

      I hope Trump tells Ms. Justine Trudeau to stick it where the sun don’t shine.

  7. ‘We truly had an incredible price correction that we have been living with sadly for over two years,’ Ms. Ramirez said.”

    Nothing sad about bubbleiyious valuations crashing back to earth, Ms. Ramirez.

  8. ‘Renters looking for a place to live near San Francisco might be wise to choose a spot near their favorite takeout joint. Landlords in the Bay Area are reportedly cooking up rental agreements with stipulations that would prevent or severely restrict cooking, or even having an oven, inside the space, according to a recent report by the SFGate’

    ‘For instance, one 500-square-foot studio apartment located near Stanford in Palo Alto advertises a microwave and a refrigerator, but clearly states “no cooking” in the listing. However, the $1,500-per-month studio includes an outdoor area “with an electric outlet for light cooking”

    ‘Another Palo Alto studio, going for $1,899, even features what’s described as a “kitchenette” — a fridge and microwave but no stove or oven — but again includes the “no cooking” stipulation’

    ‘Many of these same listings also stipulate that “no overnight guests” be allowed during the duration of the rental, the outlet noted’

    https://www.foxnews.com/real-estate/bay-area-rentals-can-include-no-cooking-clauses

    1. Weird that the codified it, but honestly most Americans don’t cook these days. They reheat stuff in the microwave, but just buy fast food or something from a quick-serve restaurant (e.g. no tip). Cooking is an art and somewhat of a luxury since it takes time. Americans are too busy working multiple jobs to pay the rent, the mortgage, or student loans.

      Truthfully, you can live pretty well just buying stuff from Trader Joe’s.

      1. I do most of the cooking for my family, using only fresh, mostly organic ingredients. We almost never eat processed or ready-made foods. I would never live in a place where I couldn’t cook.

        1. I applaud this and think it is the goal, but the reality is that you are a minority:

          https://hbr.org/2017/09/the-grocery-industry-confronts-a-new-problem-only-10-of-americans-love-cooking

          Also consider that cooking is difficult for cooking illiterate. Many individuals don’t have the proper utensils, pots, pans, or even know-how to cook a proper meal. Many lack the time.

          When I was at university there was a group of about 8 of us that formed a “dinner club.” We rotated cooking an entire healthy meal from scratch for everyone else. It was brilliant because we only had to worry about one day and then we had an entire week covered. There were rules too (like not ordering pizza and calling it a meal). Communal meals like this could be a solution to the cooking problem. Eventually cooking will become what sewing or canning is, a hobby for the well-to-do, but an unessential part of life.

          1. Groceries, if you want good quality stuff is crazy expensive these days. It’s not that much more expensive to eat out, or buy Trader Joe’s type ready to eat meals. And if it saves an hour a day in not cooking, that’s money well spent for busy people.

      2. Weird that the codified it, but honestly most Americans don’t cook these days.

        Also, something being left unsaid is that immigrants from other places usually do cook, whether they be poor or rich. And the food they make, makes the whole place smell strange to everyone not of their ethnic group…which makes it more difficult to rent or sell when they leave even after a good cleaning. Add in cleaning expense and safety issues and I can see why landlords would try the no cooking rule if they can still rent the place.

        1. Reminds me of the subway when stuck sitting between Curry and Garlic, which was preferable to Crazy and Lice-y.

        2. And the food they make, makes the whole place smell strange to everyone not of their ethnic group…which makes it more difficult to rent or sell when they leave even after a good cleaning.

          This is definitely true of our complex right now. We have lots of Indian programmers and there have been several complaints to management of the smell of curry and the like that is overwhelming to other residents not accustomed to these smells.

      1. The coroner suppressed the findings that the actual cause of Steve Job’s death was the theft of his ‘Reality Distortion Bubble’ by the Seattle City council…

    1. That was horrifying. Electing “progressives” who enable and abet drug addicts and vagrants in the ruination of your city should be considered a mental illness.

  9. Here’s another reason to think twice before buying a Tesla: After your self-driving care crashes and burns, the resulting fire may be inextinguishable.

    Bloomberg
    Businessweek
    What First Responders Don’t Know About Fiery Electric Vehicles
    Lithium-ion batteries, once ignited, are extremely difficult to douse.
    By Chester Dawson
    March 25, 2019, 3:00 AM PDT

    After an out-of-control Tesla Model S plowed into a stand of palm trees on a highway median outside Fort Lauderdale last month, police rushed to put out the ensuing blaze using a department-issued fire extinguisher. It was a wasted effort. The car kept on burning after the crash, which killed the driver.

    The police may not have known lithium-ion batteries inside electric vehicles, once ignited, can’t be put out with chemicals from a conventional extinguisher. The battery fires are susceptible to a self-destructive chain reaction known as thermal runaway, causing a feedback loop of rising temperatures. The Tesla fire stumped a series of first responders in Florida. Firefighters eventually doused the flames with water, which seemed to work, but the wrecked car reignited twice more after being towed away.

    1. Gas vehicles are more likely to be involved in a vehicle fire than electric ones, because you know, gas is highly flammable. But when EVs do ignite, the fire can be more difficult to douse.

      1. “…more likely to be involved in a vehicle fire than electric ones, because you know, gas is highly flammable.”

        I’m not sure if there’s enough collective Tesla driving experience yet to conclude this. I’ve driven past the aftermath of many gas-powered vehicle collision, and I can only recall seeing a vehicle fire once, ever. I’m not sure if it started due to a collision, or other cause. At any rate, vehicle fires are rare, making relative risks across different vehicle types hard to gauge.

          1. @Professor

            From what I can tell the study just mined government data already available from IIHS and NHTSA and separated this data into vehicles with batteries (including hybrids) and those that are strictly internal combustion engines. The study was compiled by CleanTechnica, which per their website has the following for its focus:

            “Technology-wise, our focus is solar power, clean transport, wind power, energy efficiency, and energy storage. However, we also get into many other topics — geothermal, hydropower, nuclear power, climate change, etc.”

  10. From WSJ article:
    1) “‘The data is screaming ‘overpriced,’ said Donna Olshan, a broker who tracks sales in the luxury market. ‘Until that changes, the market will not move efficiently. The longer it takes, the worse it will be for sellers and everyone else.’”

    2) “Diane Ramirez, president of Halstead, said the slowdown began among the most expensive properties, and eventually reached the entry market. ‘We truly had an incredible price correction that we have been living with sadly for over two years,’ Ms. Ramirez said.”

    – Q1) Could this be a nationwide problem? Q2) If yes, and starting with high-end, work it’s way down the price ladder?

    3) https://www.housingwire.com/articles/48654-median-priced-homes-are-out-of-reach-for-the-average-joe-in-most-markets

    Median-priced homes are out of reach for the average Joe in most markets
    For average earners, these homes are unaffordable in nearly 75% of markets
    March 29, 2019 | Jessica Guerin

    “ATTOM’s report calculated the income needed to make monthly house payments on a median-priced home, assuming a 3% down payment and 28% front-end debt-to-income ratio.

    – So, if traditional 20% down, then even more overpriced.

    Based on this calculation, it determined that median-priced homes are unaffordable for average wage earners in 335 of the 473 counties considered.

    – So one of two things need to happen to fix the “unaffordability” problem: Either 1) wages need to increase by the amount houses are overpriced, or 2) house prices need to fall by the same amount, as the current situation (bubble) is unsustainable.

    Since the Fed (banking cartel) is pro-capital/corps. and con-wages, which do you think will happen? Hint: Massive wealth inequality courtesy of same CB.

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