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How Much More Ultra Luxury, Class A Product Can Be Absorbed?

A report from the Seattle Times in Washington. “Renters looking for something that might qualify as a deal by Seattle standards are in luck as a record number of new apartments spring up. And with new housing openings scheduled to peak this spring and summer, there’s a consensus that rents won’t be budging much for a while. About 1 in 10 apartments across the city remain empty, and perks like a free month’s rent have become standard at most new buildings, and even some older ones.”

“The Seattle metro area built 17,450 apartments in 2018 — 48 per day — the fourth most in the country for the third straight year, according to census data. That beat the local record set the prior year, which in turn had surpassed the previous high from the suburban-driven apartment boom in the mid-’80s.”

“Only the New York, Dallas and Los Angeles regions have built more apartments than Seattle in each of the last three years. But Seattle is building more than those regions on a per-capita basis. A few smaller metros, most notably Austin, Texas, and Orlando, Florida, built more than Seattle on a per-capita basis.”

“The pipeline for future projects hasn’t changed much — still sitting at about 45,000 units across the region, according to Apartment Insights/Real Data. Not all of those will get built, however. Brad Reisinger, Pacific Northwest division president for Lennar Multifamily Communities, which is building several apartment projects in the region, said it’s getting harder to get funding to build projects now because costs for land and construction have gone up so much faster than rents. He said it’s getting close to the point where projects won’t work financially for investors.”

“‘It has to slow down at some point,’ he said of the construction boom. ‘There’s still tremendous demand for housing in Seattle now, (but) how much more ultra luxury, Class A product can be absorbed?'”

The Statesman Journal in Oregon. “Salem apartment rents climbed slightly in early 2019 but Oregon’s housing crunch showed signs of easing amid a healthy economy and a better balance between the supply of units and renters’ needs.”

“‘The market is settling in some places,’ said economist Josh Lehner. ‘The supply of new apartments in Portland are bringing down rents at the high-end and slowing rents for moderately priced units as well.'”

The Long Beach Post in California. “More than one in five Long Beach residents are currently living in poverty, and more residents are rent-burdened — paying more than 30 percent of their income for rent — than ever before.”

“And, despite the recent development boom, Long Beach has seen a slight downtick in our overall population and a continual rise in rents. That’s because the prevailing supply and demand — ‘just build’ — mantra put forward by city leaders and business interests is not working, has never worked, and never will work. The glut of luxury homes in Long each has not created a more affordable market.”

From KITV on Hawaii. “Hawaii County has the most affordable homes in Hawaii, according to 24/7 Wall St. It says the median home value is $375,600, with a median monthly cost of $1,600. 22 percent of the county’s housing units are vacant, which drives down price.”

From The Gazette in Colorado. “During the first quarter, the Pikes Peak Regional Building Department issued 705 permits for construction of single-family homes in El Paso County, a 27.3 percent decline from the same period last year, the agency reported. In March, the department issued 274 permits, down by a nearly identical percentage.”

“‘It’s certainly not a red flag, ‘the sky is falling’ kind of position by anybody I talk to among the top builders,’ said Todd Anderson, board president of the Housing & Building Association of Colorado Springs.”

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This Post Has 54 Comments

  1. About 1 in 10 apartments across the city remain empty…The Seattle metro area built 17,450 apartments in 2018 — 48 per day — the fourth most in the country for the third straight year…’how much more ultra luxury, Class A product can be absorbed?’

    I’d say none Brad.

        2. If progressives weren’t so enthusiastic about supporting and encouraging ilicit drug use through decriminalization, I might buy that bullshit you’re peddling.

          1. Decriminalization is different than legalization. I support the former, and loathe the later.

    2. I’m just greatful that the Fed broke into my bank and bludgeoned my savings account to death with a QE sledgehammer and handed over all future interest earnings to real estate speculators, house flippers, and idiots who can’t balance a check book buying overpriced homes with 3% down FHA backed mortgages. The future of our financial system hinges on their independent decision making, independent that is from having to shoulder any blame or take any responsibility for, or suffer the consequences of, their inane policies. That is what they are talking about when they proclaim the criticality of maintaining their independence, right?

  2. ’22 percent of the county’s housing units are vacant, which drives down price’

    Eeee-bola Hawaii County!

    1. Even worse – Hawaii County encompasses Hawaii Island (The Big Island) – the only island with an active volcano. They ARE making more land. Oof.

  3. ‘It’s certainly not a red flag, ‘the sky is falling’ kind of position by anybody I talk to among the top builders’

    So in other words Todd, don’t panic?

    1. My data from 15 San Diego zip codes for recent sales indicates that the burst in sales activity seen in February (sales up 14% m-o-m) that spurred some optimism is not going to hold. Sales will return to downtrend in the March-April timeframe. Maybe the pool of people who were lured by lower interest rates is running dry.

      1. The falling-rates gimmick to lure in more FBs can only work so often before rates stop falling.

        1. After the pets are gone Venezuelan citizen’s attention will be directed to the famous Tamsen Donner Cookbook.

  4. ‘More than one in five Long Beach residents are currently living in poverty’

    Progressive!

    1. Didn’t I recently read an article stating that CA has highest poverty rate in the nation? If yes, then that’s the expected outcome for socialism. Late-stage socialism = Venezuela. Next stop for CA…

      1. “Didn’t I recently read an article stating that CA has highest poverty rate in the nation?”

        Hmmmmmm … here’s an interesting solution …

        “Bussed out: how America moves thousands of homeless people around the country”

        (snip)

        “A count earlier this year found half a million homeless people on one night in America. The problem is most severe in the west, where rates of homelessness are skyrocketing in a number of major cities, and where states like California, Nevada, Oregon and Washington have some of the highest rates of per capita homelessness.

        “These are also the states where homeless relocation programs are concentrated. Using public record laws, the Guardian obtained data from 16 cities and counties that give homeless people free bus tickets to live elsewhere.”

        “‘Once they get you out of their city, they really don’t care what happens to you.’ – Jeff Weinberger, Florida Homelessness Action Coalition”

        “While the stated goal of San Francisco’s Homeward Bound and similar programs is helping people, …”

        At least we now know the people running San Francisco have a sense of humor.

        “… the schemes also serve the interests of cities, which view free bus tickets as a cheap and effective way of cutting their homeless populations.

        “People are routinely sent thousands of miles away after only a cursory check by authorities to establish they have a suitable place to stay once they get there. Some said they feel pressured into taking tickets, and others described ending up on the streets within weeks of their arrival.”

        There’s more. Go here …

        https://www.theguardian.com/us-news/ng-interactive/2017/dec/20/bussed-out-america-moves-homeless-people-country-study

        1. “Miller conceded that members of his board had been ‘conflicted’ over the morality of turning homeless people away because they previously took a free bus ticket.

          “But he maintained the policy was justified to discourage abuse – a point echoed by his former deputy, Mike Tolbert, who said it was the only way to prevent the shelter from being used as a ‘travel agency’.

          “There is another benefit to the shelter in banning ticket recipients from coming back: it is a policy that can appeal to locals on the island. Miller asks residents to contribute to a fund that will buy homeless people one-way tickets to relocate elsewhere. He makes clear that they will not be allowed to come back.

          “’That, I figured, was the easiest ‘sell’,’ Miller said. ‘Give us money and we’ll ship our homeless problem to somebody else.’

          I like it. 😁 Now back to San Francisco …

          “San Francisco has one of the largest homeless populations in America, and it is an expensive problem to have. Once the cost of policing and medical services is taken into account, each chronically homeless person is estimated to cost the city $80,000 annually. Bus tickets cost a few hundred dollars.

          “The city does not deny there is a financial incentive behind its program, which was launched in 2005 when officials considered the example of nearby Sacramento, which was reducing its homeless population by giving people tickets to leave.

          “Commander David Lazar, who at the time was a lieutenant representing the San Francisco police department on homeless issues, said there were humanitarian reasons he and others wanted to introduce the program in the city. But he added that giving free bus tickets was considered a ‘win-win’ because each homeless person that left was ‘one less call for services.

          “’How many more people would have been in San Francisco had we not had this program?’ asks Lazar. The dataset, which reveals the number of homeless people given tickets in and out of the city, can help answer that question.”

          1. A related article …

            Hey Area: The truth behind San Francisco’s homeless bussing program | KALW
            https://www.kalw.org/post/hey-area-truth-behind-san-franciscos-homeless-bussing-program#stream/0

            (snip)

            “Over the last 12 years, about 150 people have taken free bus tickets to come here.”

            150 homeless people were bussed from other cities into San Francisco over the past 12 years. Check.

            Moving on …

            “But, over that same time, San Francisco has bussed out over 10,000 people. In other words, the city’s homeless population would be over twice as big today, if they hadn’t taken the city up on a bus trip.”

            Bahahahahahaha … The caring, liberal city of San Francisco has been outed.

          3. “Once the cost of policing and medical services is taken into account, each chronically homeless person is estimated to cost the city $80,000 annually.”

            Same as a working stiff supporting a family.

          4. This plan could easily backfire. What’s stopping other states or cities from doing the same?

          5. Wasn’t SF spending something approaching a billion a year on their homeless problem? All Demoncrat controlled cities have turned homelessness into big business with scores of “non-profits” skimming the cream off the top to help a mere few percent. No doubt some of the money goes right back into the demoncrat party so they can maintain their vise grip on the levers of power. The cities also have small armies of people they pay to “manage” the homeless problem as well. Now we learn they spend a teeny tiny portion to ship off the worst to other places, exporting the plague they helped create and nurture with their policies.

            Its Homeless Inc., brought to you by the usual Marxist vampires.

          6. $80,000 PER PERSON!!?!! WTH is the money going? Most people don’t even MAKE $80k a year across the country. Absolute disgusting racket. Makes me just want to give up even trying anymore.

        2. Venezuala is definitely a socialist country. Read up on Chavismo and the nationalization of many industries, including agriculture. Nicolas Maduro and his predecessor has implemented disastrous economic policies, unless you are part of the “enchufados”.

      3. This is the end result of 40 years of de-industrialization, offshoring of goods production and financialization of whole sectors of the economy, especially basic human needs like shelter. But I bet the private jets are still flying to Aspen this weekend.

        1. Well, the Aspen Institute is offering an Executive Seminar on Leadership, Values, and the Good Society next week.

    2. The drug addicts on the streets are unbelievable these days. Truly the Walking Dead, they just dont bite….yet.

        1. Taxpayers have to pay for these “dummies.” All we can do is make “prisons” for rehab only. Or the streets will be riddled with the walking dead stealing for their next fix. Jail is $75k a yr per person, so that $uks too.

  7. The Long Beach Post in California. “More than one in five Long Beach residents are currently living in poverty, and more residents are rent-burdened — paying more than 30 percent of their income for rent — than ever before.”

    Heckova job, Ben & Janet.

  8. “And, despite the recent development boom, Long Beach has seen a slight downtick in our overall population and a continual rise in rents. That’s because the prevailing supply and demand — ‘just build’ — mantra put forward by city leaders and business interests is not working, has never worked, and never will work. The glut of luxury homes in Long each has not created a more affordable market.”

    I’m not surprise by this. It’s not only the high house prices but the traffic, crime, politics, etc. All of these things outweigh the decent weather in CAL. Also it has been raining a lot in the Bay Area. More than usually so the weather here is good/OK too. No way I make my kids compete in such areas. Being from the East Coast, there are many places that are being for raising a family. I just need to convince the wife that your family is not worth staying in CAL. I already convinced her to move up to SV from SoCAL away from her dysfunctional family. The next move will be out of this state completely in the next few years!!!

  12. “and more residents are rent-burdened — paying more than 30 percent of their income for rent — than ever before.”

    LOL. Rent burdened? Is that food insecurity?
    Lemme guess the solution is more govt, higher taxes and less freedom. Am I close?

    1. When rents increase, people here complain that rents are increasing and not enough rentals exist.

      When a surge of apartments are built, and rents fall, you still complain that there are too many apartments built.

      There’s no pleasing some people.

      1. Did you purposely not taken into account the substantially higher starting point that said rents are falling down from?

        Isn’t that what the title of this blog entry is about? It isn’t just rent burdened, it’s also mortgage burdened, because nothing being built new today is responsibly affordable to the majority of this country. Not just to the lower income folks that you are condescendingly looking down your nose at here, but also to the bulk of middle income earners.

        Wouldn’t it be great if we were all rich and smart like you, and could live this unattainable dream HGTV, builders, Zillow and the REIC are selling?

    2. Well now that they have solved the affordability problem in housing, healthcare, and education, they need to apply their magic touch to the next problem area.

  14. states like California, Nevada, Oregon and Washington have some of the highest rates of per capita homelessness.

    _____

    All states run by right wing Republicans!!!!! See, we need socialism to make this problem go away. If only we elect hard core leftists these states will become much better off.

    Oh wait a second….

    1. I wonder if proximity to good weather might have more to do with homelessness aggregation than political leanings of a state. How well do the homeless tent cities do in Fargo, North Dakota.

    1. I thought Al Gore invented the internet? Now these google scum rig search results to say the lynching hoax dude is a hero.

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