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It’s A Marketplace Now Where Consumers Have A Lot Of Choice

A report from the Bakersfield Californian. “The average, per-unit sales price of multi-family housing properties in akersfield climbed last year to a whopping 17.8 percent year over year. That’s ‘pretty staggering,’ said real estate agent Mark A. Thurston, senior vice president of ASU Commercial. Rent prices haven’t gone up nearly as fast as purchase prices have. In fact, according to Abodo, the median rental price for a one-bedroom unit in Bakersfield actually dropped 6.1 percent to $666 between December and January.”

“In the high-priced real estate markets of Southern California and the Bay Area, apartment purchase prices are so high that investors can only hope their value goes up over time. ‘The Central Valley is the last place you can get cash flow’ in California, Thurston said.”

The Auburn Examiner in Washington. “Seattle’s apartment scene is exploding. Why is this important?  Because if apartment rent doesn’t rise, the motivation for renters to buy a home falls. This equals downward pressure on the Puget Sound housing market appreciation rates.”

“According to Rentjungle, there are currently 2,039 apartments listed for rent in Seattle. Rents have increased by 2.97% from 12 months ago. But according to the Seattle Times, much of that is due to the new luxury units flooding the market. When looking at the same unit year over year, rents have increased only .5%.  This is less than inflation. Lastly, a picture is worth a thousand words: That’s A LOT of new apartments.”

The Times Union in New York. “In the Capital Region, the apartment market might seem saturated, but construction of multifamily units, especially those in the urban cores, continues. Jesse Holland, the president of Sunrise Management and Consulting, said he would not recommend construction of new multifamily units at this time. ‘The market needs a breather,’ he said. ‘I would discourage anyone from building anything right now.'”

The Chesterfield Observer in Virginia. “The county’s overhaul of the cash proffer system nearly three years ago, along with a growing economy and rising home prices, has led to an influx of new apartment construction. Since the Board of Supervisors slashed proffers by 50% in September 2016, thousands of new apartment units have either been built or approved for construction.”

“But an oversupply of apartments does concern Emerson. Citing market studies, George Emerson, a local developer currently involved in building Moore’s Lake Apartments, says quadrants of Midlothian and Broad Street may see a surplus of multifamily housing. ‘They think they’re overbuilt. In other words, there’s more apartments than there is demand,’ Emerson says. ‘I think you’re going to see that apartment market take a pause.'”

From Arlington Now in Virginia. “WhyHotel, which uses a portion of new luxury apartment buildings as a ‘pop-up’ hotel, has opened a new location in Ballston. WhyHotel launched in 2017 and operates temporary hotels in D.C., Baltimore and Northern Virginia, taking advantage of the fact that it usually takes a year or more for all of a new apartment building’s units to be leased.”

“‘We do expect to be in Arlington in perpetuity,’ said Jason Fudin, WhyHotel’s CEO. ‘And as there’s more and more development, we’re hoping to be the solution people look to as they activate their developments.'”

From The Torch in Illinois. “There are many new changes in store for on campus housing for the upcoming 2019-20 academic year. Starting next semester, the price of single rooms will decrease to $9,975, bringing the price closer to the cost of a double bedroom at $9,412. This is a significant decrease in the price for single bedrooms, saving students $3,000.”

“While $9,975 can still be quite a lot for some students to pay each year, a $3,000 decrease may still seem pretty appealing for some students. Sophomore psychology major Maggie Vasha lived in a single dorm this past year and feels that the price drop is good for some students, but feels as if the school should be held responsible in providing a refund for students who live in singles this year. ‘It’s so expensive and they don’t realize it. It’s ridiculous. I want a refund, or some sort of it,’ Vasha said.”

From Senior Housing News. “With shiny new supply flooding various markets around the country, senior living communities must make a good first impression on prospective residents, or they will quickly lose customers to the competition. In this environment, providers are wise to invest in stellar model units and to focus on reception and common areas that prospects first encounter.”

“‘If a property doesn’t show well, it gets removed pretty quickly [from prospects’ lists], is something we hear a lot,’ Seniorly CEO Arthur Bretschneider told Senior Housing News. ‘It’s a marketplace now where consumers have a lot of choice.'”

From Bisnow. “Press coverage of student housing typically focuses on the glitziest new trophy properties, complexes that increasingly provide residents with amenities once thought suitable for top-line resorts. That is understandable, as these buildings can sell for eye-popping amounts. But some developers and school administrators have begun to reconsider the emphasis on amenities, and say paying more attention to mundane but necessary features, ones that help students succeed both academically and socially, will more effectively sustain occupancy levels and still increase values.”

“Jason Schwartz, managing principal and head of student housing for Blue Vista Capital Management, said he recently visited a new student housing complex at a major school in Arizona, and noticed it had an entire room dedicated to a skiing simulator, an amenity he estimates could have cost $200K. He asked how often students used the room. ‘I was told that once a month somebody comes in and plays with it,’ he said.”

The Philadelphia Inquirer in Pennsylvania. “Developer Eric Blumenfeld is aiming to break ground in July on a 30-story North Broad Street tower with offices, apartments and a fitness club that he hopes to cap with digital screens featuring animated versions of the famous mural next door.”

“Along central Philadelphia’s South Street commercial strip, meanwhile, Blumenfeld is seeking to stave off the foreclosure of the commercial and rental units he owns in the property known as Abbotts Square.”

This Post Has 51 Comments
  1. ‘the median rental price for a one-bedroom unit in Bakersfield actually dropped 6.1 percent to $666 between December and January’

    ‘In the high-priced real estate markets of Southern California and the Bay Area, apartment purchase prices are so high that investors can only hope their value goes up over time’

    This is pretty much the definition of a mania.

    ‘The Central Valley is the last place you can get cash flow’ in California’

    I’ve been pointing out for years that these idiots are losing money at these prices.

    1. The locals in the far flung places just sat back and laughed as these out of towners swooped in and overpaid for all sorts of rental stock. The wages never supported the numbers, and they never will.

      1. Only those selling and getting out can laugh. The real residents are hollowed out by the arrival of dumb borrowed money speculators.

  2. ‘these buildings can sell for eye-popping amounts’

    Wait for it…

    ‘he recently visited a new student housing complex at a major school in Arizona, and noticed it had an entire room dedicated to a skiing simulator, an amenity he estimates could have cost $200K. He asked how often students used the room. ‘I was told that once a month somebody comes in and plays with it’

      1. The “marketng tool” is this case could be best described as a “staging tool”.

        The room was built to stage the place, to allow the dim imaginations of dumbed-down ignorant pukes to believe that happiness would at last be at hand if they were allowed to visit this room any time they desired.

        1. But did it work from a marketing perspective? Probably can’t see the ROI if it cost $200k. I sure wouldn’t see the value in using a ski simulator (I go to Salt Lake to enjoy the real thing). But car dealerships do similar stuff with swanky build-outs and lavish refreshments all sorts of extra amenities designed for sales people to close the deal.

        2. I can’t imagine that the parents who are paying for junior’s college education and dorm had a positive reaction to being involuntarily forced to pay for such frivolous and costly amenities. College has gotten ridiculously expensive, and its infuriating – especially for someone like me who paid his own way through college and worked like a dog to do it – to be put on the hook for such profligate stupidity.

          1. me who paid his own way through college and worked

            Me too. Four days ten hours each splitting firewood on the woodlot, three days classes. Not a moment to waste when it was time to study. I had an apartment, but it wasn’t “luxury” by any means. I borrowed a little in my senior year (to study more), but it wasn’t much.

            Cheap easy credit changes things, even for the frugal who aren’t borrowing.

  3. ‘meanwhile, Blumenfeld is seeking to stave off the foreclosure of the commercial and rental units he owns in the property known as Abbotts Square”

    And another one bits the dust. Plus, he’s building more! What a country.

    1. The market in San Diego continues to astound me. Seeing a lot of flips that were bought for top dollar at the peak last year and now back on the market for 8-10x the median income of the zip code. How many people are coming to the table with a qualifying mortgage 150k down payment to buy a 1100 sq ft shoe box in an unexceptional school district? The market is looking very bifurcated. There are lots of listings with successive price cuts sitting on the market that got stranded when the tide started going out in the fall of last year. Then there are flippers who bought at the top and are pushing the envelope with asking prices >10% above last year’s peak.

      1. John,

        It frustrating to witness and as much as we want it to pop overnight, it will take time and patience but the reward will be worth it. SALT impacts are starting to come to the table, the foreign buyer withdrawal is surely showing impact, Those two factors just take time. Bidding wars are a thing of the past. The last of the knife catchers and the peak buying speculators are the only ones left. Keep waiting it out 🙂

        1. I’m not expecting home price normalization. The Fed and our government are never going to let that happen. We will be living in a permabubble until the Fed is dismantled. I think the best you can hope for is that you get into a home during a smaller bubble rather than at the peak of one of the larger ones. I saw the last bubble coming from a mile away and piled up cash to buy foreclosures only to have most of the foreclosures held off the market by lenders who were bailed out by the Fed. The deals that should have materialized never did because we chose as a nation to institutionalize failure. I expect even more draconian measures to shore up asset prices this time.

          1. Guess my thought is that regardless what measures the fed takes, the pool of buyers that qualify will dry up. If they repeat the lending to anyone and everyone we had last bubble then I will go on a long vacation so that can play out but for now I sit patiently with my popcorn in hand.

      2. I don’t find it frustrating, I find it hilarious. Imagine the monthly carrying costs of those places, and the sleepless nights as flippers sweat it out with no buyers in sight. They know deep down that they are toast. The feeling has to be excruciating. When you “need” to get $950k for a place just to break even (losing all your labor in the process), but the market says it’s now worth $850k, you’re not a happy camper.

        1. For me it’s frustrating because of how it keeps playing out. Soon as the ground starts breaking, the fed fills it in with some more concrete like lowering rates. I definitely get a kick out of watching the specuvestors lose there asses, matter of fact it makes all this insanity quite pleasurable!

          1. Soon as the ground starts breaking, the fed fills it in with some more concrete like lowering rates.

            Pretty soon though the Fed will be “pushing on a string” and demand will be exhausted no matter what monetary policy does. The supply of greater fools is almost tapped out.

          2. I guess we’ll have to wait and see. I’ve shifted my perspective to accommodate alternatives I would have thought impossible in my lifetime. I think they are trying to acclimate us to the idea of universal basic income because they are running out of ways to expand the money supply. What happens to prices when they literally start handing out free money? For sensible folks who didn’t assume excessive risk, the denouement of the last bubble was disheartening. At least this time we know the playbook and can prepare ourselves for another heroic campaign to save the bonuses of Wall Street CEOs who have been enriched themselves handsomely through years of goosed-market incentivized stock buy back programs. Yeah I can almost taste the awesomeness.

  4. “America’s Upper Middle Class Feeling the Pinch Too”

    “Newly available net worth data from the Federal Reserve suggests that the ‘left-behind’ contagion has spread to all Americans aside from the top 10 percent. While still wealthier overall than most other groups, even the upper-middle class is feeling the pinch of income stagnation. The growth rate of this group’s incomes is lagging behind that of those both lower and higher on the socioeconomic ladder.

    “The cost of many products and services the upper middle class buys, from autos to college educations, is outpacing overall inflation. While having access to credit, these households are increasingly tapping into costlier forms of debt.”

    😁

    “Over the past decade, household debt composition, in aggregate, has shifted away from home mortgages — as the main item in the overall debt portfolio — to credit with higher financing costs.”

    😁

    “Credit card interest rates recently reached a generational high despite a relatively low prime rate. The spread between the two rates is at its highest point in almost a decade.”

    😁

    There’s more, but right now, after all of this reading I’m orgasmic depleted. Time to take a break and maybe smoke a cigarette, or possibly two.

    Go here for more …

    https://finance.yahoo.com/news/america-upper-middle-class-feeling-130000583.html

      1. It, debt, is what powers the economy. The economy used to be powered by work but those old-fashioned days are (temporairly?) gone.

        1. “It, debt, is what powers the economy.”
          Mr. Banker hits the nail on the head, but then again, that’s good for Mr. Banker and he should know his business. More and bigger debt-donkeys, esp. at exorbitant interest rates in the case of credit card debt, mean fat profits for the banks, until default rates rise anyway.

          Here’s the thing, any household, business, or sovereign nation should be run, financially, like a business. What counts is cash flow and the balance sheet. Right now, courtesy of your not-so-friendly central banker, we have credit cycles, which have replaced business cycles. Where we are now: At the peak; liabilities have once again overwhelmed assets on the balance sheet. Under normal conditions, weak businesses would fail, but thanks to the Fed, and ZIRP, zombie Cos. are allowed to be “the walking dead”. Just look at the “investment grade” (IG) corp. bond market. Just (barely) one notch above “junk”. Interest rates can’t rise, else “Houston, we have a problem.”

          At this juncture, it looks like the highly indebted world can continue on, status quo, forever, but recall that:

          “Trees don’t grow to the sky.” – German Proverb

          Stein’s Law: “If something cannot go on forever, it will stop.” – Herbert Stein (1916-1999), Economist

          “[We’re] turning Japanese, I really think so.”
          https://www.oftwominds.com/blogapr19/Japanification4-19.html?fullweb=1
          The Japanification of the World | April 5, 2019
          Charles Hugh Smith

    1. “…in 2018 property taxes rose by four percent annually on average.”

      Just in time for the federal deduction to be capped.

      That Equity shrinkage chart is eye-catching. Especially in light of the bubble that equities are in right now.

    2. psychological question:

      If people have $100K in HELOC debt or credit card debt, do they care if they go out with their family for a $200 dinner that they cannot afford. It is just another item and ….

      They will either get their housing (or stock price) or they owe a lot of money and it does not matter +/- 20% from their point of view.

      Just a question

      1. No worrie$, as long as their $100,000 HELCO credit/debt is matched by a $100,000 equitie$ $helter increa$e every 5 episode$ of flip.a.flop … then they can continue to dine.fine while on their Di$ney $ummer crui$e!

  5. I just renewed my lease in South Denver at a 3.3% increase over last year, but will be paying $150 / month less than new tenants will pay for renovated units.

    And for the underwater loanowners reading this, remember I have so much money left after “throwing money away on rent” every month that I don’t know where to throw it.

      1. “fund their retirement”

        That’s not my problem. I’m funding my retirement rather nicely.

        Have fun eating cat food and cutting your pills in half, underwater boomers 🙁

        1. Does that make you “ageist”? I think your social credit score just went down for not supporting your elders.

          1. “not supporting your elders”

            I support two of them, a Mother and a Father (acknowledging that in #CurrentYear it is cis-supremacist to recognize the biological differences of Nature).

            Broke-@ss boomers and Gen-Xers gonna starve and die. They destroyed this country, they deserve nothing 🙁

          2. “Broke-@ss boomers and Gen-Xers gonna starve and die. They destroyed this country, they deserve nothing”

            Listen, bish, us Gen-Xers had nothing to do with this sh!t. If ever a generation got fawked, it’s ours. 🙂

  6. Because if apartment rent doesn’t rise, the motivation for renters to buy a home falls.

    Also, if housing doesn’t appreciate, then the buy vs. rent calculation really starts to favor renting.

    1. Agoura Hill$, CA / & (Thou$and Oak$)

      Why do ye keep picking on towns that’s suffered wild fire$ & a mass gun shootings?

      Also, the Paramount $tudios western movie sets burned.to.the.prairie.dust!

      Geez …

  7. Last I had checked, zombie corporations were around 10%. This from Jim Grant:
    Just look at the growth in the herd of listed zombies; companies whose average operating income has fallen short of covering the average interest rate expense over three consecutive years. As it turns out, **the corporate living dead, as a share of the broad S&P 1500 index, are close to 14%**. Former Fed-Chairman Ben Bernanke once tried to reassure everyone that the Fed could raise rates in 15 minutes if it wanted to. Well, it turns out the Fed cannot do that. So, it’s a brave new world we’re living in.

    When the next recession hits, these zombies will resort to layoffs faster than a pistol shrimp snaps it’s left claw. What will become of the housing market then?

    1. People, intelligent people, keep using “the market” as a paradigm to predict future events. They extrapolate from this market concept that some event will be triggered and market forces will assert themselves. We still have some of the trappings of a free market economy, but the market itself is dead. We have a fiat monetary system with fiat markets and an increasingly fiat social organization in which free speech is increasingly criminalized. Those who are waiting for, or expecting, a market epiphany in which the market adjusts to a historical model of fundamental valuations would be better off reading Q posts and hanging a “trust sessions” sign on the wall over their bed. Free markets depend on free people. Does anyone believe we are becoming more free? This cycle of asset price manipulation may have many more years of life left in it. It may outlast us all.

      1. “Free market$ depend on free people.”

        Actually, they depend on electricity, three days without trade abilitie$ & confirmation$ = Chao$ + “lord.of.the.flie$”

      2. I agree with your assertion. I would submit that the vast majority of people in the U.S. have virtually no clue that this is the case; such is the craftiness of the nefarious “PTB” aka central banks/banking cartel, but they have an inkling:

        The Matrix, 1999:
        Morpheus: I know *exactly* what you mean. Let me tell you why you’re here. You’re here because you know something. What you know you can’t explain, but you feel it. You’ve felt it your entire life, that there’s something wrong with the world. You don’t know what it is, but it’s there, like a splinter in your mind, driving you mad. It is this feeling that has brought you to me. Do you know what I’m talking about?
        Neo: The Matrix.

        This is partly due to our dumbed-down .edu + no small portion of panem et circenses (bread and circuses), + various other almost daily inane distractions promulgated by your local MSM. Focus please!

        The Fed and GSE’s have essentially nationalized the U.S. housing market. The Fed has a monopoly on the U.S. currency (Federal Reserve Notes, aka fiat, or monopoly $). We know that the Fed indirectly and unduly influences the stock markets. Recent action in Q1 ’19 as case in point. Currently the Fed can’t (legally) directly buy stocks or corp. bonds, but that shoe will likely fall during the next crisis – coming soon to a theater near you – as we progress down the path of absolute centrally planned, command economy. This is as per the plan.

        https://www.theamericanconservative.com/articles/trump-is-right-to-blow-up-the-fed/
        Trump is Right to Blow Up the Fed
        The Federal Reserve is out of control, acting in ways and with powers that were never explicitly granted by Congress.
        By Christopher Whalen • April 9, 2019

        (removing tinfoil hat now…)

      3. Free markets depend on free people.

        A very good synopsis of the authoritarian version of free market that was ushered in by the brutal Pinochet regime. It is possible to have a authoritarian market economy (Augusto Pinochet) and a democratic socialist country (Salvador Allende). Capitalism doesn’t necessarily equate to freedom and liberty.

        1. Sorry but I can’t make heads or tails of this. Could you elaborate so I can better understand your comment? Thanks

          1. The point was simply that Americans, in general, have long thought that free markets and capitalism is synonymous with democracy. But Salvador Allende was a democratically elected socialist. And so the US via the CIA promoted think-tanks, news outlets, and propaganda that led to the rise of a violent authoritarian and a military coup, the exact opposite of democracy. Augusto Pinochet’s regime was violent and brutal, but successful in a way too. He implemented University of Chicago free market reforms in a way that was absolute. Today Chile is thriving economically, but the trail to their path is littered with abuses of human rights, killings, disappearances, torture, etc. that is on par with some of the most totalitarian states.

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