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Right Now, Hundreds To Thousands Of Units Sit Vacant

A report from News Channel 9 in Tennessee. “Construction in downtown Chattanooga might seem to be never ending. New apartments and condos pop up frequently around town, but is there enough demand for all of this growth? ‘We had a lot of apartment developments open, several hundred open kind of within a few months of one another,’ said Amy Donahue with the River City Company. ‘The initial sort of wave of this last round of development really focused on apartments and we still have a lot of apartment product coming online.'”

“Donahue said many apartments opened around the same time, so right now, hundreds to thousands of units sit vacant. Some people NewsChannel 9 spoke with said they believed those vacancies showed that downtown housing really isn’t growing. River City’s own downtown survey from 2017 showed that almost 70% of people who responded, thought downtown living was not for them because it cost too much. Still, regardless of the price and empty units, new projects are in the works.”

From Deseret News in Utah. “Utah’s housing market has been among the hottest in the western region over the past several years. The result has been escalating prices for homebuyers and apartment seekers, especially along the Wasatch Front where double-digit increases have become the norm.”

“But new information may indicate the market could finally be coming to a period of more reasonable growth in the next year or so. The report’s lead author, James Wood, a senior fellow at the Kem C. Gardner Institute in the University of Utah’s David Eccles School of Business, said the last large scale apartment projects are scheduled to be permitted this year, which will lead into a period of decreasing construction as the market demand absorbs the current supply of rental units. Residential construction is also expected to stabilize.”

“‘(Regarding) market conditions on the apartment side, we might begin to see a little higher vacancy rates,’ Woods said. ‘Supply will likely exceed demand in the next couple of years because we have so many projects ready to go.'”

“For many families, the possibility of homeownership is slipping away in the wake of double-digit housing price increases, the report states. Data showed that last year’s median new home sales price for Salt Lake County jumped 61 percent from 2010 to $418,376. That trend was also similar in three other Wasatch Front counties, with Weber County’s median price rising 50 percent, while Utah County saw a 62 percent hike, and Davis County had a whopping 71 percent increase in its median sales price over the eight-year period.”

The Idaho Business Review. “A peculiar thing happened as newcomers fled to Boise’s suburbs seeking to escape urban cores filled with apartments: Those suburbs started getting apartments themselves. Last year, just one of every five new multifamily units in the Treasure Valley was built in Boise, according to COMPASS, the regional planning agency. ‘Over the past five years we have seen more multifamily units permitted than ever before,’ said Carl Miller, COMPASS’s principal planner.”

“In 2018, Meridian alone issued permits for 1,303 multifamily units — twice as many as Boise did. But lest you think the suburban apartment market is a balloon that may pop, developers say not to worry. The Treasure Valley has long had fewer apartments than average for areas its size, and no end to its population growth is in sight.”

“While many view the suburbs as an affordable alternative to city life, many of the new apartments aren’t necessarily any cheaper than what a renter might find in Boise. Most new units constructed are labeled ‘luxury apartments’ — a term Daniel Turnbull admits doesn’t actually mean much, except that the apartments rent at market rate.”

“Taylor Grange, a Boise portfolio manager for property manager HomeRiver, helps investors decide what types of complexes to build. She’s steering them toward four-plex townhouses. ‘It’s good for investors because they can be sold off individually,’ she said. ‘If something happened to the housing market, it might be harder to find a buyer for a 200-unit complex.'”

From Multi-Housing News on Texas. “Houston’s multifamily sector has certainly faced its share of challenges over the past few years. However, it is not all doom and gloom. A number of investors are finding innovative ways to ensure returns on their investments. Some 14,000 units are under construction across the metro, the vast majority as part of luxury developments. Significant capital deployment is also underway in the realm of value-add acquisitions.”

“Sanmore Investments, a multifamily developer and redeveloper based in Houston, has been involved in the market’s value-add arena for more than five years. Owner Boris Sanchez discusses recent trends in Houston’s multifamily sector.”

“What challenges do you see on the horizon for the Houston multifamily market in the next five years? Sanchez: As more and more investment dollars are poured into Houston, it is imperative that all investors maintain a conservative mind and not overbuild.”

“Fellow Class C investors sometimes swear that (this asset type is) recession-proof. As studies have shown, it is not—both Class B and C apartments also experience expanding vacancies. Investors with the greatest flexibility in rent will be proven to be the longest lasting. There is a lot to be said for not overleveraging and not counting on an all-positive economic future.”

From McKnight Senior Living. “Serving middle-income older adults could be an answer to the occupancy and oversupply challenges facing senior living operators and developers, Eclipse Senior Living CEO Kai Hsiao told those attending a Health Affairs event.”

“‘For those in senior living right now, one of our big challenges is occupancy due to oversupply,’” Hsiao said. ‘If you take a look at what’s being built out there today, the fact of the matter is, it’s all the same. It’s all the 80-unit [assisted living], 20-unit memory care — 100-unit-ish, $4,800 [revenue per occupied room] targets. Everyone is building the same thing for that upper-income market. I think a lot of our occupancy woes and oversupply woes could be lessened or dampened if we actually targeted that middle-income demographic.'”

The News Gazette in Illinois. “A California company that rents out apartments to international students on behalf of two Champaign-Urbana apartment companies has defaulted on its payments, leaving owners and dozens of University of Illinois students in financial limbo, officials say.”

“World Elites Housing Inc., known as WeHousing, failed to make its full April payments to The Pointe at U of I in Urbana and Campus Property Management as required by its leases with those two companies, officials said Wednesday. WeHousing’s website was down Wednesday. The phone number listed for the company headquarters in Pleasanton, Calif., was out of service, and a message left was not returned. Several officials said they’ve been told the company’s offices there have been cleared out.”

“‘They basically said they didn’t have any money,’ manager Brian Agnoletti said.”

The Berkshire Eagle in Masachusetts. “A multi-unit apartment building at 54-58 Maple St. in Adams will be on the block when Sullivan & Sullivan Auctioneers of Sandwich holds a foreclosure auction at the site April 30. The building is located on a 6,970-square foot lot and contains 3,328-square feet of living space. It has 19 rooms, nine bedrooms and five baths.”

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This Post Has 60 Comments

  2. Just a data point, rent is getting really tight around the west side of Folsom this spring for the good, big stuff. I strongly suspect lots of people are intentionally renting who would normally be buying this year. The exception is the brand new stuff in the middle of nowhere south of 50, the new subdivisions. It’s not so hard to find a place down there if you don’t mind being in a half finished subdivision far from schools. People seem to be shying away from that, though.

  3. “What challenges do you see on the horizon for the Houston multifamily market in the next five years? Sanchez: As more and more investment dollars are poured into Houston, it is imperative that all investors maintain a conservative mind and not overbuild.”

    YES we will…we promise *wink* *wink*

  4. I come home one Friday
    Had to tell the landlady I’d-a lost my job
    She said, “That don’t confront me
    Long as I get my money next Friday”
    Now, next Friday come, I didn’t get the rent
    And out the door I went…

    ####

    “has defaulted on its payments, leaving owners and dozens of University of Illinois students in financial limbo, officials say.”

  5. I was out of touch with the blog for a few hours. I had the first part of a crown done this afternoon and to make matters worse, my phone stopped working.

    Man, was I nervous. It went as well as could be expected.

    1. 3 of them now. I’d rather take a walk in the rain than sit white knuckled in the dentist chair.

    5. As long as you have a good, experienced dentist, crowns are (almost) a cake walk. Had a few in the last 8 years…. no biggie. (Back when I had group coverage, before retirement).
      IMHO

      1. It was my first one (it had a crack) and I was unnecessarily nervous. In the future I’ll probably be OK with it. I did have to sign a paper warning me of all the bad stuff that could happen first.

        1. I’ve had 3 crowns but none due to a “crack” Problem with cracks is that not even the dentist can be sure a crack doesn’t burrow down below the gumline – meaning the inside of your tooth can still develop an infection through the unprotected parts. The only time I had a tooth crack, I had it extracted.

        1. Those girls could sing (later musical version.) Saw it a couple of times live, last time right before we moved; it was great.

    7. Had one that I got in 2011 break a couple months ago and it needed to be extracted (not enough left of the original root to rebuild) – got an empty gap where a bone graft is fusing in, and later this year they’ll build a permanent replacement there.

      I let my teeth go to crap in my late teens and 20s because I was terrified of the dentist. As a child, our small-town dentist used an anesthetic that didn’t work on me at all. Even small cavity work was painful as all hell. As a young child I was basically tortured in the chair.

      When I finally dragged myself into a dentist at 30 due to neglecting my teeth, I had to have multiple root canals – but, the new stuff my big city dentist used actually blocked the pain, and those root canals were 100x less painful than childhood cavity work.

      I wish I knew better as a child and didn’t have the maintenance issues I have now.

      1. My childhood memories where quite unpleasant as well but I do remember a treasure box of goodies I got to rummage through after the dentist jack hammered my teeth. Even with that I still dreaded even cleanings and still do to this very day.

        1. I know quite elders who had tales of multiple dental problems, so bad they decided early in life to have all their teeth extracted, and got full dentures. E.g., mother had this done at age 50. Nearly all of them said later it was the best thing they ever did for their health. None ever needed further dental care. A few went on to need revisions of fit & finish of the dentures. I know, I know, it’s not “cool” to have dentures, not good “for appearances”. Months ago I happened to discuss this with a local postal clerk at work. She’s fat. Said she had full dental extractions about a year before, followed by full dentures. The Type II diabetes mellitus she had going into the extractions CEASED!. Old time times (before about 1920) physicians (not dentists) would often recommend patients with multiple dental problems to go for full extraction. They knew carrying around a mouthful of infection and inflammation, &/or undergoing numerous procedures, was not good for one’s general health. Dentistry has been criticized for the poor quality of research done in the field, compared to other parts of medicine. Evidence for procedures done so widely is just not there. You can bet studies of full dental extraction followed by long term outcome documentation is about the last thing the dentists want to examine. Their bread & butter is procedures, procedures and more procedures. One procedure to rule them all is definitely not in their financial interests. (Reminds me of a saying popular and repeated often on this blog.) That being said, I go in for dental cleaning & exam 3 times a year.

      2. I wish that during my Air Force career, a dentist had at least once told me that my gums were receding so much that I should start using an electric toothbrush. So now I’m stuck with the damage. I just have to be very diligent about brushing, flossing, Etc. Thankfully, other than the gum recession, my teeth are in good shape.

    8. Root canal first or just a crown ? My last dentist was crown happy so I switched to a new dentist . Make sure the bite is right after they put the crown on meaning sit up when biting on the blue tape don’t do it laying down unless you eat laying down.
      Yea I have a few crowns myself. My last dentist was crown happy so I finally switched dentists.

  6. I thought the headline said “hundreds OF thousands of units sit vacant”

    Oh well, not quite yet 😉

    1. hundreds OF thousands

      It’s just Chattanooga, and he’s just talking about brand new apartments. The big picture is tens of millions.

      1. That’s right. 25 million excess empty and defaulted houses with another 35 million just beginning to empty as boomers die off at a rate of 10,000/day.

  7. “They basically said they didn’t have any money”

    Can you hear that, REALTOR?

    Because that’s you. And if not now, soon 🙁

    1. A sample of some recent price cuts in ZIP 80210. Recent, as in within the last two weeks.

      Cut $26K to $899K on 4/17:

      https://www.zillow.com/homedetails/2030-S-Gilpin-St-Denver-CO-80210/13375964_zpid/

      Cut $11K to $609K on 4/12:

      https://www.zillow.com/homedetails/1482-S-Emerson-St-Denver-CO-80210/13370908_zpid/

      Cut $25K to $458K on 4/19:

      https://www.zillow.com/homedetails/1748-S-Garfield-St-Denver-CO-80210/13373630_zpid/

      Cut $50K to $1.225M on 4/22:

      https://www.zillow.com/homedetails/3061-S-Fillmore-Way-Denver-CO-80210/13388087_zpid/

      Cut $13K to $717K on 4/23:

      https://www.zillow.com/homedetails/1180-S-Elizabeth-St-Denver-CO-80210/13372393_zpid/

      Cut $15K to $480K on 4/25:

      https://www.zillow.com/homedetails/3655-E-Yale-Ave-Denver-CO-80210/13375619_zpid/

      Cut $36K to $1.539M on 4/15:

      https://www.zillow.com/homedetails/1157-S-Vine-St-Denver-CO-80210/13370188_zpid/

  8. Hi Ben,
    This too shall pass. Get well soon.

    On MFH:
    “Donahue said many apartments opened around the same time, so right now, hundreds to thousands of units sit vacant. Some people NewsChannel 9 spoke with said they believed those vacancies showed that downtown housing really isn’t growing. River City’s own downtown survey from 2017 showed that almost 70% of people who responded, thought downtown living was not for them because it cost too much. Still, regardless of the price and empty units, new projects are in the works.”

    – Every cycle builders overbuild. Seems to be the case in many/most MSAs currently. It’s kind of a phenomenon. There’s lots of lux, but vacant units aren’t paying the loan note. Lots of false signals and malinvestment. The everything bubble. The unwind from this could be epic, and that’s just for MFH. Let’s add SFH, stocks, high yield and corp. bonds to the mix.

    IMHO, we close to, or just completing, an epic “blow-off top” in the stock markets, a la the Fed/Powell cave at the start of Q1 ’19. Maximum moral hazard. Tomorrow could be and “interesting” day for those longing for a small taste of price discovery. Time will tell.

    “Ladies and gentlemen, the Captain has turned on the fasten seat belt sign. We are now crossing a zone of turbulence. Please return your seats and keep your seat belts fastened. Thank you.”

    Quotes from “Jurassic Your Asset Park”, 1993 (A movie about dinosaurs central bankers running amuck) – paraphrased

    John Hammond: All major theme parks have delays. When they opened Disneyland in 1956, nothing worked!
    Dr. Ian Malcolm: Yeah, but, John, if The Pirates of the Caribbean breaks down, the pirates don’t eat the tourists.

    Dr. Ian Malcolm: God help us, we’re in the hands of engineers central bankers.

    Dr. Ian Malcolm: If I may… Um, I’ll tell you the problem with the scientific power that you’re using here, it didn’t require any discipline to attain it. You read what others had done and you took the next step. You didn’t earn the knowledge for yourselves, so you don’t take any responsibility for it. You stood on the shoulders of geniuses to accomplish something as fast as you could, and before you even knew what you had, you patented it, and packaged it, and slapped it on a plastic lunchbox, and now
    [bangs on the table]
    Dr. Ian Malcolm: you’re selling it, you wanna sell it. Well…
    John Hammond: I don’t think you’re giving us our due credit. Our scientists central bankers have done things which nobody’s ever done before…
    Dr. Ian Malcolm: Yeah, yeah, but your scientists central bankers were so preoccupied with whether or not they could that they didn’t stop to think if they should.

    1. “– Every cycle builders overbuild.”

      For decades there weren’t “cycles”, “builders” or “overbuilding”. 20 years all this fraud started…. And now it’s falling apart along with all the DonkeyTalk that goes with it.

        1. “There is no cause to worry. The high tide of prosperity will continue.”
          … Sec. of Treasury, Andrew Mellon,
          September 1929.

          “Stock prices have reached what looks like a permanently high plateau”.
          … Yale Economist Irving Fisher,
          October 16th 1929.

          “This crash is not going to have much effect on business.”
          … Chairman Arthur Reynolds
          Continental Illinois Bank of Chicago
          October 24th 1929.

          “I have no fear of another comparable decline.”

          … Arthur W. Loasby
          President Equitable Trust Co.
          October 25th 1929.

          1. “Would I say there will never, ever be another financial crisis? … Probably that would be going too far. But I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t believe it will be.”

            … Janet Yellen
            Federal Reserve Bank Chair
            June 27, 2017

      2. I suppose it really could go on forever if the Fed and PPT continue pumping liquidity into the market.

        1. Something will have to give. The more money they print to prop up the markets the lower the dollar will be worth. They can’t expect any other outcome.

        1. Bitcoin price: are fraudsters behind latest value plunge?
          The Week UK-4 hours ago
          … which has traditionally been a “major support level”, he said. That could lead to a wave of investors selling off their virtual assets, prompting another price drop.

          1. Crypto Market Bleeds $8 Billion Wipeout in Minutes but Bitcoin …
            CCN-5 hours ago
            By CCN.com: The valuation of the crypto market dropped by $8 billion in a matter of minutes after the office of New York Attorney General’s office filed a lawsuit …

      1. Globalist-run, you mean. Globalists are all about open borders and unrestricted Third World immigration into formerly prosperous First World countries. The leftists are just their accessories and accomplices.

      2. A state judge in Massachusetts has been indicted and suspended for interfering (at an official level) with ICE.

        BOSTON (WHDH) – Federal officials have indicted a Massachusetts trial court judge and a trial court officer with obstructing justice and perjury after they allegedly conspired together to prevent an ICE agent from taking a twice-deported drug suspect into custody last year.

        U.S. Attorney Andrew E. Lelling announced charges Thursday against Newton District Court Judge Shelley M. Richmond Joseph, 51, of Natick, and Court Officer Wesley MacGregor, 56, of Watertown, who are both accused of preventing an ICE agent from detaining a drug suspect in April 2018.

        The usual suspects (lawyers and judges) are squealing like pigs about this. If charges are true, disbarment and long prison terms might just encourage les autres.

        1. Wow, this is terrible, but glad to see these judges who have become a law unto themselves being held accountable.

          1. these judges who have become a law unto themselves being held accountable. You dreamer, you! I won’t believe this particular judge has been “held accountable” unless & until she’s been disbarred and done some hard time in federal prison. Judges know how to take care of each other.

          2. I learned that insiders rule, after what didn’t happen to US Army General Hull, who gave up the city of Detroit to the British army, without a fight, in the War of 1812. For this he was court-martialed, convicted, and sentenced to death, but he received a pardon from President James Madison and his reputation somewhat recovered. (WIkipedia)

  13. Bless you, weak hands, for gifting me your firesale precious metals and mining stocks this past week. With the Keynesian fraudsters at the Fed intent on printing away all government and corporate debt, I am happy for every opportunity to trade green pieces of paper backed by nothing and soon to be Weimar 2.0 wheelbarrow money for physical gold and silver, which will soar as the Fed’s debasement of the currency continues apace.

  14. The Wall Street Journal
    U.S.
    Homeownership Rate Drops for First Time in More Than Two Years
    A rising rate primarily reflects younger households successfully making the transition from renting to owning
    By Laura Kusisto
    April 25, 2019 3:31 p.m. ET

    The U.S. homeownership rate fell for the first time in more than two years in the first quarter, putting the brakes on the recovery of an important piece of the economy.

    The homeownership rate fell to 64.2% in the first quarter from 64.8% in the fourth quarter, according to U.S. Census Bureau figures released Thursday—a notable drop for a number that barely moves from one quarter to the next.
    …

    1. “putting the brakes on the recovery”

      “Recovery” WTF We’re about to enter the 11th year of expansion.

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