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Buyers Are Keenly Aware Of The Amount Of Inventory Available, And Want To Negotiate

A report from Bloomberg on New York. “Apartments in Manhattan’s Financial District aren’t exactly trading like blue chips on the nearby New York Stock Exchange. After a spurt of construction aimed at foreign buyers, whose numbers are dwindling, and finance workers, who have seen many of their jobs move uptown, the area is plagued by oversupply.”

“Financial District apartment inventory grew 24 percent from a year earlier in the second quarter, led by new developments, according to a report by Corcoran Group. With all that supply, the average price for resale condos dropped 11%, and average new development prices fell 46%. No previously owned condo was sold for more than $1,600 a square foot, the first time that’s happened since 2013.”

“Meanwhile, the construction downtown continues. More conversions also are in the works. ‘Buyers are keenly aware of the amount of inventory available, and want to negotiate at all price points,’ said Garrett Derderian at the brokerage Core.”

The Auburn Villager in Alabama. “Auburn Mayor Ron Anders voiced his concern over student housing in the city during last week’s City Council meeting. Over the past several years, a number of large student-housing projects downtown have come online, with more opening this fall, one more under construction and another in the early phases of demolition. Once the projects are all online, about 2,900 bedrooms will have been added to the city’s student-housing inventory.”

“‘Considering what we could be facing, I believe we’ll have to consider all options and ultimately the council will have to make a decision,’ said Anders. ‘But I don’t think it’s in Auburn’s best interest for us to just continue to allow large-scale student housing to be built in Auburn if the numbers show that we don’t need it.'”

The South Bend Tribune in Indiana. “Take a drive through the neighborhoods around the University of Notre Dame campus and you can see a potential problem on the horizon. Hundreds of new apartment units — in the form of large complexes and town homes — have come on line over the past decade as local and outside investors have sought to capture a piece of the student-housing market.”

“With vacancies already prevalent, landlords are a bit on edge. ‘There’s been a big boost in supply in recent years,’ said Mark Neal, chief operating officer of the Bradley Co., which manages the 100-unit Stadium Club Apartments.”

The Berkeley Daily Planet in California. “There are two crises facing the Bay Area. Supposedly. One is a crisis of homelessness, which is the economic production (through inflation and rent increases) of people who cannot afford housing, because they are priced out and are left to sleep on sidewalks and parks. The other is a crisis of affordable housing.”

“There are entire apartment buildings in Berkeley that are empty – closed to occupancy and unused for years. And the government cannot open them. In addition, there are now large, brand-new apartment buildings, built over the last few years, that are still not fully rented. They have ‘Now Leasing’ and ‘For Rent’ signs on them, which means there is a glut of market rate housing.”

The Dallas Morning News in Texas. “Here’s some good news for Dallas-area apartment renters — you’re more likely to get freebies to sign that lease. Apartment deals often include a month’s free rent, gift cards or other enticements. Three of Texas’ big city markets are among the top places in the country for apartment concessions, according to RealPage.”

“Houston, San Antonio and Dallas have all seen thousands of new apartments built during the last few years. ‘Dallas has been the nation’s busiest market during the cycle, seeing nearly 125,000 units deliver, increasing the large existing base by 24.6%,’ according to RealPage.”

From AZ Big Media in Arizona. “RENTCafé just released its July Rent Report where it analyzed the evolution of monthly Arizona rents, along with the rents in 260 United States cities. Average rents in Arizona have seen month-over-month decreases across the board as the rental season is slowing down. Multifamily rent increases are slowing down across the U.S. Only eight out of the 260 cities in the RENTCafé study saw month-over-month jumps of more than 1%.”

From News 5 Cleveland in Ohio. “Even with new apartment projects popping up all over downtown Cleveland, many of them are being advertised as ‘luxury living,’ and they come with luxury prices. SEIU Local 1 janitor Brian Yarbrough says he and many of his co-workers have to live outside downtown even though many of them keep the buildings there clean.”

“‘They’re probably working close to downtown, but I guarantee you, they’re not living downtown because it’s too expensive,’ said Yarbrough.”

From Travel Weekly on Hawaii. “While those with vacation plans farther out have time to adjust, people planning to visit the Aloha State in August and September have had to scramble as numerous accommodations have been taken out of the rental pool. Don Eovino, an Oahu resident who operates vacation rentals, said he still has some legal units but has had to scale back his business and plans to reduce staff for maintenance, cleaning and other duties.”

“‘My feeling is that for the most part, things have been operating fine for 30 years and it’s only recently that the hotels have made a lot of noise about it,’ Eovino said. ‘I understand some people don’t want it in their neighborhood, but I think that is mostly because of some bad actors. It could be better regulated and controlled properly.'”

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This Post Has 68 Comments

  1. ‘With all that supply, the average price for resale condos dropped 11%, and average new development prices fell 46%. No previously owned condo was sold for more than $1,600 a square foot, the first time that’s happened since 2013’

    Are we there yet?

  2. ‘I understand some people don’t want it in their neighborhood, but I think that is mostly because of some bad actors. It could be better regulated and controlled properly’

    That’s what they’re doing numb-nut.

  4. ‘I don’t think it’s in Auburn’s best interest for us to just continue to allow large-scale student housing to be built in Auburn if the numbers show that we don’t need it’

    ‘Take a drive through the neighborhoods around the University of Notre Dame campus and you can see a potential problem on the horizon. Hundreds of new apartment units — in the form of large complexes and town homes — have come on line over the past decade as local and outside investors have sought to capture a piece of the student-housing market’

    ‘With vacancies already prevalent, landlords are a bit on edge’

    So a no budget blog saw this coming years ago and the MSM still hasn’t caught on. Here’s something anyone can understand. All over the country, developers, lenders, city planners have all misjudged what was needed or desired. How could that be, in so many places and at the exact same time?

    Price. The prices told them to build. Sure they concocted elaborate stories to justify the absurd. (Remember the Atlanta apartment with $5,000 a month rents and all the free alcohol you could drink?) But it remains a fact the entire multi-billion dollar industry completely flubbed it while this blog saw it coming 5 years ago. No crystal ball. I could see their motivation was speculative, not filling a need. Therefore a mania.

    2. “…local and outside investors have sought to capture a piece of the student-housing market…”

      ‘Luxury’ student housing.. What a complete and utter scam.

      Even Bernie Madoff would be embarrassed.

    3. Behind the mania is a flood of Bernanke/Yellen/Powellbucks desperately searching for yield. Without this tsunami of cheap money, there would be no bubble or mania. So what are they going to do? They’re going to unleash even larger amounts.

  5. Just heard that USC has a study on how Airbnb is impacting house prices. It is substantial but not the primary cause for the past inflation. However there is a clear relationship between the amount of short term rentals and prices.

    1. My guess is that the direction of causation is confused. There are some cities that are greatly in demand because of tourism and work opportunities but not enough density can be built. So capitalism, which seems to maximize profits, sees an inefficiency in the pricing and people turn long-term rental units into short-term units because of the restriction on building due to land regulation. If you allowed better land use policy and eliminated things like single-family zoning, I don’t think you’d see the proliferation of Airbnbs to the scale we see now.

      Having said that, I am the resident Airbnb guy here. I had another programmer from Sri Lanka sign a lease on a unit. I will tell you that Airbnb has been a very good leasing tool for people looking to relocate to our city. We use it very syngergistically. Also, I talked with a couple from Boise, ID the other day who purposely chose to stay in our Airbnb to visit the local theme park. Why not a hotel? There is great value in having access to a host who knows the city, restaurants, deals, attractions, etc. This is why we used Airbnb all over eastern Canada. We had some amazing experiences that we wouldn’t have had if we had stayed in a hotel.

      1. There are some cities that are greatly in demand because of tourism and work opportunities but not enough density can be built. So capitalism, which seems to maximize profits, sees an inefficiency in the pricing and people turn long-term rental units into short-term units because of the restriction on building due to land regulation. If you allowed better land use policy and eliminated things like single-family zoning, I don’t think you’d see the proliferation of Airbnbs to the scale we see now.

        I certainly think you could make that argument for the Seattle metro area.

      2. Access to a host who knows the city? Hotels have “concierges” who probably know more than you do. Even the front desk clerks at Motel 6 can help.

        1. Hotels have “concierges” who probably know more than you do.

          I doubt it. Hotel concierges are low-paid, often foreign. There is a huge cultural disconnect between them and their guests typically. This is probably not always true, but I’ve rarely had good insights from hotel staff. They are not likely to be able to recommend a good hole-in-the-wall joint. They are most likely going to recommend their own in-house restaurant and any establishments that the chain has an affiliate program with.

    2. an obviously unwelcome & unsightly marker of residential neighborhoods transition to AirBnB (used as long term rentals) is the MASSIVE increase of on-street parking used by said renters: once empty streets are filled bumper-to-bumper.

      example: quite a number of residential streets around me are completely filled with vehicles. this formerly middle-class area now resembles the typical ghetto mentality of “stuff yo’ stuff in the garage & park in the streets!”
      whats even better is when the new arrivals work on their cars in the street because their garage is filled with CRAP & the driveway already has, wait for it, wait . . for . . . it . . . . .
      other broken down junkers!

      oh joy.

      (gotta love the filthy t-shirt w/beer belly / legs stuck out into the busy roadway. you. just. cant. fix. stupid. you really can’t)

      I am one of the very few home owners that actually (gasp) use the garage for its intended purpose: to PARK MY EFFIN CARS!
      geez, imagine that: they don’t spill-out down the street to rudely clog my neighbors residence frontage. I’m always SMDH at people who act like any open street area is a free-for-all to whomever wants to park their 3rd, 4th vehicle / rvs / semis / etc

      send a donation to Ben. send me a gold star / brownie button to:
      Archie “Aqius” Bunker
      Tenements of Citrus Heights
      Kalifornia USA

      P.S. hey TXChk I grok your desire to move to a more scenic abode. might I suggest a visit for at least a week before a perm move?

      FNL: Texas Forever!

      2. First mistake: you’re in Clownifornia. Get out and get away from the third world hordes and drug addicted slobs that that worthless state serves as a magnet for. Another plus about leaving is that you wont have to pay the obscene taxes to subsidize those scum-tards.

    3. There are tons and tons of vacant AirBnbs. I’m not so sure this model is working out for people. In fact, I’d bet there are a lot of them who would prefer a long term tenant. Who wants to clean up a house every day or few days for a new guest?

      1. In fact, I’d bet there are a lot of them who would prefer a long term tenant. Who wants to clean up a house every day or few days for a new guest?

        It really depends. Our 1-bedrooms start at $1085 before other add-ons. We target 2x to 3x on our short-term rentals. So if the revenue is good, people are willing to do the cleaning (or pay for professional cleaners, as I do since I have a handful of them).

        The other benefit of a short-term rental is that you are getting into the unit every few days to look at it. You don’t have near the wear and tear because you don’t have people full-on moving in. Long term residents can be really hard and the make-ready turns by our maintenance staff with painting, patching, carpet/LVT replacement, etc.

        1. You know what? You’re sounding like a paid shill for AirBnb, and the REIC. Actually, you sound like a paid shill for Tesla, too, and every single bubble industry which loses billions of dollars.

          1. Nope, am neither. I bought a model 3 a few months ago and love it. Although having owned it for about 5 months, there are things I would do differently were I to purchase again. I would not pay for full-self driving (navigate on auto pilot and advanced summon plus “future” self-driving capacity). It just wasn’t worth it in my opinion. But the autopilot (e.g. traffic aware cruise control) is fully worth it.

            As for Airbnb, I have said many times before that this was an experiment at our complex. We but about a dozen units in a separate wing into a short-term rental pool to test out the concept. It has worked very well. Not that we are virtually full, we are phasing out the Airbnb units in favor of long-term tenants. I’m not a black or white type of thinking person (e.g. Airbnb is awesome/terrible). It’s a mixed bag. Definitely needs regulation, but I think many on this board see Airbnb as synonymous with the housing bubble. I don’t see it that way and do see a legitimate use case for it in any market. Some speculators will be wiped out though.

  6. Another Fed-induced mania/bubble. The malinvestment is so thick you can cut it with a knife. Overbuilt. Stick a fork in it. The Fed got their (artificial) growth. Now comes the inevitable downside. Lux apartments as far as the eye can see.

    1. It wasn’t just the central bank. Mel Watt put the federal government behind a huge amount of this multi-housing bubble. If that hadn’t happened it would have slowed down long ago because borrowing would have been higher;

      Isn’t Thornberg a bay aryan? “Oh prices won’t fall” he said. Jeebus they are down there more than any place in the country! Well, that’s what the media says anyway. Actually Miami Beach is down double digits since 2015. NYC the same since 2016.

      All the while we’ve had to listen to this shortage horse-sh$t from the REIC. That loans are rock solid. “Prices have raced past wages for year after year, but they still aren’t a problem!” Welcome to reality.

      ‘average new development prices fell 46%. No previously owned condo was sold for more than $1,600 a square foot, the first time that’s happened since 2013’

      How many of the buyers in the past 6 years are now underwater and will walk away? I’d guess a lot.

    2. Not only are the people the big losers, but also many businesses, both corporate and privately owned. High rents and house prices have stolen every last bit of discretionary income, so now people cannot shop. In an eCONomy which is 70% consumer spending based, that’s a death knell, which is why there are so many retail businesses shuttering their doors, and we haven’t even begun to see the real pain.

      1. High rents and house prices have stolen every last bit of discretionary income, so now people cannot shop.

        This is definitely true. There are winners in the REIC game, but overall the economy suffers. It’s a bit like the econ concept of “tragedy of the commons” where everyone pursuing their dogged self-interest can wreak havoc in the big picture.

        1. I’ll chime in a bunch of agreement to the both of you…

          Socially and structurally we’re going to pay for it in the long run, but I don’t think the powers that be and elites care…

  7. The Berkeley Daily Planet in California. “There are two crises facing the Bay Area. Supposedly. One is a crisis of homelessness, which is the economic production (through inflation and rent increases) of people who cannot afford housing, because they are priced out and are left to sleep on sidewalks and parks. The other is a crisis of affordable housing.”

    – The crises are one in the same: Glut of overpriced housing/scarcity of affordable housing. This is exactly what you get when the government/Fed picks winners and losers. I don’t think you could screw up housing more right now if you tried.

    “There are entire apartment buildings in Berkeley that are empty – closed to occupancy and unused for years. And the government cannot open them. In addition, there are now large, brand-new apartment buildings, built over the last few years, that are still not fully rented. They have ‘Now Leasing’ and ‘For Rent’ signs on them, which means there is a glut of market rate housing.”

    – Translation: The rents are too darn high. This will resolve itself now that speculators are exiting the market. Lower prices ahead. Might take a few years though along with some painful readjustments for some.

  8. Chinbabwe
    August 18, 2019 at 8:40 pm
    “I will not waste any more of my time on you.”
    That’s a good plan. He’s an instigator, choosing to pick fights here ??

    If correcting bogus statements or outright BS is being a instigator trying to pick a fight then Im guilty…Ive been here a pretty long time dude and Whirlaway suggesting that I know “nothing” regarding the real estate market deserved my response…

    1. scdave,
      Ignore$ their faux unknowing you a$$ertions. They just need to it fireside for 15 mins to bee “enlightened”.

      $incerely , Hwy50

        1. Just off the upper Kern yesterday, 14 mile boot trek trying to catch some golden trout … got a friend visiting from Iceland, he snagged the biggest one! … Yep, the deep Sierra’s got very little social issues really. … Mr. Cole is in his last yer of high school, might end up furtherin’ his “knowledge gathering” in the central coa$t, most likely $LO. Hope you & yearns are healthy & doin’ good!

    1. office vacancy rates ??

      Class B & C office space around here is in big trouble…Small strip retail is also starting to have visible trouble…

        1. Oxide, it sounds more like a barrio than a hood. However, the question is whether you are dealing with Spanish culture which I like or would not live in NM or a subculture. From your posts I would say the latter which is too bad. It sounds a little like the southeast part of Albuquerque which is the area where the bodies stack up and the crime rate makes the entire state look bad. I hope it is not that bad. Gang culture is really the antithesis of culture which is why I do not live in ABQ only near it.

          1. My exact nabe isn’t quite a barrio, but we’ll see what happens. My block is diverse but more or less Latino. When I moved, there were 5-6 young boys on my block. They are American, they speak English to each other and the parents seem ok. They take care of the houses, and they know me. My block is very safe; I’ve left doors open.
            But the kids are preteens now. All it takes is for one to get into drugs or booze or a gang and the block will go down.

          2. “My block is diverse but more or less Latino.”

            On the plus side, the Latino men tend to remain at home in the father role and support their family’s needs regardless of economic power.

          3. On the plus side, the Latino men tend to remain at home in the father role and support their family’s needs regardless of economic power.

            Hmmm. It would be interesting to know if that’s more about their dedication to family or more about the woman being willing to stay with them “regardless of economic power”.

    2. They are building a ton of corporate office space in Santa Clara. Look at the NVDA new office building (looks like a small airport) and the buildings around the area. I work near the AMAT building next to the Whole Food…. new high-rise office buildings being constructed everywhere… very nice. Next to the new luxury apartments starting 2 BR around $4K per month (the “cheap” unit).

      2. qt…I am very familiar with where you are at…Yeah…Those class “A” corporate centers are not what I speak of…Those are built for the big boys…I am talking about smaller office buildings that would house lawyers, accountants etc…They are having big trouble retaining tenants and holding rents…Then on top of that, financing them is very difficult and the interest rates and fee’s they extract are very high…6% + with points and prepayment penalties…

  12. Thanks everyone for all the comments yesterday. I feel like I’ve joined a club that many of you are already in – the once you have had ‘major repairs’ and bouced back club for lack of a fancier title.

    Today is a good day. We’re talking Ice Cube levels of good day.

    First day I’ve been more than 24 hours without the strong meds. Feeling strong and clear.

    And a great day for the grand opening (finally) of the Spiffy 1000 Investment fund.

    2. If recovering from surgery remember to keep the knee moving until you can get to full motion. Buy a used stationary bike on craigslist and ride it until you can’t stand it. Recovery to 80% happens quickly (2 months). To get to the point where you no longer have small amounts of pain when standing up and walking a few paces, takes a year to get to 100%.

      We would love to join your investment club as long as your CAP rates are at least market of around 5% such that a minor economic hiccup will wipe us out or at least provide negative cash flow.

      1. AK barrel is cold?

        Yup. Didn’t have to use it today. 🙂

        The motor of Spiffy’s (next) passive income stream got turned on today.

    4. Spiffy 1000 Investment fund

      FWIW, my advisor likes electronic payment system stocks (e.g., V, PYPL). I don’t like Jack Dorsey so no SQ for me.

      2. I was looking at the “big boys” in payment – American Express seems not so hot these days, but Mastercard and Visa look compelling.

          1. Can’t hurt to see what people use. I’ve been stalking the various reddit pf/fi/re boards and various blogs soaking up info.

            My game plan is to hoover up lots of info and idea, and spend the time until then educating myself and narrowing down the plans and subjecting them to more scrutiny.

            It’s going to be 3-4 months before I hear the jingle in my pockets, but after today it’s only a question of “when” and not “if”. ( Always nice to see my work hit the top of the sales charts 😉 )

          3. I suggest portfoliocharts.com for anyone researching asset allocations (eg spiffy)

            I’m not affiliated, but frequent a forum at which the owner is a regular.

  14. You can eat at the soup kitchen with the other victims of the housing bubble. Realtors have their own table.

  15. Hey folks, what do you think? Would it be ‘wrong’ to write an email to someone who you don’t know but see on the property sales rolls that they MASSIVELY overpaid for a house in Ann Arbor MI and just ask them wtf ? Like, who was your realtor so I can warn the others ? I’m tempted, so tempted. The reAltors I interacted with this weekend at low traffic open houses said they think the market is softening from the craziness of the last couple yeArs but they wish their sellers would realize this because they aren’t acting like it yet. The RE cabal must have special celebrations when the comps get bolstered like that by an outrageous overpriced sale! I asked about the Ann Arbor poison water too in a town nearby which has currently clean municipal water but some unclean private wells in outlying areas about that issue and they said yeah the seller on a private well needs to disclose and test to close but nothing required so far on disclosure for municipal water haha, so Ann Arbor is still golden!!! The brats at UM don’t even realize UM uses Ann Arbor PFAS laden water they think it comes from Detroit I’ve learned from talking to some. Out of state tuition is 52k a yeAr now, bottled water in your 1700$/bed student apartment extra!

    1. Just ask details as a concerned citizen and point out the brazen fraud and misrepresentation and tell them to call their attorney right away.

      1. Lol perhaps I shall! Dude paid 720k for a house on a 55×100 ft lot where even as over priced as things are nothing should cost more than 350. It’s a couple hundred SF more than the typical little shacks in the area but unless the fixtures are made of gold it makes no sense at all.

    2. Out of state tuition is 52k a yeAr now, bottled water in your 1700$/bed student apartment extra!

      Frak. I thought it was crazy at $12K a year out of state back when I was there.

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