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There’s A Disconnect Between Supply And Demand

A report from the Wall Street Journal on New York. “Two New York landlords with large portfolios of rent-regulated apartments are behind on payments on more than $200 million in real-estate loans, a sign that new state rent laws are starting to hurt investors. After New York’s state legislature passed its rent reform package, Emerald and Sugar Hill started missing payments on the loans over the summer, according to bond records and people familiar with the matter.”

“Industry experts expect other landlords to fall into financial trouble as the rent laws push down income and property values. ‘These are not isolated incidents,’ said Ofer Cohen, president of TerraCRG commercial real-estate brokerage. ‘We expect to have more of those in the next 18 to 24 months.'”

“Meanwhile, the dollar volume of rental-apartment building sales in New York City fell 51% in the third quarter from a year earlier, according to a new report from brokerage Ariel Property Advisors.”

From Mansion Global. “In Dallas, it’s a French chateau with space for 10 living rooms and a padded gymnasium; in Rolling Rock, California, it’s a red-roofed Mediteranean villa custom built with 25 bathrooms; and in Rancho Santa Fe, outside San Diego, California, it’s an airy modern new construction with glass walls and a dedicated master wing.”

“The three mansions of vastly different styles and locations share a common status as ‘the largest house in town,’ clocking in at four-to-five times the size of the median home in their posh neighborhoods. They also happen to share the misfortune of having sat at some point on the market unsold for years.”

“They are just a few of the many examples that show that, when it comes to smart real estate investment, biggest is rarely best. But it doesn’t have to be palatial for size to present an issue when it comes time to sell, as Alexandra Sierra of Compass Florida knows well. She’s marketing a custom-built hurricane-proofed home on the border of Miami suburbs Coral Gables and Coconut Grove, and at nearly 5,500 square feet has struggled to sell because it’s larger and more modernized than anything in the neighborhood.”

“‘The square footage is killing me,’” she said of the five-bedroom house asking $2.5 million.”

From Forbes on Florida. “The further away from Miami Beach, the longer it’s taking for developers and luxury real estate brokers to sell condos priced at $1 million or more, according to Q3 2019 figures from Analytics Miami, a real estate brokerage firm specializing in data collection.”

“‘Edgewater, Downtown Miami and Brickell continue to be the worst performing luxury condo markets,’ Analytics Miami founder and principal Ana Bozovic said. ‘Even though it gets so much press because people want to read about the rich and famous buying properties, the luxury market is incredibly small. There’s a disconnect between supply and demand.'”

“According to Multiple Listing Service data from the past six months, Analytics Miami’s Q3 2019’s report shows 144 months of supply of condos in the $1 million to $2.99 million price range in Edgewater. In Downtown Miami and Brickell, the supply for condos between $1 million and $2.99 million is 93 months and 76 months, respectively. Fisher Island, one of the most expensive zip codes in the country, has 19 months of supply in the $1 million to $2.99 million price range. South Beach has 36 months of supply and the South of Fifth neighborhood, it’s 26 months worth of inventory.”

“Ron Shuffield, CEO of Berkshire Hathaway HomeServices EWM Realty, said a healthy condo market can handle 18 months of supply. Across Miami-Dade, he said, there is an average of 25 months of supply. He also said 81% of condos sold in the last year sold at a 20% discount. ‘I tell our associates that they can’t shoot from the hip,’ Shuffield said. ‘You have to put a lot of data together. Today, we are renting more than we are selling. That gives you a picture of where buyers are today.'”

From ABC 15 in Phoenix Arizona. “‘We are probably at about 46-percent below what our normal inventory should be,’ said local real estate analyst Tina Tamboer with The Cromford Report. ‘When we get over the $500,000 mark, the market is actually quite balanced, and there is plenty of supply.'”

The Taunton Gazette in Massachusetts. “Every city in Massachusetts has one or two, and in Lawrence, there are hundreds, Mayor Daniel Rivera said Thursday: vacant properties that aren’t being developed, because their owners are tied up in land court or the ownership is otherwise unclear.”

“‘They’re either zombie properties or in bureaucratic no-man’s land, where people really can’t access them,’ Rivera said. ‘As you can imagine, as you know, this creates a situation where these properties sit idle and dormant. They’re a threat to harbor vice, vagrants, most likely, and in cities they become a threat for arson, they don’t just take down the property that they have, they take down the properties around them.'”

The Dallas Business Journal in Texas. “With just over four months under his belt leading the Dallas Division of national homebuilder Taylor Morrison, Keith Hurand is looking to grow the brand and hone the company’s lot positions. Q: Are you seeing any cause for optimism in addressing housing affordability and the escalation of housing prices? Any real hope of increasing the availability of new homes prices at $300,000 or less?”

“A: It’s tough to get below that mark mainly because of the land prices. It all starts with the land. To be able to get homes that are in the price point, you’re having to go out a little further than typically what you would.”

“Q: As you evaluate where your lots are, what are you seeing that you might change? A: Our goal is to not have more than about a three-year lot supply. As we look at the 3,000 lots of what we own or control, it may not be all in the right spots. We may be oversaturated in certain submarkets, so we’ll look to accent that with submarkets that we need to grow in or we see other opportunities. As we look to rebalance our portfolio, you’ve got to be careful that you don’t compete with yourself.”

This Post Has 71 Comments
  1. ‘Industry experts expect other landlords to fall into financial trouble as the rent laws push down income and property values. ‘These are not isolated incidents…We expect to have more of those in the next 18 to 24 months’

    I’m gonna say what the MSM won’t. This is exactly what needs to happen. Default, lower basis for the new owner, lower rents that people can afford. Foreclosure is the solution, not some pestilence the guberment needs to fight tooth and nail.

    1. I would have thought the same thing; however, it seems inevitable that this will end up creating a boatload of new slumlords.

      Guess what’s going to happen to the properties as their value drops.

      1. They become cheaper.

        Note that these guys just stopped paying. Not “are behind a couple of months”, they just stopped paying on a few hundred millions in loans. Good money after bad, etc. This is why it’s important to make a profit. Plus the article mentions they were counting on higher rents.

        1. This is why it’s important to make a profit.

          This profit thingy you speak of…I’m intrigued. Do go on. Is this somehow relevant to investing or true value? Cuz it seems like it’s all the rage to invest in cash-burning unicorns that have yet to turn a profit, yet have Yellen Bux valuations in the stratosphere.

      2. “Guess what’s going to happen to the properties as their value drops.”

        Fire sale auctions?

        1. I wasn’t just referring to the value of the property — I was thinking additionally of how well they would continue to be maintained by future landlords/owners if values dropped significantly, and what effect this would have on neighborhoods as a whole.

          Foreclosed homes getting stripped, blight, etc.

          1. Not usually.

            ‘Third least affordable place to live: 97144 zip code. The median multiple is 13.1 based on the median household income of $11,250 and median home value of $247,700.’

            ‘Here’s an example of what’s on the market in Timber: 60085 N.W. Railroad Ave. is listed at $266,905. The house, built in 1924 on a 3,920-square-foot lot, has two bedrooms, one bathroom and 760 square feet of living space, according to Zillow, which notes: The owner of this property has been served a Notice of Sale, making this a foreclosure.’

            https://www.oregonlive.com/life-and-culture/g66l-2019/10/11b1d1ead27644/can-you-afford-to-live-here-a-study-of-oregons-least-and-most-affordable-cities-will-surprise-you.html

    2. I hate rent control but I don’t understand how a just passed change in the law caused defaults unless they rolled back rents–which generally does not happen under rent control. Did they purchased with the plan of immediately raising rents dramatically and that plan was stopped?

  2. ‘144 months of supply of condos in the $1 million to $2.99 million price range in Edgewater. In Downtown Miami and Brickell, the supply for condos between $1 million and $2.99 million is 93 months and 76 months, respectively. Fisher Island, one of the most expensive zip codes in the country, has 19 months of supply in the $1 million to $2.99 million price range. South Beach has 36 months of supply and the South of Fifth neighborhood, it’s 26 months worth of inventory’

    Note that Ron was careful to avoid the $3 million and up sector, cuz that’s over 20 years of inventory.

    DONG!

    1. Okay, so there’s 20 years worth of inventory, but since AOC has informed us the world is going to end due to climate change in 11 years, that means we can expect buyers to front-end load their shack purchases. St. Greta revealed this to me in a vision.

    2. “The square footage is killing me”

      LOL@ paying the electric bill to air condition that shack 24/7.

  3. 80 mph winds, more fires, and more power outages in LA-San Fran this weekend.

    Anyone else care to expound upon California’s “perfect weather?” 🙄

      1. We’re lucky to break into the 50s now, and it has been very windy lately enough that we can hear the door seals whistling and the roof trusses creaking under strain. But it’s paid for!

        1. The article makes no sense, especially the grass analogy. Even if you stripped out all renewable energy from CA’s energy mix, you’d still have natural gas being used at point of generation to spin turbines. This electricity would then need to be moved over transmission lines.

          You conveniently left out extreme weather and climate change as one of the factors in CAs wildfires.

          The only way to get rid of the fire risk would be no transmission lines at all. That would mean rooftop solar and local battery storage, which incidentally is what Tesla is marketing heavily with all the PG&E rolling blackouts.

          1. The only way to get rid of the fire risk would be no transmission lines at all.

            You can bury the lines. It would be a major project though.

          2. “You can bury the lines.”

            Those long distance 500kV transmission lines can get mighty hot and sag down to treetop level, and I’m not sure they can be buried and kept cool like the lower powered lines.

          3. Those long distance 500kV transmission lines can get mighty hot and sag down to treetop level, and I’m not sure they can be buried and kept cool like the lower powered lines.

            Maybe not but I didn’t think those were the ones causing the current fire danger issues. I thought it was the small old stuff down in the trees.

        2. No your crony capitalist articles are the disinformation. You can post as many articles as you want claiming green power is cheap. However, if you look at any country that has tried significant amounts of green power the results are the same, very high electricity rates and an unreliable grid. It is true in Germany, Australia, and California and it will be true in all the states which thought they could prove Trump wrong by mandating green energy. Bill Gates admits it. Only people feeding at the trough of subsidies or have the I.Q. of room temperature still claim you can run an economy on wind and solar.

          1. disinformation

            stopthesethings = disinformation/propaganda.

            Just like the merchants of doubt when Big Tobacco was threatened with truth, they hired scientists to down play the link between smoking and lung cancer. The same is happening with dirty energy and clean energy. There is a coordinated misinformation campaign going on to confuse people who have only a cursory knowledge of things. Thankfully people are smart. The internet is full of paid trolls and spreaders of misinformation, but it is also easier to get to truth. Oil is on it’s way out.

  4. I live in San Luis Obispo county and have been following this blog for a few years. We are having 4000+ homes coming online in the next five years .Most are coming online now. At 800k+/- these are only affordable for the select few. There are a lot of young families buying these and i think that a sizable dip which has started in this area will effect all of these new buyers.

    1. “At 800k+/- these are only affordable for the select few.”

      Seems out of reach for those hopeful adjunct professors at CalPoly living the California Dream on lentil bean soup.

  5. Also, alongside oxides comment ,these new power outages and the economic effect on the state these will have could signal the start of an more profound transition to a depreciation of California as we know it.

    1. Gavin Newsom looks ready to write a few wild fire checks with that “Cheshire cat grin” developed during his body language coaching.

  6. What I have seen here being in the cabinet trade has been a huge amount of flippers doing good and bad remodel work but never high end work and then relisting within a year for hundreds of thousands more. This has made it hard for young families or anyone to buy and an affordable place. It is a small group of realtors/flippers/lenders involved in doing this in San Luis Obispo county.

    1. Is $5 billion alot?

      “The Chinese subsidiary of WeWork, valued at $5 billion in 2018, could be headed to zero in the quarters ahead. Why?”

      1. “Is $5 billion alot?”

        It depends on the comparison. It is less than $4 per capita based on the population of China. So it is not going to bring down China. Is it a lot for the company? The answer to that is obvious.

  7. FYI, the recession is already underway, and is leading straight to depression.

    Opinion – Economy
    America’s sex recession could lead to an economic depression

    Published Fri, Oct 25 201912:05 PM EDT
    Jake Novak
    Key Points
    – Forget the trade wars, automation, and even the skills gap.
    – The real threat to the U.S. economy may be that fewer Americans are in the mood for sex.
    – That could be a serious problem for a wide ranging list of sectors from real estate, to apparel, to condoms.
    GP: Young couple in bed with mobile phones millennials
    Getty Images

    Forget the trade wars, automation, and even the skills gap. The real threat to the U.S. economy may be that fewer Americans are in the mood for love.

    Well not love, but sex. Enduring reports of America’s sexual recession are a sign of a serious problem for a wide ranging list of sectors from real estate, to apparel, to condoms.

    1. “But the economy has been steadily growing for more than 10 years now, which encompasses most of the adult lives for Americans under 30.”

      Raising children is incredibly expensive, and consumer debt is already out of control. It shouldn’t take a genius to connect the dots.

      1. No, I think this is different. If it were just about money, there would be the same amount of sex but more birth control and fewer kids. But it seems that people (Millenials?) are just having less sex in general. From the article, it appears that women just aren’t impressed by sheer manhood anymore and the men are turning to video games and p* as a substitute.

        (and as an aside, it appears that men reject the less-than-perfect-women — for example, women who weren’t lucky enough to be born with long legs — and the women are turning to cats for love.)

        1. “…for example, women who weren’t lucky enough to be born with long legs…”

          Don’t exclude the gap…it’s an important feature of the anatomical ensemble.

        2. When I went to college man and women truly liked each other and we felt like we completed each other. I still think we do, I think men and women go to extremes without each other in our lives. I think it is very sad. I do think the increased access to porn has played a role. Both sexes are looking for physical perfection instead of love. Children are desired when people love each other. While the cost of raising children certainly plays a role in having fewer children, I think the other reason is people do not have and make the life time commitment to each other which occurred in the past.

          1. “I do think the increased access to porn has played a role.”

            You should see how the ladies market themselves on social media these days. Wonder why cervical cancer rates are soaring? Good thing a “day after” pill readily available.

      1. It’s been a long time since I dated, but the number of women offering a little affection for extreme debt salvation was staggering.

    2. On a (somewhat) related note …

      Meet The Man Who Test Drives Sex Robots
      https://www.forbes.com/sites/andreamorris/2018/09/27/meet-the-man-who-test-drives-sex-robots/#2df8962d452d

      (snip)

      How he became a sex robot beta-tester?

      “I’ve had numerous relationships up until my early fifties. I was coming out of a relationship that I had been in for about two years and it was just one of those things where we just weren’t clicking and there was just another failed attempt at a relationship. I had some relationships that were seven months long, the longest I’d had was about three and a half years after my divorce.”

      Dollbanger says he was getting frustrated.

      I was getting pretty depressed about hitting the wall constantly. You keep looking for the one. Well, what happens if the one doesn’t happen? I mean, are you just supposed to keep looking and be depressed and upset until you die? Is that what this all about? I made a conscious decision. I said, I’m going to try a different direction here.”

      By ‘different direction’ Dollbanger is referring to his friend who floated the idea of silicone sex dolls. “I thought, you know what? I need to take the edge off. I’m looking for a sex toy and a fleshlight is just not gonna cut it.”

      He says he didn’t gravitate to this because he’s some sort of freak. “I’m a very gregarious person. Very happy. I have many friends, male and female… I have a good relationship with my children.” Both of his children know about his animatronic sex dolls. He says his son is okay with it, his daughter, not so much.

        1. I read it. It was icky. Knowing guys are turning to silicon dolls for sex did not improve my life in any way, shape, or form. Ewwww….

    3. Toys R Us was the canary in the coal mine. Watch out when demographics starts changing as it will ripple across the housing market.

  8. The MSM pretends not to know why the Fed would cut interest rates three times in a row with the stock market at all-time highs and a supposedly booming economy (based on debt-fueled consumption). The answer is simple: the Fed knows that despite ten years of “emergency measures,” the wheels are coming off the bus and true price discovery is closing in on its asset bubbles and Ponzi markets.

    https://www.marketwatch.com/story/why-would-the-fed-cut-interest-rates-a-3rd-time-in-a-row-even-as-stocks-near-records-investors-may-soon-find-out-2019-10-27?mod=mw_latestnews

  9. The ISIS leader is dead. I think that Turkey gave him up as part of the bargain. The world is complicated and despite the globalist press trying to make him look like an idiot, Trump truly understands how to wheel and deal to get things done. I found this very interesting article on globalism and China. The “geniuses” finally have figure out that China is not a supporter of their dream of globalism: https://wattsupwiththat.com/2019/10/27/the-globalists-race-against-time-on-china/

      1. “One factor frequently associated with the little emperor effect is the “four-two-one” family structure, which refers to the collapse of the traditionally large Chinese family into four grandparents and two parents doting on one child.” —wiki

        Never thought about it on those terms.

        1. Never thought about it on those terms.

          It occurred to me recently that Chinese one-child-policy families will have zero interest in supporting any war that requires their child to serve. Perhaps there are enough rural Chinese that doesn’t matter, though.

          1. The rural Chinese probably reproduce like rabbits.

            I’m sure they can. But it’s been discouraged until very recently (even though they were allowed exceptions to the 1 child policy) and you can’t turn it back on immediately for a war.

          2. Probably any rural family from the 3rd world who subsistence farms needs to reproduce like rabbits to insure their survival.

  10. Looks like Softbank has entered the Deadpool along with WeWork. Suspect that with newfound investor scrutiny of profitability, the tech landscape is going to resemble the La Brea Tar Pits as floundering unicorns sink beneath the bubbling black surface with CEO whimpers and shareholder shrieks, as trillions of dear departed Yellen Bux ascend into debached currency heaven.

    https://www.reuters.com/article/us-softbank-group-visionfund/softbank-to-write-down-minimum-5-billion-for-wework-other-losses-bloomberg-idUSKBN1X4003

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