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There’s A Lot Of Conversation About Are We Getting Overbuilt?

A report from the Mercury News in California. “There’s new hope on the horizon for harried renters struggling to afford the Bay Area’s astronomical prices — rents have started falling. Median rents dropped in September and August compared to the year before, reversing an upward trend of more than seven years that has pushed prices into the stratosphere, according to Zillow. The recent slowdown comes as the Bay Area’s housing market also is tapping the brakes, with real estate agents reporting homes are taking longer to sell and aren’t fetching quite as much money as they did several months ago.”

“The cooling trend extends beyond the Bay Area — rents are dropping around the country. Nathan Ho, senior director of housing and community development for the Silicon Valley Leadership Group doesn’t believe prices are falling because of a natural market correction or because cities are building more homes — instead, he credits something more alarming.”

“‘It’s not because we’re finally meeting the demand,’ he said. ‘It’s that folks have gotten so frustrated and fed up with finding an affordable place to live that they’ve moved on.'”

“People are leaving the Bay Area more quickly than they’re moving in, according to a 2018 report by the Silicon Valley Leadership Group and Silicon Valley Community Foundation. An average of 42 people per month left San Francisco, San Mateo and Santa Clara counties in 2016, the most recent year for which data was available.”

“That’s a dramatic change from the year before, when the region gained an average of 1,962 residents per month. ‘This might be the beginning of the tipping point in terms of folks not wanting to deal with the housing crisis anymore,’ Ho said.”

The Dallas Morning News in Texas. “More than 25,000 apartments will open their doors in Dallas-Fort Worth this year — more than in any other metro area in the country.”

“‘Employment growth has been the tailwind this entire economic cycle and that has continued to push forward,’ said John Sebree, national director with Marcus & Millichap, one of the country’s top apartment brokers. ‘There is a lot of conversation about are we getting overbuilt in apartments?'”

“‘We really don’t have any markets we are overly concerned about,’ he said. ‘We don’t see anything fundamentally that says we are headed over a cliff.'”

“‘We have terrific demand that is keeping occupancy very, very healthy,’ said Greg Willett, chief economist with Richardson-based RealPage ‘At the same time, we are delivering a whole lot of product. That has cooled off the achievable rent growth in the marketplace.'”

“To lure renters to the thousands of new rental units in the area, builders have ramped up the number freebees they offer. More than 20 percent of Dallas-area apartments now provide concessions, versus 14 percent across the country, he said.”

“Even with the weaker rent growth, Willett doesn’t see local apartment builders pulling back. ‘Right now we have 35,000 units under construction in Dallas-Fort Worth,’ he said. ‘That is the most across the country by a giant margin. I think we are going to continue for a while.'”

“RealPage figures show permits for new apartment projects in North Texas are up 2 percent this year. ‘This suggests we are not really cutting back,’ Willett said. ‘The annual pace of building is running pretty much where it has been over the last few years.'”

From Community Impact on Texas. “Just over a year since Hurricane Harvey devastated the Greater Houston area, experts say the demand for apartments from displaced homeowners in Spring and Klein is trailing off, but population pains and a burgeoning economy continue to fuel the market.”

“Prior to Harvey hitting Houston in August 2017, apartment occupancy rates in Spring and Klein were trending downward from 2016 due to a metrowide apartment glut, said Bruce McClenny, president of ApartmentData.”

“Patrick Jankowski, senior vice president of research at the Greater Houston Partnership, said although the boost from Harvey was temporary, overall demand is still rising thanks to job growth in the area.”

“‘The market has tightened up. There are a lot fewer free rent concessions, fewer gift cards, fewer incentives being offered,’ Jankowski said. ‘If you’re driving around town and you see signs for free rent, that’s a sign the apartment market is getting soft again.'”

“McClenny said construction in the Greater Houston area has diminished following the oil and gas industry downturn in 2016 when the price of crude oil plummeted, which put the brakes on any new development. However, the apartment market could be in the beginning stages of another construction boom as developers are working to secure sites and permits, he said.”

”There’s definitely a need for apartments. … Demand is picking up, and supply is muted or slow right now [and has been since 2015-16]. But the supply will be picking up in the next couple years,’ McClenny said. ‘We need to have more apartments on a consistent basis. Our problem is we overshoot.'”

From Westword on Colorado. “Despite steadily increasing rent costs in metro Denver during recent years, prices have actually declined in 27 Mile High City neighborhoods over the past six months, based on Westword’s analysis of figures from RENTCafe. Plenty of prominent neighborhoods have seen rent-price dips — Uptown, Villa Park and Baker among them.”

This Post Has 17 Comments
  1. ‘Even with the weaker rent growth, Willett doesn’t see local apartment builders pulling back. ‘Right now we have 35,000 units under construction in Dallas-Fort Worth,’ he said. ‘That is the most across the country by a giant margin. I think we are going to continue for a while.’

    Not one of these markets pulled back in time. IMO that’s because they don’t care about fundamentals, but rather all the loot to be made flipping these things.

    1. Du uh.

      When were the approvals for those 35k units finalized? Probably over a year ago if not more. Of couse they are being built out. They can’t really pull back once ground is broken. Then softening of the market is a recent happening. Wait and see what happens once,those units go on line. Some of these folks say the dumbest things. Really love the in the other post which describes seller liquidity as being Lee’s than they want. Really? Now what could that possibly mean? Another one for the top 20 list. Will get to the list soon and will post on the blog when collated.

      Yee gad.

      1. Lived in a number of different apartments around DFW years ago. If I was still there, I’ll make sure my things were easy to pack up and move and play the “who’se got the cheapest apartment this year?” game.

        I recently looked up the apartment complex I rented in Austin a decade ago (near the Dominion, off Mopac). It was a much nicer than average setup, even had an attached garage, and I rented a second, adjacent garage. Rental prices are up only about 10% compared to 10 years prior, and they have vacancies. I don’t see how any new apartments coming online would be able to compete with that price-wise. That rooftop avocado toast bar better be awful damn fancy…

  2. ‘There’s new hope on the horizon for harried renters struggling to afford the Bay Area’s astronomical prices — rents have started falling’

    Lo and behold: the Mercury New’s 15th or 20th announcement that rents are falling for the first time since they ran off the Indians!

  3. “Even with the weaker rent growth, Willett doesn’t see local apartment builders pulling back. ‘Right now we have 35,000 units under construction in Dallas-Fort Worth,’ he said. ‘That is the most across the country by a giant margin. I think we are going to continue for a while.’”

    “RealPage figures show permits for new apartment projects in North Texas are up 2 percent this year. ‘This suggests we are not really cutting back,’ Willett said. ‘The annual pace of building is running pretty much where it has been over the last few years.’”

    KEEP BUILDING BOYZ

      1. Most of the info on this site is good, but you can ignore all of Mafia’s links. The movoto data is pure trash or his linked area is very cherry picked.

        I don’t see how demand is strong as they say in the article. People are being born, but not at a rate to fill all housing units across the country. More speculator BS.

        1. True, people are being born. But anyone who has been watching the demographic trend the past 3 years is attuned to something amazing (and sad) happening: the US life expectancy has begun to fall. Google “deaths of despair” and you’ll see that suicide, alcoholism, and drug overdose (opioids) are starting to reduce the median life expectancy. Morbidity is giving way to an uptick in mortality, which will give way to more vacant homes in the next decade.

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