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In the Rush To Make Loans, Some Lenders May Have Lent Too Much

A report from the Urban Land Institute. “‘Real estate doesn’t appear to be the sector where we are taking risks that won’t pay off,’ says Sam Chandan, an associate dean of New York University’s Schack Institute of Real Estate. ‘By and large, we have been fairly reserved in our development activity, in our investment activity.'”

“That said, Chandan does worry about some loans made to apartment properties. ‘Commercial real estate has been much more reserved in the expansion of its debt with the exception of multifamily,’ he says. Lenders had $1.4 billion in loans outstanding to apartment properties. That’s twice the volume of apartment loans outstanding just before the financial crisis, he says.”

“In the rush to make those loans, some lenders may have lent too much. The average apartment borrower carried $13.95 of debt for every $1 of net operating income in the second quarter of 2019, up from an average of less than $10 of debt in 2010, according to Chandan. ‘Not all of that debt is going to have been structured in a way that is going to survive maturing in a downturn,’ says Chandan.”

“Chandan also sees a mismatch in the housing markets: ‘The bulk of development that we have seen has been that class A, urban, high-rise building that is well amenitized and is in the top decile of the asking-rent distribution, if not even higher.’ That creates a glut of housing for upper-income people, and an expensive shortage for everyone else.”

The Business Observer on Florida. “The resiliency of the multifamily market statewide, but particularly in Tampa, continues to defy the odds. ‘Eight years ago, Tampa Bay may not have been on people’s radar, but today it is,’ says Zach Ames, senior director at Franklin Street in Tampa, in the CoStar report. ‘I don’t think we’re overbuilt, even though it may seem that way. There’s still a shortage of housing.'”

“A pair of recent deals helped push Tampa Bay’s price-per-unit average to around $143,000. That bests Dallas-Fort Worth, Houston and Las Vegas, the report shows, while trailing New York, Miami and Chicago.”

From WBAA in Indiana. “Tippecanoe County’s 2019 Student Rental Report recommends a self-imposed moratorium on building any more high-rise apartment complexes in the near future. The numbers suggest occupancy rates have decreased in West Lafayette as hundreds of new beds became available this fall. As occupancy rates are decreasing, West Lafayette Development Director Erik Carlson says so are rental prices for apartments surrounding the Purdue University campus.”

“‘We’ve seen a significant decrease in rent within a half-mile of the campus about 5 and a half to 6 percent and then at the half-mile to mile range around campus is actually around 29 percent decrease in rent,’ Carlson says.”

“‘Rents have gone down because there’s more supply that’s just a fact, students have a heck of a lot more choices than they used to and there’s more competition,’ Plan Commission Assistant Director Ryan O’Gara says.”

“Carlson says the amount of available housing has discouraged lenders from funding new student housing options. But First District City Councilor Nick DeBoer says although rates are decreasing, high rent costs are still a problem. ‘The cost per square foot is still more expensive than San Francisco and Boston,’ DeBoer says.”

The New York Post. “Actress Jennifer Lawrence has slashed the price of her Upper East Side penthouse yet again. The three-bedroom, 4½-bathroom home, at 400 E. 67th St., is now asking $12 million — down from an already discounted $14.25 million. That’s far less than the $15.6 million she paid for it in 2016. (The penthouse was asking an astonishing $21 million in 2014.)”

From Bloomberg on California. “The real estate market in downtown Los Angeles is taking a hit as Chinese cash dries up. Condo sales plunged 31% in the third quarter from a year earlier, according to data from appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.”

“Chinese buyers have made about 50% of the purchases in downtown Los Angeles in recent years, said Stephen Kotler, who oversees the western region for Douglas Elliman. But tightened restrictions on capital flowing out of China have hampered the market.”

“Roughly 13,000 apartments have been built in the area since 2014, swelling the inventory there by almost 50%, according to CoStar Group Inc. An additional 4,000 units are under construction. There’s also been a push to develop luxury condos, with about 2,000 units under construction and several thousand more moving through the pipeline, CoStar said.”

“But without wealthy Chinese buyers, condos priced above $800,000 aren’t selling. ‘New building prices are too high for what buyers think is valuable,’ Kotler said.”

The St. Louis Post Dispatch in Missouri. “While more lawmakers and inspectors close in on T.E.H. Realty over dismal living conditions at the firm’s low-income apartment complexes, one player has been able to get work done quickly for tenants.”

“Fannie Mae, a federal government-sponsored enterprise that secures loans, recently convinced St. Louis County Circuit Judge Joseph L. Walsh III to grant an emergency order to help protect collateral here at Springwood Apartments. Nicholas Zluticky, an attorney for Fannie Mae, argued that a receiver was needed to ‘protect and preserve the property’ and ‘maximize the value of assets.'”

“The troubled property, near Interstate 170 and Natural Bridge, has garnered hundreds of citations from Bel-Ridge code enforcement and lots of lawsuits between the landlord and tenants. This week, Trigild representatives had locks changed and went unit by unit, looking behind each door. One of the new managers donned a respirator mask. A police officer had a gun drawn.”

“According to the receivership case, the lender notified T.E.H. Realty in March that it had failed to maintain the property and it must fully repair ‘Life Safety’ items listed in a property condition assessment that valued the needed work at $933,217. After failing to make the repairs, the firm went into default. As of Sept. 30, SM-T.E.H. Realty 1 LLC owed Fannie Mae $4,329,630 for the property, records show.”

This Post Has 83 Comments
  1. ‘The bulk of development that we have seen has been that class A, urban, high-rise building that is well amenitized and is in the top decile of the asking-rent distribution, if not even higher.’ That creates a glut of housing for upper-income people, and an expensive shortage for everyone else’

    We just hit a 40 year high in multi-family construction. A 60 year high in Boston, 72 year high in San Francisco. And look at the mess. One would think “planners” and chin stokers at the ULI might see something is going on here besides “supply and demand.”

    1. “…high-rise building that is well amenitized and is in the top decile of the asking-rent distribution, if not even higher.’”

      “…if not even higher.”

      That perfectly sums up the greed of the rentiers. They’ve all aimed for the pinnacle peak of rents, and beyond. Hell, even trailer and RV parks have gone “luxury.” This sh!t show can’t end soon enough.

      1. A few years ago we started to see it called “super” A. As the land zoomed up they had to come up with ever crazier ideas to justify the higher rents (and loans, he he). Remember around 2016 there was the apartment in Atlanta that charged $5,000 a month per unit and had people walking around all day serving all the alcohol you could drink?

    2. Boston is getting out of control. Construction absolutely everywhere. The “low supply” argument will be laughable very soon.

    3. 1) “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” – Upton Sinclair

      2) The Federal Reserve and other Central Bank extraordinary and unprecedented monetary policy has completely screwed-up (and screwed) the global economy. Free markets have been replaced by a centrally-planned, command and control economy.

      Think former USSR and you wouldn’t be far off.

      False signals of low interest rates, easy money, all supported by vast, steaming piles of debt. This results in maximum moral hazard and minimum price discovery. The effect is across all asset classes, aka: The Everything Bubble.

      “Everything Is Awesome!!!”
      (feat. The Lonely Island)
      (from “The Lego Movie” soundtrack)

      [Tegan and Sara:]
      Everything is awesome
      Everything is cool when you’re part of a team
      Everything is awesome
      When you’re living out a dream

      Everything is better when we stick together
      Side by side you and I are gonna win forever
      Let’s party forever

      We’re the same, I’m like you, you’re like me
      We are working in harmony

      Everything is awesome
      Everything is cool when you’re part of a team
      Everything is awesome
      When you’re living out a dream

      [The Lonely Island:]
      Woooo! 3, 2, 1, go
      Have you heard the news? Everyone’s talkin’
      Life is good ’cause everything’s awesome
      Lost my job, there’s a new opportunity
      More free time for my awesome community
      I feel more awesome than an awesome possum
      Dip my body in chocolate frostin’
      Three years later wash off the frostin’
      Smellin’ like a blossom, everything is awesome
      Stepped in mud, got new brown shoes
      It’s awesome to win and it’s awesome to lose
      (it’s awesome to lose)

      [Tegan and Sara:]
      Everything is better when we stick together
      Side by side you and I are gonna win forever
      Let’s party forever
      We’re the same, I’m like you, you’re like me
      We are working in harmony

      Everything is awesome
      Everything is cool when you’re part of a team
      Everything is awesome
      When you’re living out a dream

      [The Lonely Island:]
      Blue skies, bouncy springs
      We just named two awesome things
      A Nobel prize, a piece of string
      You know what’s awesome? Everything
      Dogs with fleas, allergies
      A book of Greek antiquities
      Brand new pants, a very old vest
      Awesome items are the best
      Trees, frogs, clogs, they’re awesome
      Rocks, clocks, and socks, they’re awesome
      Figs, and jigs, and twigs, that’s awesome
      Everything you see or think or say is awesome

      [Tegan and Sara:]
      Everything is awesome
      Everything is cool when you’re part of a team
      Everything is awesome
      When you’re living out a dream

  2. From the last link:

    ‘Absent a receiver, the Fannie Mae attorney argued that the life safety repairs “are unlikely to ever be completed,” which would allow collateral to fall “further and further into a state of disrepair, posing serious safety concerns, and decreasing the value and the marketability” of the collateral.’

    ‘Springwood once bustled with life, even after Bel-Ridge officials condemned a few of the buildings. But unaddressed repairs there, and at numerous other T.E.H. Realty properties in St. Louis and Kansas City, became a broken record of the same woes: no heat, broken air conditioners, mold, collapsed ceilings, unpaid bills that were supposed to be included in the rent’

    ‘Liens have been racking up. As of Oct. 31, T.E.H. Realty owed the Metropolitan St. Louis Sewer District $162,471.49.’

    ‘While public records don’t indicate that T.E.H. Realty has recently sold any of its complexes, or lost any to foreclosure — other than Park Ridge Apartments in Ferguson this summer — spot checks by a reporter this week indicated that some of the properties appear abandoned by maintenance and office personnel’

  3. ‘Roughly 13,000 apartments have been built in the area since 2014, swelling the inventory there by almost 50%, according to CoStar Group Inc. An additional 4,000 units are under construction. There’s also been a push to develop luxury condos, with about 2,000 units under construction and several thousand more moving through the pipeline, CoStar said’

    ‘But without wealthy Chinese buyers, condos priced above $800,000 aren’t selling. ‘New building prices are too high for what buyers think is valuable’

    Still no bubble Bloomberg?

    1. Still no bubble Bloomberg?

      Bloomberg is running for president to get globalism back on track. That should get the Chinese back to inflating our rents and housing prices or really just making a bigger bubble to collapse

    2. Also the following. Questions?
      1. This is about new condo sales? or new condo+house sales? Or is it really about all sales?
      2. How is possible that Chinese have poured so much Yuan into downtown LA? My understanding is that they were buying in Orange County

      —–
      “Chinese buyers have made about 50% of the purchases in downtown Los Angeles in recent years, said Stephen Kotler, who oversees the western region for Douglas Elliman. But tightened restrictions on capital flowing out of China have hampered the market.”

    1. Of course a crash starts out slow at first because there is artificial means used at first to prop it up.

      But , if the market rise was based in speculation , faulty lending, foreign buying, hype and artificial low rates, than it will crash in accordance with how much those factors propped the market up.

  4. The New York Post. “Actress Jennifer Lawrence has slashed the price of her Upper East Side penthouse yet again. The three-bedroom, 4½-bathroom home, at 400 E. 67th St., is now asking $12 million — down from an already discounted $14.25 million. That’s far less than the $15.6 million she paid for it in 2016. (The penthouse was asking an astonishing $21 million in 2014.)”

    Nah, that ain’t slashin’…that’s a paper cut. C’mon, Jennifer – watch an old Jamie Lee Curtis flick to see how it’s done, then get to sawin’ and slashin’ like you mean it.

    1. $21 million to $12 million and ain’t sold yet. I bet when she bought that falling knife for $15.6 million she was bragging about it to all her friends. It appears to be falling faster than her career.

      1. Even with Janet Powell pumping $120 billion in funny money PER DAY into overnight repo operations, it looks like the trillions of Yellen bux pumped into global asset bubbles and Ponzi markets since 2009 are evaporating much faster than the central bankers’ ability to keep the Everything Bubble levitated with new tsunamis of fiat currency.

      2. When I saw her as a young actress in Winter’s Bone, a great movie, I was quite impressed. She’s just filthy Hollywood trash, now.

        1. That was about the bleakest movie I’ve ever seen, outside of “The Road.” But it was clear she was going places, as long as she conformed to Hollywood’s dominant ideology.

        2. “She’s just filthy Hollywood trash, now.”

          Seemed like she had Weinstein’s back last time I saw her in the news. I thought she was still an A-list actress, or is she taming water moccasins up in Chatsworth these days?

        1. Oh the horror! Everyone has a right to own a vacation home to visit once or twice a year. Think of the sweet equity you will earn and lack of maintenance from the lack of use. Buy now before your dead!

    2. Just as Ben says, the peak of the luxury bubble was 2014. But I don’t remember hearing about price cuts like this in, say 2016 or 2017. The luxury bubble popped long ago but no one issued a press release and now sellers are finding out the hard way.

  5. New York University’s Schack Institute of Real Estate.
    I think I found a typo, I think it should be New York University’s Shack Institute of Real Estate. Where you go for the piled hip deep degree.

        1. That’s the difference between Trump voters and the Clinton/deep state/oligarch/globalist supporters – the Trump voters keep things to themselves, playing their cards very close to their chests. The oligarch bootlickers scream and shout to the heavens like a child who hasn’t learned how to use their words.

          1. I never like to engage in polls. I think they often times poll to see if the dummies bought their narrative or not , or if they need to alter their PR.

            The point is I don’t want them to know what I think so they can lie to me to get my vote.

    1. “a principled Democrat”

      That’s pretty rare. I used to vote for Dennis Kucinich when I lived in his district. I can remember articles about him noting that he had a lower net worth than most other members of Congress.

      Why is that? Maybe because he worked for his constituents, not for the globalist pigmen who looted this country into bankruptcy and collapse.

      1. Biden used to be the same way. He bragged (or others bragged) about him being the poorest in the Senate and how he took the train home to Delaware every day. When Obama made Biden some csar of the middle class, that wasn’t a mistake. But I don’t know what happened to Biden. My guess is he would do anything for his sons, and couldn’t resist the power of the VP.

    1. The weak demand for new homes on Saturday came after a week that posted the worst performance of Hong Kong residential property since the anti-government protest crisis erupted in June.

      By November 17, only four out of 144 units at Chinachem Group’s Sol City development in Yuen Long had been sold, according to agents. That day, less than 10 potential buyers were at the sales office at Nina Tower in Tsuen Wan when sales commenced at 10am.

      In October, Chief Executive Carrie Lam Cheng Yuet-ngor raised the mortgage cap to 90 per cent, from 60 per cent, for homes valued up to HK$8 million, and to 80 per cent, from 50 per cent, for homes valued up to HK$10 million. The measure was meant to give first-time homebuyers an advantage and help ease the city’s housing crisis.

      Youth anger at forever being priced out of decent housing has been identified as a major causative factor behind the social unrest that has erupted in Hong Kong. Sorry, Carrie Lam, but “helping” debt donkeys get up on that overpriced housing ladder isn’t going to fix this.

      1. Same thing happens to anyone who is laid off from just about anywhere. Unless you have a super hot, in demand skill, you can expect to take a serious haircut in your compensation package, assuming you can find at job at all.

  6. Yep, Gabbard has some guts.

    The thing is you feel like the Dems get their talking points and if you stray to far from that your DOA.

    That’s why George Washington didn’t like political parties, or foreign entanglements either.

    1. This Deep State operative fabricated evidence to pervert the course of a criminal investigation, yet neither he nor his FBI co-conspirators will ever face a single day in prison. Ruminate on that for a moment. Pretty much says everything there is to say about how broken and corrupt our two-tiered “justice” system has become, with the really big criminals breaking the law with complete impunity.

      This is exactly what the Founding Fathers warned was going to happen to the republic if we weren’t vigilant.

    2. Those government worker witness people from the impeachment hearings were a joke.

      Firstly, they were allowed to grandstand their political foreign policy positions in their opening statements, which wasn’t relevant to the alledged crimes.

      Second, they made out like they were a bunch of brave Patriots, as if they were on the front lines of military battle. They are just a bunch of overpaid pencil pushers that have a inflated idea of their importance as well as being liberals.

      I think firing about 30 % of them to reduce bloated government might be in order. I really don’t care that they didn’t like Trumps policy changes, and I don’t care if the prior lady ambassador was hurt that she got fired. All I care about is evidence of a crime, and I didn’t see that.

      Anyway, again I say, watch the great movie from the early 60’s called SEVEN DAYS IN MAY for some perspective on the issue.

      In Seven Days in May you had a military General who didn’t like the foreign policy with the Russians of the sitting president of USA. The General, who was played by Burt Lancaster, was planning to take over the President with some Congressmen and some other military traitors. Some great writing in the movie also.
      But, never in my lifetime did I ever think I would see something that resembled a movie I saw in my youth, that I thought was far fetched at the time

    1. I am not sure about being surprised, after the first “suicide” attempt he probably had some clue. Prince “never let them see you sweat” Andrew might have been pleasantly surprised.

      1. Unfortunately the sun sets on the empire these days, or Queen Elizabeth would have had a steady supply of veal for her son.

      2. https://babylonbee.com/news/cdc-people-dirt-clintons-843-greater-risk-suicide/
        CDC: People With Dirt On Clintons Have 843% Greater Risk Of Suicide
        November 9th, 2017
        ATLANTA, GA – According to a report from the Centers for Disease Control released on Thursday, people with inside, compromising knowledge of Bill and Hillary Clinton’s financial and political dealings are 843% more likely to commit suicide.

        “We’ve never seen a single risk factor cause a spike of this magnitude,” a CDC spokesperson told reporters. “Interestingly, in spite of their increased suicide risk, people with dirt on the Clintons rarely show any warning signs of suicide, and they never leave a suicide note.”

        Remarking about how abnormal it is, the spokesman again stressed the significance of the data.

        “Therefore, we advise any American with detrimental information about Bill Clinton, Hillary Clinton, or the Clinton Foundation to forget about it as quickly as possible to avoid a greatly increased probability of taking your own life,” he cautioned.

        “And—I swear—that’s all we know.”

          1. Even Giuliani believes that is the case.

            He would know. He dropped out of the NY Senate race against HRC in May 2000. I’ve been suspicious of his real reasons since.

  7. Made a visit down to SoCal this week for some disneyland kid time and visit some family. While eating lunch yesterday, i overheard two realtors talking about how some sale fell through, UHS #1 was banking on it to make her monthly payment obligations and luckily she had some Sugar daddy she could borrow money from. They both went through a few sake bottles during the 30 mins we spent eating our lunch. They left as we did, each driving off in new model MB and a range rover. My wife knew i wanted to say something and luckily she was there to stop me. Prepare for cardboard housing and squirrel infused ramen soup realtors!

      1. Social unrest is coming the U.S. for the same reason it has erupted from Chile to Lebanon and Hong Kong: the screwed-over proles are finally saying “Enough!” to corrupt, rapacious elites. The longer the unrest drags on, the more skybox prices are falling in the affected locales. Stay tuned, oligarchs. Your day is coming.

      2. NYC Cops beat a friend of mine so badly you couldn’t recognize his face back in 1980. He was caught trying to buy Coke or pot somewhere around the Garden before a concert. They didn’t arrest him, after they beat him they just left him lying there.

        And he was Caulkcajun.

        1. An old friend of mine went to a concert in the early 90s and thought it would be fun to do a stage dive. It was a raucous show and that sort of thing happened all the time. He jumped up on stage, ran around for a moment, then dove into the crowd. Security quickly grabbed him and took him out back and beat him to within an inch of his life and left him for dead. He was found unconscious behind the venue and rushed to the hospital where he had to recover from a head injury.

  8. Where have all the Mike Curtis’s gone?

    https://www.youtube.com/watch?v=HdP2G7UtS9I

    Harvard-Yale football game delayed for 48 minutes due to on-field protest over climate change

    Ben Kercheval
    2 hrs ago • 1 min read

    The annual Harvard-Yale football game Saturday was briefly delayed due to protesters on the field at the Yale Bowl. The protest, which caused a 48-minute delay, began following the second quarter of the game at the Yale Bowl when more than 150 people stormed the field with signs. The protesters, led by students and alumni of both schools, were demanding the colleges stop funding of fossil fuel companies.

    https://www.cbssports.com/college-football/news/look-harvard-yale-football-game-delayed-due-to-on-field-protest-over-climate-change/

    1. This is from the article it makes it sound like a prediction but it has been going on for more than ten years, it is why I bought in 2010, I saw the PTB “solution” to the down turn:
      “While none of these three paths are good, printing money is the easiest path because it is the most hidden way of creating a wealth transfer and it tends to make asset prices rise. After all, debt and other financial obligations that are denominated in the amount of money owed only require the debtors to deliver money; because there are no limitations made on the amounts of money that can be printed or the value of that money, it is the easiest path.”

  9. I think greed and desire to control the working slaves is the underlying problem of all social problems.

    When I talk about the good old days it was a time where industry was willing to give good paying jobs to the working majority. But they failed to do this in the black communities. They created the welfare system instead, which isn’t the proper solution.

    Greed from Wall Street and industry moved into Globalism, the gutting of American jobs and manufacturing, and Casino markets and fake prices.

    It was always greed and control that was the underlying problem. The power brokers are willing to exploit whites, just as much as blacks.

    There isn’t reasonable distribution of wealth and a balance of power, and price fixing monopolies are part of the problem. Building houses for speculation rather than need is apparent and it’s destructive as well as faulty lending.

    These politicans that sold out the working class years ago don’t even talk about the real problems. The economy is rigged and that goes back to the greed factor.

    The Communist party has a perfect opportunity to gain power under circumstances like this. While this is the wrong solution, and people would not really like living under communism, It’s gaining power.

    My point is that the politicans aren’t even talking about what the real problems are, or their solutions are bizarre.

    1. Justin Raimondo at antiwar.com did a series of editorials on globalism (I really wish I had saved them). Long story short, at the end of WW2 the existing intelligence services in the US (precursor of the CIA) saw a void in power and decided to fill it for the foreseeable future. What they came up with was world-government globalism, based on trade and defense, which the DC egg-heads would be in charge of. They called in Greenspan and Volcker to set up the central banking mechanisms and off they went. It took a while. The Common Market in Europe. The EU, NAFTA. WTO. The first time I noticed it was in the late 70’s early 80’s. All of a sudden these Japanese cars and TV were everywhere. Did you know they used to make pretty good TV’s in Texas? Then a bunch of the electronics manufacturing went sailing off to Japan. Reagan cratered the US dollar, and those $6,000 Honda Civics became $9,000 lickety split. In the 70’s, the US was the worlds largest creditor nation with most of the largest banks. In the 80’s, Japan had taken those positions and the US was the worlds biggest debtor nation.

      Now we have to listen to a woman who claimed to be an Indian for 37 years tell us the only way to get rich is buying and selling each other shacks.

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