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Prices Are Under Pressure Amid A Surge In Inventory

A report from Point 2 Homes on Texas. “”Q: Would you recommend buying or renting in the largest cities in Texas this year? Shannon Cornelison-Brown Assistant Professor of Accounting Austin College: ‘In the largest cities in Texas, investor funds have caused a large supply of apartment options. An individual has a high likelihood to obtain rental concessions due to this oversupply of apartments.'”

From Nevada Business. “Apartment rents are leveling off in the Reno-Sparks area, thanks largely to the increasing number of units being built, says a report released this week by the Nevada State Apartment Association. ‘The apartment market in the Reno area has been shifting recently,’ NVSAA Executive Director Susy Vasquez said. ‘Rents have been slowing down and vacancy rates have been rising. This is largely due to the unprecedented number of new apartment units being built here. Since 2017, more than 4,000 new apartment units have hit the local market.'”

The Denver Post in Colorado. “Tenants have consistently filled the new apartments that hit the market in recent years. But Paula Munger, head of industry research and analysis for the National Apartment Association, estimates developers overshot demand by about 1,900 units last year in metro Denver. ‘I would expect slower rent growth in 2020 until demand has a chance to catch up with supply recently delivered,’ she said. ‘I anticipate continued strong demand in 2020 in metro Denver, but we may see developers hit the pause button after projects currently underway are wrapped up.'”

The Mercury News in California. “According to Rent Cafe, while the overall rental market is seeing a rare slowdown across the nation, two-thirds of the largest Bay Area cities saw annual rents rise between 1 and more than 7 percent through the end of 2019. Just three markets — Richmond, Petaluma and San Jose — saw drops throughout 2019. At the end of 2019, renters in San Jose were paying an average of $2,685, about $32 per month less than the previous year, while those in Richmond and Petaluma saw even more significant declines in rent.”

“The report looks only at market-rate multifamily properties with at least 50 units, so it doesn’t account for rents in smaller complexes or subsidized affordable housing. It also doesn’t look at the number of bedrooms in a unit. ‘The devil is in the details,’ said Doug Ressler, manager of business intelligence at Yardi Matrix, which provides data for Rent Cafe’s reports.”

The Union Tribune in California. “It appears the San Diego County apartment market is showing little signs of slowing as developers continue to benefit from ever-growing rent. The difference this year is a lack of large-scale downtown developments, particularly the massive complexes in East Village and Little Italy that made the last few years seem like downtown was a giant construction site.”

“One of the downtown’s biggest developers, Nat Bosa of Bosa Development, said there isn’t a whole lot to read into a slowdown. Bosa’s Broadway Block apartment complex, with 620 apartments downtown, is set to open in 2021. ‘A little bit of slowing down in the apartment sector is not all bad,’ he said, ‘because there has been a hell of a lot that came on scene. So, we need to absorb all that inventory.'”

“Rent profits aren’t what they used to be a few years ago, but it doesn’t seem to be stopping developers.”

From Arizona Big Media. “Lindsay A. Cullum-Colwell, managing principal, Cullum Homes: ‘The residential construction industry will grow at a steady pace in 2020. Thanks to a shortage of skilled labor in a majority of the construction trades, the market is not being overbuilt.'”

“Chapin Bell, CEO, PB Bell: ‘We continue to believe in the strength of the apartment market in the Phoenix metropolitan area. We are seeing some softness in some sub-markets, where there has been a large amount of new inventory brought to the market. Even though there is some areas of softness, we believe this is short lived as this new inventory is being absorbed … Projections continue to put Phoenix as one of the top rent growth markets in the country. One area of concern which will have an impact on the amount of new inventory added to the market, is the increase in construction costs. This will slow down the inventory growth as it will be harder to get the new deals to pencil.'”

The Wall Street Journal on New York. “As the real-estate market surged to highs in the mid-2010s, German investor Ekkehart Hassels-Weiler quietly plowed $131 million into four downtown New York penthouses, including the top perch at Herzog & de Meuron-designed skyscraper 56 Leonard. When he sold two of those units last year, he took a nearly 16% hit.”

“His fortunes reflect the declining market for high-end condos in New York City, which has fallen amid oversupply, tax changes and a decline in foreign buyers. The median sales price for a Manhattan luxury apartment fell 24% in the fourth quarter of 2019, compared with the same period the year prior, according to Douglas Elliman. Many of the biggest resale losses of 2019 were at new buildings or recent conversions, including Billionaires’ Row mega-tower One57 and 56 Leonard, where the three largest losses of the year took place. Prices at such high-rises are under pressure amid a surge in inventory.”

“Some of the largest losses of the year, based on dollar volume, occurred at this Extell Development tower that kicked off the condo boom. Retail heir David Lowy unloaded his three-bedroom, 4,116-square-foot unit at the building for $19.06 million, roughly 32% less than what he paid in 2015. It was the biggest loss of the year, based on dollar value. Mr. Lowy didn’t abandon the building; he spent about $36 million to buy a larger unit in the tower at foreclosure auction.”

“Another lower-floor unit also sold for a loss in September. The seller, a limited company bought the unit in 2018 for $23.53 million and sold for $19.913 million.”

This Post Has 66 Comments
  1. Lot’s of gluts and oversupply these days. I said this was gonna happen back in 2014. No crystal ball folks. I simply saw their motivation was not adequate rents but quick riches flipping to greater fools.

    And easy access to vast amounts of credit. Interesting how that always seems to accompany these overbuilding periods!

    In 2014 you couldn’t find one person in this industry advising caution. But a blogger in Arizona saw the whole thing coming without leaving his desk.

    1. “…their motivation was not adequate rents but quick riches flipping to greater fools.”

      I don’t understand this at all. The people overpaying for these apartments all said “we don’t care about the low cap rate and rents not cash-flowing, we’re just going to sell the whole complex for more money to somebody else?”

      1. Let me explain this to you in a dumb down way so even you can understand.

        It’s called the Greater Genius Theory.

        You see, with magic of real estates, the comps is determined by the last Genius and the more that genius buy high, the more the wealth effects. The more the wealth effects, the higher the prices which results in more Geniuses paying more and more. This is like majic. Like the houses work for you. You dont need to work. It fund your retirement, the wife boob job, Benz payments, vacations, etc. This is why its called the Greater Genius Theory.

        1. Commercial real estate is totally different than residential. The loans are 10 year and the properties need to cash flow. From a lending perspective I do not understand how the properties even get financed.

        2. Information like this costs $1000’s at Olick and Thornberg seminars. Thanks for explaining it for me!

  2. ‘Thanks to a shortage of skilled labor in a majority of the construction trades, the market is not being overbuilt’

    This is one of the stupidest things you will hear.

    1. This is one of the stupidest things you will hear.

      Amidst the cacaphoney of stupidity (and dissembling) coming from the REIC media shills, such claims get lost in the jet stream.

      1. One of my favorites was in 2016 by a DC developer. He said the lenders wouldn’t keep lending us money if we were overbuilt! In the same post I posted a writer on a Minneapolis luxury apartment that was over 90% vacant wondering, these guys do market studies, don’t they?

    2. …. and a blatant lie besides.

      “Lindsay A. Cullum-Colwell, managing principal, Cullum Homes: ‘The residential construction industry will grow at a steady pace in 2020. Thanks to a shortage of skilled labor in a majority of the construction trades, the market is not being overbuilt.’”

      Your BS radar should be screaming when you hear stuff like this. Residential construction dollars are low double digits of overall construction dollars….. a small sliver of the business. Nor is there crossover between construction segments. Shack trades and shack outfits haven’t the expertise to bid and construct anything but shacks.

      Lindsay talks like a woman with rocks in her head.

      1. Yeah, so much construction is going on that there aren’t enough workers, and that’s a sign we aren’t overbuilt.

      1. According to some things I read, only immigrant labor is skilled at construction. Preferably the type that cannot legally immigrate via USCIS.

        1. The big builders treat it like an assembly line. A pair of guys installs all ceiling fans in the development. A crew lats roof felt. Another crew does edge metal. Another lays tile. They are unskilled. That’s why there are no young guys learning trades. What’s the point when the fed spigot is open and the big boys are building thousands of units at a time?

      2. The National Electrical Code is written in English only. The Journeyman and Masters Electricians exams are administered in English only.

        No English = no license for you.

    3. Thanks to the dishonesty and stupidity of reporters on the real estate markets we are not being overeducated on the condition of the market.

  3. The median sales price for a Manhattan luxury apartment fell 24% in the fourth quarter of 2019, compared with the same period the year prior, according to Douglas Elliman.

    Spin that, Diana Olick.

    1. I’ve posted some interesting mentions of odd foreclosure proceedings in NYC. One referred to “friendly foreclosures”:

      “A friendly foreclosure, by definition, is another term for a deed-in-lieu of foreclosure. This is a process where the homeowner or property owner voluntarily returns the property to the lender, allowing both to avoid the long and drawn-out process of a foreclosure.”

      “A voluntary foreclosure is a foreclosure proceeding that is initiated by a borrower who is unable to continue making loan payments on a property, in an attempt to avoid further payments and prevent involuntary foreclosure and eviction.”

  4. “One of the downtown’s biggest developers, Nat Bosa of Bosa Development, said there isn’t a whole lot to read into a slowdown.

    Whistling past the graveyard, are we, Nat?

  5. “in metro Denver … I would expect slower rent growth in 2020 until demand has a chance to catch up”

    More people are leaving Denver than moving here.

  6. Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.

    “…a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the [oligarchs] denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped.”

    1. It’s time to end the FED, send these banker pigs to prison, and come up with a system that benefits the people.

      1. Ron Paul warned the American sheeple about the Fed in 2008. He got five percent of the vote. The sheeple elected a Goldman Sachs puppet who went on to amass a fortune thanks to his subservience to Wall Street.

        The prosecution rests.

        1. It struck me the other day that Ron was the Bernie Sanders of the right. Correct about many things but unelectable by the current population. Both were dangerous to TPTB but I think Bernie is just socialist enough to be a danger to everyone in spite of his good intentions.

          1. Bernie says a lot of stuff that resonates with a lot of people. Make no mistake, we have a serious problem in this country insofar as economic inequality goes, and it’s only getting worse. It’s being masked by debt.

            There has never been as large a group of unemployed people who don’t count as unemployed in history, thanks to the FED’s phony numbers. Further, there has never been so many people in debt up to their eyeballs in history. It’s no coincidence that, at the same time, the top 10%, even more so the top 1%, have seen their wealth skyrocket.

            When it comes time for the election, somebody like Bernie can just repeatedly ask how the stock market is doing for the majority, if they have more money. The answer is largely “no.” I’m not sure how the current president is going to answer that.

          2. “Bernie says a lot of stuff that resonates with a lot of people.”

            So did Hugo Chávez

            The Cult Following of Venezuela’s Hugo Chávez

            Thousands Continue to Rally in Support of President Chávez

            By MANUEL RUEDA
            January 10, 2013, 8:39 PM

            Jan. 11, 2013— — When telenovela actor Winston Vallenilla spoke at a massive rally in support of Venezuelan president Hugo Chávez yesterday,

            The audience, carrying a sea of signs that read “yo soy chavez,” (we are Chávez) cheered at the obvious revelation.

            “I would give my heart for Chávez,” added a 69 year old man who claimed to have 29 children, and said his family benefited from subsidized food programs put in place by the Venezuelan government. “I don´t care about living any more. I would die for Chávez, because the people need him to continue living.”

            https://abcnews.go.com/ABC_Univision/News/venezuelas-hugo-chavez-cult-created/story?id=18186070

          3. Bernie Sanders

            https://dev.vashiva.com/a-lesson-from-history-the-two-faces-of-the-establishment/

            “A lesson from history! The Establishment has Two Faces. One of the faces is the Obvious Establishment. On the other side we have Change Agents. These are passionate people who want to build independent movements for change. More insidious than the Obvious Establishment is the Not-So-Obvious-Establishment. These are people like Elizabeth Warren and Bernie Sanders who say radical, revolutionary things but do something completely opposite and embrace the Establishment. The Not-So-Obvious Establishment is the agent that takes the movement on the streets and funnels them to the Establishment. This video shares the dynamics of the two faces of the Establishment.”

          4. there has never been so many people in debt up to their eyeballs in history

            People who make really bad decisions think really bad solutions sound good.

          5. Ron was the Bernie Sanders of the right

            That’s a good analogy. Calling Sanders a socialist however is more of a right wing talking point. It’d be more fair to say he favors strong social welfare policies, or as he puts it, a democratic socialist. That might be too fine of a distinction for some, but it is a distinction nonetheless.

            Shoot, the US gives Israel $10.5M a day, each and every day of the year. Not to pick on the Jews, but that’s alotta tamales. What does Israel have? Universal healthcare and free college.

            I’d settle for just giving 10 Americans $1M each day. Better than shipping it overseas.

          6. “Calling Sanders a socialist however is more of a right wing talking point. ”

            LOL.

            Barney is a card carrying socialist.

            Now carry on with your gyrations.

          7. I agree. I also agree with half of Red’s point:
            “These are people like Elizabeth Warren and Bernie Sanders who say radical, revolutionary things but do something completely opposite and embrace the Establishment.”

            Warren is just that she will push globalism just like Obama. Having grown up in Vermont and knowing people who knew Bernie well, he is the real deal. He is a Marxist and has been all of his adult life. This is the reason why CNN is working so hard to take him down. A Trump vs. Sanders election is a nightmare for the billionaire globalists who want to run the world. They have gone from numerous elections where they had control of both candidates so they could not lose a presidential election, to an election where they do not control either one so they cannot win. Now, I do not want to live in a communist society or an open border society so the choice would be easy for me. However, the globalists just would not know whom to support.

          8. It’d be more fair to say

            Actually you mean more specific, not more fair. If I say I had vegetables with my meal, it is more specific to say carrots and broccoli. Fairness has nothing to do with it.

          9. “Having grown up in Vermont and knowing people who knew Bernie well, he is the real deal. He is a Marxist and has been all of his adult life.“

            Real Marxists don’t run mainstream political campaigns, nor do they push for reform within the current system. Real Marxists form cabals and institute armed revolutions. They take people to basement prisons, or out into fields, shoot them, and make piles of their skulls.

            Bernie is very much a part of the establishment, i.e. part of mainstream America. He is a Keynesian, like almost every single person in America. He simply wants more government programs and more government spending. This is not even remotely Marxist.

          10. “He rolled over after getting screwed by the DNC.”
            “Sounds like an MSM talking point along with projection to get you to ignore Bernie Sanders’ “Economic Bill of Rights” Taken Nearly Verbatim from Stalin’s 1936 Soviet Constitution. This article provides links to Sanders’ speech about Democratic Socialism as well as Articles 118-122 of the 1936 Soviet Constitution.”

            Red, these are two comments you made within 15 minutes of each other. In one, you support my contention that Sanders is a genuine old school Marxist. In the other, you seem to suggest that he has changed and abandoned that and become a new left Democrat. I am not sure if that is what you meant when you said “rolled over”. I do not want to put words in your mouth. So can you reconcile the statements?

          11. rolled over

            Accepted defeat in exchange for something: a lake house; his wife’s fraud case being dropped; or, something else. I think that whatever he believes is being whitewashed by the MSM and that he is not as principled as some think/hope.

  7. We had it, gold backed money and limited federal government. Banks that were irresponsible went out of business they were not propped up.

    1. Well, we’ve seen what an system dominated by banks and loose credit does to an eCONomy- it melts down. Now it’s time to go to a totally different model.

    2. “Accepted defeat in exchange for something: a lake house; his wife’s fraud case being dropped; or, something else. I think that whatever he believes is being whitewashed by the MSM and that he is not as principled as some think/hope.”

      That the communist party leaders do not live like the members was pointed out by George Orwell and in both Animal Farm and 1984. Thus, to the degree communists have principles, he is not inconsistent with their principles. I do think that he caved on accepting Hillary to avoid having his wife prosecuted for fraud by the politically corrupt Obama Justice department which went on to attempt a soft coup against Trump.

  8. In the largest cities in Texas, investor funds have caused a large supply of apartment options…

    Ya, you can say that again. The number of apt’s recently built or being built around Dallas is really something. There’s a lot of infill which seems to make sense, but those ‘asking’ rents are really something.

    One of my neighbors is moving. Sorry to see them go as our daughter’s were on the same soccer team, we were the coaches, etc. The primary motivator for moving is the school district. We have a decent school but not great. With one child we may go private, or to the local magnet, but for him with 2 kids, private school would be pricey.

    We bought about the same time (2012ish) for sub $200k and they’ll likely get low $300k’s for their place. I told him not to expect any appreciation where they’re moving (burbs). Not only onacuzza the overall market but the price point they’re buying at. Everything at the higher mid price range ($400k to $500k) is stagnant or declining.

    1. “Everything at the higher mid price range ($400k to $500k) is stagnant or declining”

      Hello, Denver.

      REALTOR, have you eaten today? Would you like half a bagel? Or some uneaten but still almost warm McDonalds fries? Have a meal, REALTOR, we know you’re not earning enough from your now non-existent commissions to buy one 🙁

      1. If im going to provide charity to a realtor I prefer to use the BooRandy method of flicking them a quarter after torching it with my lighter

      2. You emptied your bank account after the last BMW payment, so no food this month Realtor. I hear seagull is edible if you cover it in ketchup. Get your EBT application in pronto.

  9. “Blunder”

    The Economist writers have come up with a fitting new moniker for The Housing Bubble, laying the blame squarely at the feet of centrally planned government housing market interventions.

    1. “Plunder”

      The U.S. is being looted by billionaire corrupt investment bankers and their stooge government officials.

  10. Proof that the millennial generation is a herd generation. Had to live in a handful of trendy cities so they drove rents in those cities through the roof, had to own a handful of tech stocks so pay huge amounts for companies such as Uber and now they are buying houses at the top:

    https://www.ccn.com/rampant-millennial-demand-makes-us-housing-market-crash-unlikely/

    P.S. I do not thing that they can keep houses from declining in real terms but they certainly can make the process take a lot longer.

  11. All you need to know about Bernie sanders can be learned from looking at the lunatics who follow him and run his ground campaign

  12. All you need to know about bernie sanders can be learned from the lunatics who follow him and run his ground campaign.

      1. That’s where things get complicated. I try not to judge people by their followers. Every major public figures have at least a few wacko fans. But Bernie does seem to have a disturbing number of fans who really would like to pile the skulls of their enemies in order to get the change they desire. You can make strong accusations against Trump’s wackiest fans as well, but I think there’s a big difference between being willing to fight to protect what has existed for a long time versus wanting to fight to force change on people who don’t want it. I think it’s intellectually honest to want to secede to create your own utopia, but not to try to force me to join it.

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