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Price Cuts Are The Surest Path To A Deal

A report from Bloomberg on New York. “If you want a discount on a Manhattan apartment, you’re in luck. You’ll find them in every neighborhood, with some of the deepest reductions in the priciest areas. ‘There is a wave of capitulation among sellers who realize that their first asking price was a bit off,’ said Grant Long, senior economist at StreetEasy. ‘The fact that you’re seeing so few areas in which homes are selling for above their initial asking price tells you this is not an isolated phenomenon, that the slowdown in the market is becoming much more widespread.'”

“In the third quarter, buyers got median discounts of 6.3 percent in Tribeca and 6.1 percent in Flatiron, according to data from StreetEasy. Midtown, where ultra-luxury condo towers are proliferating on Billionaires’ Row, had the biggest cuts in Manhattan—a median of 11 percent.”

“The discounts extended to almost all neighborhoods in Brooklyn and Queens as well. As purchases slow across the city, a broader swath of sellers has been facing the reality that price cuts are the surest path to a deal.”

The Lansing State Journal in Michigan. “Student housing development has boomed near college campuses across the country in recent years. Nationwide, investors spent about $3 billion on student housing in 2014. By 2016, the investment had tripled, said Jaclyn Fitts, the director of national student housing for CBRE.’

“New developments have opened their doors, including the nine-story SkyVue apartment complex on Michigan Avenue next to Frandor Shopping Center and the five-story 565 Building on Grand River Avenue downtown. Some aren’t so sure all the extra housing is needed. ”

“‘If you look around East Lansing there are apartments everywhere,’ said Richard Foster, the owner of an apartment building across the street from the new Hub project. ‘Eventually, there’s not going to be any demand.'”

From the Denver Post in Colorado. “Apartment rents and vacancies usually move opposite of each other, but they both fell in the third quarter, according to the latest Denver Metro Apartment Vacancy and Rent survey. Typically, average rents rise in the third quarter as high school and college graduates and summer newlyweds look for a place to live. But for the third year in a row, they have fallen.”

“Ron Throupe, associate professor of real estate and construction management at the University of Denver’s Daniels College of Business, argues that new apartments are now being added at a faster pace than new households are forming.”

“Projections call for 30,000 apartments over the next 30 months and about 22,200 households a year forming in the metro area. Assuming 40 percent of those households choose to live in an apartment, that would mean the market is building 2,600 more units a year than needed, Throupe said.”

“Despite warnings the past few years of an apartment glut, developers kept building and young adults kept moving here and renting those units, Nicolais said. The trend he sees now is toward a ‘normal, balanced’ market.”

“‘Supply is finally catching up with demand. It has been a long time in coming,’ he said.”

The Arizona Republic. “Downtown Phoenix’s housing boom is blanketing the area with thousands of new apartments and condominiums. But the rents and prices for the new homes will shut the door on some who want to live in the area. And home prices in historic neighborhoods in and around downtown Phoenix are soaring as the area becomes more popular, further limiting potential buyers.”

“Most of the 8,000 apartments recently built, underway or planned in downtown Phoenix are in luxury complexes with rents higher than the average Valley mortgage. The average apartment rent in downtown Phoenix is $1,608, according to ABI Multifamily. The average apartment rent for a one bedroom for the entire city of Phoenix is $1,050.”

“If too many apartments go up and don’t fill up fast, rents could fall in downtown Phoenix.”

“Phoenix Housing Director Cindy Stotler said downtown Phoenix has 1,001 affordable units — which is more than most people realize. The issue is that those units are reserved under federal law for ‘very low-income’ individuals who have a median annual income of $14,000-$38,000.”

“To get workforce housing downtown, the city likely won’t be able to rely on traditional developers, Stotler said. Land prices are high, which makes it difficult for developers to offer middle-income rents and still turn a profit on their projects, she said.”

“Stotler said the real downtown housing gap is in ‘workforce housing,’ for middle-income individuals who make $38,000-$48,000 annually. These individuals would have to pay nearly 50 percent of their income to afford living in market-rate housing downtown —which is not reasonable or sustainable, she said.”

“‘To me, the area that we’re missing in downtown is the working people’s housing. And people who are not like a lawyer or something and making a lot of money, but they’re just average working people,’ she said. ‘There’s no regular housing for them. We’re not building that.'”

This Post Has 22 Comments
  1. ‘The fact that you’re seeing so few areas in which homes are selling for above their initial asking price tells you this is not an isolated phenomenon, that the slowdown in the market is becoming much more widespread’

    Well Grant there’s that, and the fact you’re now in your third year of crater. Just what aspect of a bubble isn’t in New York City housing?

    Over the top prices? So much luxury it’s useless? Speculative condos sitting empty all over the place? Gigantic price declines and losses to speculators?

    Just how can anyone deny there was a bubble in NYC and it has clearly popped?

  2. ‘Most of the 8,000 apartments recently built, underway or planned in downtown Phoenix are in luxury complexes’

    How common is this now? It’s almost ubiquitous. I’m not sure why anyone would want to live there. Maybe if you worked at the courthouse or the related ambulance chaser outfits surrounding it. But in the summer, it gets HOT downtown. There’s nothing but concrete and asphalt, so it stays hot all night. I’m sure they’ve built a bunch of bars. What usually is considered the target for these urban vibe apartments/condos are barflies.

  3. “In the third quarter, buyers got median discounts of 6.3 percent in Tribeca and 6.1 percent in Flatiron, according to data from StreetEasy.

    Those knife catchers will feel like such geniuses when the price drops another 50% or more.

    1. I documented a near 50% loss on a Manhattan condo bought pre-construction and delivered in the spring of 2016.

      ‘Lender Looks To Foreclose On NYC Condo Over $41M Loan’

      ‘(October 24, 2018) — A New York-based lender sued a company building a condominium building for $52.6 million in state court on Tuesday, saying the builder defaulted on a $41 million loan for the property…’

      Entire buildings going onto foreclosure – check.

  4. “‘To me, the area that we’re missing in downtown is the working people’s housing.

    Affordable housing for blue collar and lower-earning workers is missing in every community – another legacy of Ben & Janet.

  5. ‘An 80th floor condo unit in West Midtown billionaires’ bunker One57 just hit the rental market for $125,000 a month, which Curbed informs us is the priciest rental ask in the city that isn’t in a hotel. The apartment at 157 West 57th Street was purchased for an also-eyebrow-raising $53M in 2014 by a buyer using the Pasadena, CA-registered LLC Lapusny, Inc.’

  6. Haven’t all apartments always been luxury? Anything new is called luxury,but then it gets old and the price drops.

    The problem is, we had a period when no apartments were being built at all, so prices got too out of whack. Developers have always targeted the high end though, now we’re just seeing a correction back to normal as inventory piles up.

    1. No, that’s a REIC lie. And these are beyond luxury. Did we “always” build apartments with goat yoga and bocci ball courts that rented for $5,000 a month and came with free beer?

      There is a bubble in the land prices, that’s why they are going 100% super lux.

      1. A lie indeed. There were already 25 million excess, empty and defaulted housing units out there before this latest blow out of additional housing inventory getting built.

      2. That’s what I mean, the lie has always existed that all new apartments are luxury apartments. They always offer something new over the last gen, but it’s always just window dressing and the build quality is never high, so they get old and crumble, rinse and repeat.

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