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There’s A Risk We Could Oversaturate The Market And Cause Prices To Drop

A report from Multi-Housing Pro on Colorado. “Average rents in Denver fell by $19 per month in the third quarter of 2018, continuing a three-year trend in rent decreases during the third quarter, according to the Denver Metro Area Apartment Vacancy and Rent survey.”

“‘The Denver community has debated how best to provide attainable housing, and the good news is that the market is sorting this out,’ said Mark Williams, executive vice president of the Apartment Association of Metro Denver. ‘One of the best pieces of news coming out of this quarterly study is that there are still plenty of apartments renting for less than $1,000 per month. In fact, the study shows that there are an estimated 29,051 apartments in the Denver metro area that rent for $1,000 or less.'”

“‘For average rents to decrease in the third quarter is unusual. For them to drop in the third quarter for three consecutive years is exceptional,’ said Teo Nicolais, a Harvard Extension School instructor who specializes in real estate. ‘Developers today face labor shortages, higher construction costs, and tighter lending standards, which are putting the brakes on new apartment supply. The only other time Denver recorded three consecutive years of third-quarter rent declines, Ronald Reagan was President and average rents in the city were $396.'”

The Daily Camera in Colorado. “After two years of double-digit increases resulting in record high rents in 2017, the market throughout Boulder County has finally begun to level out thanks to a large influx of newly constructed housing.”

“The question is how long this trend will continue before rents skyrocket again. For the time being, real estate brokers feel they’ve found a happy medium that could last for several years.”

“‘The inventory is starting to catch up with demand so my prediction is that we’ll start to see things get back to more of a normal pace,’ said Bob Danos, the owner of PML Inc., a property management firm in Longmont. ‘There’s a risk that we could oversaturate the market and cause prices to drop, but I don’t see an excess of construction in the future. I think the scenario we’re dealing with right now is that we’re building at a controlled pace where we’ll be able to maintain our demand.'”

“During the next three years, according to the Department of Housing and Urban Development, the estimated demand for rentals in the Boulder County area is 2,325 new market-rate units. With 950 units either recently completed or under construction, that demand will be met for the first year and most of the second year, especially with CU’s push to house 40 percent of the student body on campus, including a new 575-bed dormitory in the Williams Village area that is expected to open for the 2019 fall semester.”

“Currently, the average rent for a one-bedroom in Boulder County has stabilized at roughly $1,550 per month. Sam Radbil, a communications manager with the real estate research firm Abodo, said that cost is the new norm for major cities, especially those encompassing college campuses. ‘The days of finding an apartment for $1,000 in a big city are long past,’ Radbil said.”

From The Real Deal on New York. “Justin Timberlake and Jessica Biel have once again slashed the price of their Soho penthouse. The Soho Mews home is now listed for $6.35 million down from their initial asking price of $7.99 million, the Daily Mail reported. The couple paid $6.5 million for the unit in 2010.”

From Curbed Hamptons. “We’ve covered the fun-loving mansion at 23 Luther Drive in Water Mill several times in the past, from when it went on the market for $13.9 million back in 2016, to when it received a $1.25 million price cut last summer.”

“After more than two years on the sales market, the 10,000-square-foot home has just come down in price again and is now asking $9,995,000. This is the first time since becoming available for sale that the home is under $10 million.”

From Mansion Global on California. “British pop star and boy band darling Harry Styles discounted his Los Angeles home Tuesday, cutting half a million from the asking price. The price tag on the modern property, tucked away behind gates above the Sunset Strip, now stands at $7.49 million, listing records show.”

“Mr. Styles bought the home in 2016 for $6.87 million through a limited liability company linked to his business manager in the U.K., property records show. He first tried to part with the house last May for $8.49 million and discounted it for the first time in February.”

“During his ownership, he made a few contemporary tweaks to the home, Mansion Global previously reported, including putting down white flooring throughout the kitchen, galley bar and living spaces, and painting the media room in black.”

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This Post Has 18 Comments

  1. ‘The days of finding an apartment for $1,000 in a big city are long past,’ Radbil said’

    Hey Sam – ass meets hat:

    ‘the study shows that there are an estimated 29,051 apartments in the Denver metro area that rent for $1,000 or less’

  3. ‘There’s a risk that we could oversaturate the market and cause prices to drop, but I don’t see an excess of construction in the future.’

    My experience with such statements is that although they pretend to predict the future, they actually reflect present reality.

  4. “During his ownership, he made a few contemporary tweaks to the home, Mansion Global previously reported, including putting down white flooring throughout the kitchen, galley bar and living spaces, and painting the media room in black.”

    This extreme example relates to a question Oxide raised last week about whether it is better to invest in upgrades before selling or just sell for a reduced price and let the next owner have full discretion over what improvements to make. Any prospective buyer for this place who isn’t into the black-and-white motif will be willing to pay less for the place due to the cost of redoing it.

    A related example comes from a walk through Roger Marris’s house that was on the market when I was a kid. Unless a prospective buyer was crazy about baseball, the decor was not an enticement to buy it.

    1. For a high end home like that I don’t think it’ll matter much. If you can afford a $5MM shack you can probably afford to reprint the walls and redo the flooring.

      But for us Joe 12 Packs I think it is imperative to at least update the house into this decade. 30 year old carpet and peeling wallpaper turn a lot of folks off. No one wants to buy a Boomer Museum.

      2. It may get down to convenience of financing. Overpaying for someone else’s update decisions by rolling the cost into my thirty-year government guaranteed loan may be easier than coming up with the cash to pay for upgrades after the purchase, even if the sale price was lower by the cost of the foregone upgrades.

      3. “For a high end home like that I don’t think it’ll matter much.”

        Hmmm…I wonder why all those multimillion dollar megamansions are sitting on the market forever with no offers if money is no object to the wealthy?

  6. Mr. Market is speaking:

    WY is at five year lows
    HD is at one year lows
    KBH is at one year lows

    And this bubble is just starting to pop….

    1. It’s a very long way down from here. You’ll know when a bottom is near when the “no bubble this time” MSM-annointed experts claim to have called the crash.

  7. And thus – all improvements and property taxes are fully deductible….

    “Mr. Styles bought the home in 2016 for $6.87 million through a limited liability company linked to his business manager in the U.K.,”

  9. “‘The Denver community has debated how best to provide attainable housing, and the good news is that the market is sorting this out,’ said Mark Williams, executive vice president of the Apartment Association of Metro Denver.

    One Jerome Powell started taking away the punchbowl, the Everything Bubble created by Ben & Janet’s deranged money printing was doomed to implode. Remove the trillions of fake FedBux being lavished on investment bankers and hedgies, and you just kicked away the props holding up the Fed’s Ponzi markets and asset bubbles. True price discovery is going to wipe away trillions in fictitious wealth, and wreak havoc on the speculators and FBs who bid up real estate prices to such ludicrous levels.

    1. “…is going to wipe away trillions in fictitious wealth…”

      $5 trillion and counting, and Fed normalization has barely even started…denial seems to be running pretty thick at the moment.

      Markets
      October 29, 2018
      October Selloff Tops $US 5 Trillion
      By Glenn Dyer

      According to an estimate from Deutsche Bank, the big sell-off on world markets has erased about $US5 trillion in value from global stock and bond markets so far in October alone.

      The bank said that shouldn’t be severe enough to affect the economy, for now- it pointed out that the $US5 trillion estimate is a third of the $US15 trillion global markets have added in value since the start of 2017.

      “Academic studies of the wealth effect find that households and companies don’t react to short-term fluctuations in their wealth but instead react to a moving average of where their wealth levels are,” said Torsten Slok, chief international economist at Deutsche Bank Securities, said in a note to clients on Friday when we saw billions more wiped off valuations as markets in Asia, Europe, and the US again sold off.
      …

  10. “The question is how long this trend will continue before rents skyrocket again. For the time being, real estate brokers feel they’ve found a happy medium that could last for several years.”

    Skyrocketing rents can only occur during a bubble. The ongoing implosion of the Bernanke-Yellen Everything Bubble and resultant financial devastation of millions of speculators, FBs, and retail investor muppets is going to ensure we won’t see skyrocketing rents or bubbles for a long, long time to come.

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