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There’s A Lot Of Supply That’s On The Market

A report from The Real Deal. “A decade-long apartment boom may be coming to an end. Federal data shows that multifamily building permits have declined every month since March, the Wall Street Journal reported. According to the latest Census Bureau data, permits were pulled to build 351,000 units in new properties with at least five units in September. That represented a 9 percent year-over-year decrease.”

“Developers added 347,000 apartments across the U.S. last year, which contributed to rent growth that weakened from 5 percent in 2014 to 2.9 percent in the third quarter of 2018, according to RealPage.”

From King 5 News in Washington. “Alex Casey, a policy advisor on the economic research team at Zillow, said Seattle’s market has seen a cooling trend over the last year, but that home values continue to steadily rise. He also noted in some neighborhoods — like the University District, Capitol Hill, and Fremont — rents have actually fallen several percentage points. He attributed that to more housing units coming online.”

“‘We’ve just been building more apartment units,’ Casey said. ‘It could potentially fall even more, which would be lucky news for some renters.'”

From Multi-Housing News on Colorado. “Denver’s multifamily market continues to thrive, bolstered by a strong economy and positive demographic trends. Development in both the multifamily and office sectors has stayed strong, with 26,000 apartments and more than 2.4 million square feet of office space underway as of August.”

“Multifamily transaction activity has softened compared to last year, with a total investment level of roughly $1.9 billion. The decrease in volume and per-unit prices was largely due to investors focusing on value-add opportunities, as they target higher yields. With deliveries expected to cross the 16,000 mark by year-end, we expect rents to continue their rise at a moderate pace.”

The Star Tribune in Minnesota. “Developers are on track to build a near-record number of rental apartments in the Twin Cities. Through September, 3,920 new units have hit the market, 10 percent more than last year, according to Marquette Advisors. That doesn’t include more than a dozen rental projects reviewed Tuesday by the Minneapolis Planning Commission, including a pair of high-rise towers and a half-dozen midsize buildings.”

“That flurry of new projects will help make 2018 what is expected to be the second-busiest year for apartment construction on record despite growing concerns about the depth of demand in some areas. To date, 2014 was the record with 4,451 new units.”

“‘The mood is cautiously optimistic,’ said Matthew Rauenhorst, vice president and general manager with Opus Development Co., which recently completed a luxury high-rise in downtown Minneapolis and is about to break ground on a luxury apartment building overlooking the Mississippi River.”

“He cites a healthy local economy and strong job growth as the primary drivers of additional demand, but a fully loaded pipeline of new proposals is reason for caution. ‘How many of these proposed projects will get built and when will they get built?’ he said. ‘We will have to wait and see.'”

“Some submarkets are beginning to soften. In some areas, leasing activity is slowing, vacancy rates are on the rise and property managers are offering one-time inducements to encourage renters to sign a lease.”

“All eyes are now on downtown Minneapolis, where construction has been the most robust, developers are most concerned and rents are the highest. The average rent in that submarket is $1,728, which is now 6.7 percent higher than it was last year. The average vacancy rate is 3.5 percent — a stunningly low figure considering how many new units have been built. But when you factor in the more than 1,200 new units opening so far this year, the true vacancy rate is 8.4 percent.”

From Boston.com in Massachusetts. “The average sale price for condos decreased in six Boston neighborhoods but sharply increased in others in the third quarter, according to a new analysis by Berkshire Hathaway HomeServices Warren Residential.”

“Beacon Hill: A 16 percent drop, from $1,608,561 in the third quarter last year to $1,349,938 this year; Charlestown: A 0.86 percent decline, from $712,878 to $706,677; Downtown: A 6.99 percent decrease, from $1,765,447 to $1,378,764; Fenway/Kenmore: A 14.27 percent drop, from $713,095 to $611,304; South End: A 4.6 percent decline, from $1,299,323 to $1,239,499; Waterfront: A 2.5 percent decrease, from $1,283,877 to $1,251,399.”

“‘There’s a lot of supply that’s on the market,’ said Shayan Jalali, a realtor with Berkshire Hathaway. ‘A lot of new construction that’s been added to inventory recently, so buyers just have more to choose from than before.'”

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This Post Has 15 Comments

  1. ‘The decrease in volume and per-unit prices’

    A decrease in per unit prices. Bad news for those guys.

    ‘deliveries expected to cross the 16,000 mark by year-end’

    Oh dear…

    1. I worked in the new building at 9th and Colorado in Denver from June 2017 to April, and have driven by it several times recently in the 6-8pm hours, and it is very dark in there.

      Their website is now offering 6 weeks free:

      https://theoapartments.com/

  2. ‘The mood is cautiously optimistic’ translation: my last check cleared.

    ‘The average vacancy rate is 3.5 percent — a stunningly low figure considering how many new units have been built. But when you factor in the more than 1,200 new units opening so far this year, the true vacancy rate is 8.4 percent’

    So why bother with the average? Oh, right that’s the number you give lenders and reporters. And if they don’t tell you effective rents and vacancies the numbers are much worse.

  3. ‘Beacon Hill: A 16 percent drop, from $1,608,561 in the third quarter last year to $1,349,938 this year; Charlestown: A 0.86 percent decline, from $712,878 to $706,677; Downtown: A 6.99 percent decrease, from $1,765,447 to $1,378,764; Fenway/Kenmore: A 14.27 percent drop, from $713,095 to $611,304; South End: A 4.6 percent decline, from $1,299,323 to $1,239,499; Waterfront: A 2.5 percent decrease, from $1,283,877 to $1,251,399’

    I guess the Boston Globe didn’t want this in the print edition so they passed it off to Boston.com.

  4. It’s not capitulation until it goes to $0, as Bitcoin has no fundamental value, no returns aside from mania appreciation, and no barriers to entry against unlimited entry of new cryptocompetitors.

    CryptoWatch
    Why bitcoin prices are staging a fresh collapse
    Published: Nov 15, 2018 12:57 p.m. ET
    The pace of the decline suggests there is little new money entering the industry, analyst says
    Getty Images
    By Aaron Hankin
    Reporter

    On Wednesday, bitcoin, the world’s most famous digital currency, plummeted more than 10%, crashing through $6,000 and trading to its lowest level since October 2017.

    By the end of the session bitcoin (BTCUSD, -1.07%) closed down 11.6%, the third-largest decline of 2018, only topped by the 16.5% fall on Jan. 16 and a 15.5% slide on Feb. 5, according to Dow Jones Market Data.

    Even bitcoin guru and early adopter Barry Silbert, who said in July, that bitcoin wouldn’t make a new low in 2018, was stunned, summing up the move in one word: Capitulation

    https://www.marketwatch.com/story/why-bitcoin-prices-are-staging-a-fresh-collapse-2018-11-15

  7. CA Oct numbers are out….

    “California Existing Homes in October: Sales Down 7.9% YoY, Inventory Up 28%”

    TIMBERRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

  9. The end is nigh.

    Hedge-fund boss who predicted ‘87 crash says get ready for some ‘really scary moments’
    Published: Nov 15, 2018 4:07 p.m. ET
    Bloomberg
    By Mark DeCambre
    ‘From a markets perspective, it’s going to be interesting. There probably will be some really scary moments in corporate credit.’
    Paul Tudor Jones

    Paul Tudor Jones, a hedge-fund luminary, said he’s stress-testing his portfolio of corporate debt because he expects a tumultuous road ahead on the back of the Federal Reserve’s apparent commitment to normalizing interest rates and buttressed by corporate tax cuts from the Trump administration.

    Speaking at an economic forum in Greenwich, Conn., a hotbed for hedge funds, Jones said the Fed faces real challenges amid “the end of a 10-year run” of economic growth that many anticipate will soon come to a screeching, cyclical end.
    …

  10. “A decade-long apartment boom may be coming to an end”

    My corporate overlords didn’t get the memo. For a new lease term, my rent will go up $40/mo.

    1. Can’t do a deal unless you’re willing to walk. My lease is up in February and and brand spanking new 200+ luxury unit are sitting half empty just across the parking lot.

      On sunday i get to walk over to the open house for some harbor front condos (about 60 units) that are also nearing completion.

      It should be fun saying i can wait for some airbnb speculavestor to capitualate winter after next.

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