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Supply Is Starting To Outpace Demand

A report from the Tampa Bay Times in Florida. “Pasco County’s high-growth corridor is attracting more than single-family homes, restaurants and retail outlets. Nine luxury apartment complexes — two already leasing to residents, two that remain under construction and five more that are proposed — will bring more than 2,500 multifamily units to the county’s southern tier. ‘It is turning into apartment city. That’s what it is,’ said Commissioner Mike Moore. ‘How much more do you need right there?'”

“The apartment boom is not unique to Pasco. The Real Data research firm reports more than 6,100 units under construction and another 6,500 proposed in the Tampa metro market that includes southern Pasco. Moore said that too many apartment complexes could exacerbate already crowded schools. His bigger complaint, however, is that a saturated market can lead to high vacancy rates and long-term decay among complexes over a 10- or 20-year period.”

From Bisnow on Georgia. “A fledgling effort to boost the number of affordable apartments around the Atlanta BeltLine and Westside district may be a case study in unintended consequences. Those consequences have city officials looking to expand its inclusionary zoning policy to include for-sale housing along the 22-mile pedestrian path that has become Atlanta’s version of Central Park.”

“Atlanta City Councilman Andre Dickens said he has heard of few grumblings about the IZ among developers, and dismisses its effect on new apartments. Instead, he suspects the slowdown in permits for new projects with a for-rent component may have more to do with a natural slowdown in apartments as the market digests a glut of new supply.”

“‘The reason why you’re seeing that trend is because of the oversaturation of apartments, and you’ve got to see that die down,’ he said.”

From Bisnow on Washington. “The state of capital markets in Seattle is strong, thanks to the region’s continued strong job market. The exception is the downtown Seattle apartment market, where rents are beginning to drop due to high levels of supply. ‘Capital tends to chase job growth,’ The Wolff Co. Vice President of Development Chris Rossman said.”

“In the near term, Rossman expects to see stabilizing rent growth, which will put pressure on margins and yields. ‘One thing we need to consider is that development is a three- to four-year business,’ he said. ‘Although supply is starting to outpace demand, there are projects that have yet to be considered. Development is slow to change.'”

From Crain’s Chicago Business in Illinois. “Rent growth is slowing down at suburban Chicago apartment buildings, but developers are speeding up. Developers are on track to complete more than 3,000 apartments in the suburbs this year, up from 1,843 in 2017, according to Integra Realty Resources, a Chicago-based consulting firm. It would also be the biggest total since at least 1996, when the firm began tracking suburban multifamily construction.”

“Amid a strong job market, a key driver of demand for apartments, landlords have jacked up rents, lifting property incomes and values—and attracting a herd of developers trying to get in on the boom.”

“Yet the suburban apartment market is cooling, enough to make it harder for landlords to raise rents but not enough cause alarm. One reason: Though job growth in Chicago area remains strong, a big chunk of the new jobs are being created downtown, not in the suburbs, said Integra Senior Managing Director Ron DeVries.”

“Competition from new buildings could make it harder for some landlords to raise rents—good news for tenants. ‘You combine the supply with where jobs are happening, and I think next year is probably going to be another year of modest growth,’ DeVries said.”

“Developers aren’t backing off yet. Nearly 4,300 apartments are under construction in the suburbs right now, and about 3,000 of those will be completed in 2019, according to Integra.”

From WGBH in Massachusetts. “A tax on high-end condos is one idea that Boston City Councilor Kim Janey is considering as a potential solution to a shortage of affordable housing in the city. ‘I’d like us to be thinking about how we go after these luxury condos,’ Janey said in an interview with WGBH News. ‘If you wanted to sell your property within the first year, which a lot of flippers and speculators do, you would then be paying a higher tax when you let go of that property, versus if you held on to it.'”

“The proposals for new taxes, which received public praise from concerned residents at the hearing, came from the left-leaning Institute for Policy Studies. Chuck Collins, director of the program on inequality and the common good at the DC-based think tank, wants the city to tamp down speculative activity.”

“Collins argued that Boston’s luxury housing market is evolving into a safe deposit box for global wealth. He said that while the construction jobs and property taxes that come with high-end units have positive effects, he does not think those effects are not positive enough to offset their damage.”

“‘These are $3 million condos and up, so many of them are out-pricing local affluent markets and pushing affluent buyers into other neighborhoods and leading to a cycle of displacement,’ he said.”

This Post Has 49 Comments
  1. ‘Developers aren’t backing off yet. Nearly 4,300 apartments are under construction in the suburbs right now, and about 3,000 of those will be completed in 2019’

    Chicago has been overbuilt for a couple of years. Note to reporters: why do developers ignore supply and demand? It’s like they just plan to flip these things or something.

    1. They don’t ignore supply and demand, their problem is it takes too long to react. Prices are high, so it all pencils out, they can get financing so they start. Four years late they and everybody else arrives with an abundance of fresh supply.

      1. Yep, the planning and approval stage can be well in advance of ground breaking. My guess is that such applications are tailing off by now.

  2. “…supply is starting to outpace demand…”

    I know it’s different, cause this is housing, yada yada yada, but the usual remedy for this situation is lower prices.

    3 charts suggest housing ‘bubble trouble’ with a tech meltdown ‘yet to come’
    By Shawn Langlois
    Published: Dec 4, 2018 3:49 p.m. ET
    Is the bubble finally popping?

    Finding an affordable place to live in the tech-rich Bay Area isn’t easy these days, but it sure seems to be getting easier — a lot easier. That is assuming Wolf Richter of the Wolf Street blog has it right.

    “It’s high time to unload houses and condos in Silicon Valley and San Francisco,” Richter wrote. “Sellers are now flooding the market with properties.”

    In fact, according to data provided by the National Association of Realtors, he points out inventory has more than doubled from a year ago.

    Just take a look at this chart:

          1. Maybe lending money to the manifestly non-creditworthy is a fundamentally flawed business model, Mr. Banker.

      1. “…A country of totally dumbed-down broke-ass losers….”

        Sadly, (with emphasis on “dumbed-down”), that pretty much sums it up.

        Gut feeling: Can’t prove with hard data, but I think 90% of all households here in the OC (Orange County) are living above their means in some manner. Sadly, us, the responsible 10% end up paying for all this irresponsibilty big time. (social tension, welfare, crime, higher prices due to credit losses, etc, etc)

    1. I wonder if the loss of home equity wealth effects might have led to a loss of the ability for many to repay their credit cards? Debt kiting is not a sustainable financial survival strategy.

    2. I wonder if the increase in credit card debt and non-payment is related to health insurance premiums, now allowed to be paid on credit cards. That is another tipping point in our economy!

  3. 1) Credit, housing (high-end an CA 1st), yield curve (2yr-10yr) near inversion, bank stocks (due to said inverting yield curve), are all leading economic indicators. After almost 10 years of an artificially-stimulated economic “boom”, the cycle can be extended, but not prevented. Right now we’re running out of “extended” and slowly moving into the next, inevitable, phase.
    2) Housing inventory is “suddenly” rising – as the author of this blog has mentioned many times – due to a rush for the exits by “investors” (read speculators). Note that said speculators cannot all exit the bldg. at the same time (and at the same price).
    3) “Bubble-nomics” is a terrible way to run an economy. Centrally-planned, command economies (read socialism) have never worked, as shown by the corpses of said failed states littered throughout history. However, politicians (including their central bank cronies) gain from the graft and corruption, so on it goes.

    1. This Brookline (next to Boston) condo was sent to me today. It’s “value” has doubled in the last 10 years. Interesting price history in the last 6 months:

      https://www.zillow.com/brookline-ma/X1-SSlrd6ksjsrdaj_46au6_sse/56565464_zpid/?utm_source=email&utm_medium=email&utm_campaign=emo-dailysavedsearch&utm_term=urn:msg:20181205083624a139dd2459b573c2&utm_content=forsaleimage&3col=true

      12/4/2018 Listed for sale $649,000
      9/5/2018 Listing removed $699,900
      8/9/2018 Price change $699,900
      7/18/2018 Price change $725,000
      6/28/2018 Listed for sale $799,500 +128.4%
      7/17/2008 Sold $350,000 -14.4%
      11/21/2007 Listing removed $409,000
      11/2/2007 Listed for sale $409,000 +64.3%
      12/28/1999 Sold $249,000 +45.6%
      6/30/1989 Sold $171,000

  4. Using “Pasco County” and “luxury” in the same sentence is absurd. Most of what has been constructed in the last fifteen years is unremarkable suburban sprawl built for middle-class people willing and able to commute long distances. I doubt these apartments will be anything different.

    Before it was sacrificed to this god, most of south-central Pasco was pasture.

    1. Pasco started becoming suburban to Tampa over 10 years ago. I lived in Hillsborough County for 10 years. Pasco was kind of far out there. Early developments could hear the sounds of moon cows quite clearly. It was a natural expansion and started with Tampa Palms then New Tampa. Next hop north was southern Pasco County. Land was dirt cheap in those days.

        1. While I wasn’t born here, I’ve been local that whole time, and have seen it happen, although like many, I’ve always used “Tampa Palms” (a gated community within New Tampa) and “New Tampa” interchangeably.

          The thing about this kind of growth is that civil society is real thin on the ground. No one has roots. And people don’t necessarily want to develop them. But when you think about it, could anyone really develop an emotional attachment to Wesley Chapel?

          1. That’s funny. Tampa Palms is Tampa Palms… I always think of NT as north of the bit of 75 and Bruce B Downs, around Taco Bell/Dona Michelle Dr. I’m in Tampa Palms five days a week and it is definitely more ‘Tampa’ than ‘Pasco’ (besides the literal fact that they’re in different counties about ten miles or so apart), if we are going to compare at all.

            We lived in New Tampa (Cross Creek) for a short time and there was nothing remarkable about NT or WC, and they’re one in the same except for the county line that divides them. Everybody is from somehwere else here, so no, there aren’t any reasons to put down roots.

    2. I live in one of those unremarkable new construction homes in Wesley Chapel and from contract to current day (less than three years) it’s sad to see where the development is going, due to the stupidity of lending practices… I afford my home, I question how some families around my CDD are buying 450k and up- and for some people their homes have a lot of issues with sub-par workmanship. I won’t get started on schools or roads with these builders.

      1. I watched this same practice happen in Holmes Harbor WA on Whidbey Island….sub par construction, no honoring of warranties and then when the market tanked in 2008, people scooped up the remaining plots for development at much lower prices. This invited all kinds of problems as dubious people moved into houses that were only meant for 2 people (septic, size, etc), brining extended family, teenaged children that quickly dropped out of high school or college, got pregnant, used Heroine, broke into other homes in the hood to support the hobbit, the guy moved in near us, his daughter died after crashing into an innocent retired couple, severely injuring them. Heroine all over the scene. They had no respect for the people all around them who had bought in before, cause all kinds of problems and just brought down the entire block with the prices. It was hard to watch and we got out before all went up in smoke.

    1. Sounds like they are destined to take a bath just like the Japanese speculators in U.S. real estate did a generation ago.

  5. New build in Tustin, CA. https://tinyurl.com/y888wdvn

    Builder bought two residential lots with older 60s builds, bulldozed them and put up 8 luxury cookie cutters with zero lot lines and no green space.

    Started at $940 in August, price down to $850 as of today. As far as I know, all 8 remain unsold, though only three are listed on the MLS.

    God, I love the smell of price discovery in the morning.

    1. Look at the street view – I’ve been calling those houses “California Boxes”

      They will sometimes try and dress them up with lots of indents, other times they just leave a huge flat slab of a wall like the house on the left side of the street view – practically a giant cardboard box in shape.

      It’s been showing up around here with new construction (albeit with lots of cuts/indents to soften it visually).

      Is there a better / more proper name for that style of “Maximum volume” style of building?

      1. Is there a better / more proper name for that style of “Maximum volume” style of building?
        “Big Box House”
        “Castle for Commoners”?

      2. WA too. It’s sad and almost impossible to find a well built home with character anymore…I refer to them as “a hall” like the cheap commercial buildings you will see for community centers, the VA, Elks Lodge…just a big hall. To get anything good, it seems like you would have to custom build, know the builder for years, and stand over personally every hire that touches the house.

        We did a custom build in WA, and popped in one a week at least with a reputable builder, and during that time they had to undo so anythings they did as I would come and surprise spot check and find things like entire walls that had no insulation, the wrong kind of insulation, insulation installed wrong, misaligned framing, wavy tile in the wrong colors, they couldn’t even get the paint colors right – e.g. a room is supposed be painted white and builders love that ugly mustard color – is it pompous grass that looks like pea soup or throw up…I mean how do you get from white to that?

        I throw up my hands. Even after the build they had to come back and re-do so many things that were wrong. and then you discover more after the fact that you wind up absorbing before you sell again.

    2. I know that area.

      What the R/E agent will “forget” to tell you is that traffic (Particularly along Newport Ave) is beyond unbearable.

      Your office/job better be located within a few miles or your doomed.

    1. From the article:

      “With fewer mining operations, there is a chance that several miners could partner together to execute a so-called 51% attack, according to Ryan Selkis, co-founder of crypto researcher Messari. In such a maneuver, controlling miners can reverse transactions and stop new ones from confirming — potentially making off with billions in other people’s money.”

      Absolutely hilarious. Poor poor Alphonso and all other bitheads.

        1. Sure…then at the end the controlling miners kill each other right before the value goes to zero and the last one kills himself. With nothing left in the end but a big pile of outdated mining equipment and some unpaid electrical bills.

          “Look upon my works ye mighty and despair”.

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