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Huge Backlogs That Aren’t Being Financed Due To The Glut

A report from KVAL in Oregon. “Rent prices in Eugene have gone down the past two months, according to a San Francisco real estate research firm. The Lane County Rental Owners Association has seen this trend as well. The president of the association says the reason for the drop is simply supply and demand.”

“‘It used to be that you would put an ad up, and you’d have 20 applications within a few hours,’ said Tia Politi, the president of Rental Owners Association. ‘Now it’s taking longer, the vacancy factor, and rents are leveling off and in some cases dropping.'”

The San Francisco Examiner in California. “The most important package of development policies for the Bay Area — that you’ve probably never heard of — is being decided today. Going by the name of CASA, this invite-only assembly of movers and shakers was convened in late 2017 to craft a ‘grand bargain’ with market-rate developers in exchange for their support for affordable housing.”

“The real estate interests in CASA, unfortunately, seem to be mainly focused on incentives in urban core neighborhoods and hot market cities. The Big Three cities of the region — San Francisco, Oakland and San Jose, which carry responsibility for almost 45 percent of the entire region’s housing — have already exceeded their goals for market-rate production, and have huge backlogs of approved units that aren’t being financed due to the glut of high-end development.”

From Boston 25 News in Massachusetts. “With the growth of online rental sites in recent years, Alisa Magnotta Galazzi, CEO of the Housing Assistance Corporation in Hyannis says more investors bought homes on the Cape with the idea of renting them out in the summer. ‘In fact, we lost 3,000 year-round housing units in the past five years and gained 6,000 seasonal homes. What we’re seeing is there is a glut of seasonal rentals on Cape Cod and people aren’t making as much money as they thought.'”

From Bisnow. “Student housing experts say a recession is coming as early as next year. But a downturn could prove once again that the student housing industry is recession-resilient, experts at Bisnow’s Annual Student Housing West conference said.”

“Despite a possible recession, NB Private Capital CEO Blake Wettengel said this is a really exciting time for student housing. He is bullish on the industry making it through another downturn. ‘We’ve been telling everybody for years that we are recession-proof,’ Wettengel said. ‘It’s time to put our money where our mouth is.'”

From Skift. “WhyHotel, a company that runs pop-up hotels in luxury apartment buildings, said Wednesday that it had raised $10 million in a Series A round of investment. So far this year it has instead created a series of ‘pop-up hotels’ that are really glorified vacation rentals available by the day, with daily housekeeping service.”

“Chris Hemmeter,managing director of Thayer Ventures said that there’s a great deal of capital in a low-interest rate market chasing high returns and that the alternative lodging, soft brand category provides the impression of having great potential scale in a large addressable market and against a fragmented industry backdrop of no dominant players.”

“But investors need to remember the risks. Hemmeter said, ‘Just because VC money is pouring in doesn’t mean all bets are good bets!'”





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  1. ‘The Big Three cities of the region — San Francisco, Oakland and San Jose, which carry responsibility for almost 45 percent of the entire region’s housing — have already exceeded their goals for market-rate production, and have huge backlogs of approved units that aren’t being financed due to the glut of high-end development’

    It’s been a few months since we learned that in downtown SF, every single unfinished or proposed residential project is for sale.

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        Aug 15, 2018 – The owners obtained a $45.8 million loan, which was wrapped into … one of the largest mortgage-fraud investigations since the financial crisis.
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        Aug 16, 2018 – Federal officials are in the middle of one of the largest investigations into mortgage fraud since the financial crisis. Investigators are looking into …
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        Aug 19, 2018 – Federal authorities are undertaking one of the largest mortgage-fraud investigations since the financial crisis. The probe focuses on whether …

  4. “‘In fact, we lost 3,000 year-round housing units in the past five years and gained 6,000 seasonal homes. What we’re seeing is there is a glut of seasonal rentals on Cape Cod and people aren’t making as much money as they thought.’”

    This is what happens when you turn shelter into an “asset class” and the entire market is taken over by specuvestors.

    1. Well, hopefully taxes hit them as well and they all decide to sell.
      I can’t imagine holding on to a home that you don’t live in and have to maintain and is losing you money.
      Hopefully some weak hands panic and drive the price down which makes more people panic

  5. ‘Despite a possible recession, NB Private Capital CEO Blake Wettengel said this is a really exciting time for student housing. He is bullish on the industry making it through another downturn. ‘We’ve been telling everybody for years that we are recession-proof,’ Wettengel said. ‘It’s time to put our money where our mouth is.’

    Every mania needs a little story and this is it in student housing. And of course land is too expensive so most of it has to be luxury, just like everything else. Student housing is even more overbuilt than luxury apartments but they keep building because the financing is there.

    1. is it demographic proof? You might be better off speculating in funeral plots. As boomers die off there will be more demand

      1. The idea is that more people go back to college in a recession. Problem is they built too much and the net student population is declining.

    4. “…‘We’ve been telling everybody for years that we are recession-proof,’ Wettengel said….”

      Mr. Wettengel may have to brace for a disappointment.

      Currently reality is that increasing number of students do coursework on line and never set foot on a fancy campus. Why? It costs too much! (Hardly a revelation).

      My own company sponsors (for free, BTW) technical training online during normal paid work hours as well as classroom based in our building. No “luxury” student apartment required. Great courses. No nonsense. No BS. Just real information to help everyone succeed (and get better raises).

      Got to admit there is a downside, no more football, crazy dorm parties or beer busts.

      1. I completed my engineering master’s degree online from a university I never visited, in a state I haven’t been to in at least 20 years. Good graduate programs are insane if they don’t offer online options.

        1. Seems like the ABET certified engineering programs had substantial lab coursework too, but that was thirty years ago for this dinosaur.

          1. The do, at least for undergrad. The practice was (and maybe still is?) for a university to seek ABET accreditation for only the undergraduate degree – since ABET would not accredit both undergraduate and graduate programs (it was one or the other).

            Not sure if that’s changed, but none of the graduate programs I looked into were ABET accredited.

      2. A lot of kids attend local community colleges while living with parents to save money. Take on line for as many of remainder as possible, the finish at a state school for remainder. It is a very cost effective approach and popular topic amongst high school seniors. I have one and have heard the discussions. It is real.

  6. ‘a company that runs pop-up hotels in luxury apartment buildings…raised $10 million’

    This has to be some bizarre convergence of stupidity. Can’t rent the new apartments? Turn them into hotels run by money losing start ups!

    1. It reminds me of money pouring into Pets.com, the cutting-edge company with a business model of shipping massive 50lb bags of dog food all over the place.

      1. How is the Chewy.com business model different from Pets.com model of 20 years ago?
        I don’t understand how Cheey can make money except on expensive treats and accessories.

    1. Thank god – I rent in Petaluma -$2800 for one bedroom house. Had to move twice in last 2 years.
      A home I rented for 1600$ until 2 years ago sold for 750,000$ – it was a 1949 blue-collar job in a good neighborhood. These people are nuts or stupid. Specuvestors are scum.
      Tbone

  8. For some easy side cash, I Airbnb’d a part of my old house and was always booked solid whenever I posted it. Every waiter on planet earth would come up with his girlfriend and blow cash in town and then come back to my place with a nice bottle of vino. When this debt-fueled party comes to an end a lot of Vacay Rental Landlords used to easy cash are gonna get throttled. The Airbnb Bubble is real.

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