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Hyper-Commodification With The Promise Of Pseudo-Luxury Amenities

A report from Crain’s New York Business. “Manhattan rents fell by 1.9% last month compared to the year before when accounting for concessions by landlords, according to appraisal firm Miller Samuel. Rents are correcting themselves after prices rose beyond what the market would bear, prices are being depressed by a glut of supply, and New Yorkers are simply reaching the limits of what they can afford.”

The Bend Bulletin in Oregon. “Construction is underway at The Alexander, an apartment complex for people 55 and older on the east side of Bend, in the heart of the medical district. The 136-unit complex, expected to be finished in the spring, is part of what appears to be a much fuller pipeline of apartments than even a year ago.”

“With close to 1,000 apartments completed in the last two years, one developer thinks Bend could become a renter’s market. And recent rental data backs up that notion. Bend Community Development counts 2,878 units completed, under construction or proposed over the past two years, according to a report generated Sept. 30. That’s 30 percent more than were in the pipeline at the same time in 2017.”

“Rent growth has slowed nationwide, but even more so in Bend, said Chris Salviati, housing economist at Apartmentlist. ‘That slowdown is a bit more extreme in Bend,’ Salviati said. ‘From July through September, we were actually reporting negative rent growth in Bend.'”

“It’s conceivable that Bend is on its way to becoming a renter’s market, said Chris Looney, vice president of development at Paradigm Properties in Eugene. ‘We’re seeing it in our class ‘A’ stuff in Portland,’ Looney said. ‘Rents are down; concessions are up. It’s a renter’s market.'”

The San Antonio Express News in Texas. “City Council members Thursday overhauled two programs that gave millions of dollars in incentives to downtown housing developers but that critics say neglected San Antonio’s need for affordable housing.”

“Councilman Rey Saldaña said the city risked subsidizing a glut of market-rate housing if it couldn’t find a way to encourage more housing for families earning 60 percent or below the area median income. ‘If we’re going to be serious about the issue of a diverse downtown, we have to put up or shut up if we want that as our goal,’ Saldaña said.”

From D Magazine in Texas. “Curbed takes up a topic we’ve batted around these parts before: why are new apartments in American cities so ugly? Calling it the bland, boxy apartment boom, the website wonders why so many U.S. cities are being reshaped by the same kind of mishmash-y housing that has come to define the many Dallas inner city neighborhoods that have been the beneficiaries of new investment and development over the past decade or so.”

“These days, aesthetics, architectural ideas, and regional sensitivity take a back seat to the more practical considerations of the development market, such as building code, construction costs, and a trend in the industry to cut expenses by bypassing architects all together.”

“In a sense, what we are seeing being built in Dallas and across America is the perfect architectural expression of our age: hyper-commodification, computer-driven formality, an over-attention to surface considerations, generic, inconspicuous façades papered-over with the promise of pseudo-luxury amenities.”

“A combination of inexpensive materials and a shortened economic life cycle mean the stud-and-drywall apartments that are sprouting up won’t last as long as the heavy stone and oak creations of the Victorians.”

“‘I don’t think these buildings will be around in 40 years. They’ll collapse and be maintenance problems,’ says Denver-based writer Michael Paglia.”

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This Post Has 71 Comments

  1. ‘We’re seeing it in our class ‘A’ stuff in Portland,’ Looney said. ‘Rents are down; concessions are up. It’s a renter’s market.’

    Remember the days, maybe 6 months ago, when all these guys talked about was a shortage?

      1. Not a single word about loose monetary policy spawning the current housing bubble (and thus higher prices which is the central theme of the article).

        I am really surprised that KPCC (public radio) authored this article. I have listened to (and supported) KPCC for many years.

        Obviously, the authors don’t read The HBB!

        1. I don’t think the average person knows that monetary policy is connected to any of the things they deal with. As whoever-it-was said, if they actually knew there might be a revolution by nightfall.

          2. the average person

            My grandparents lived through the Great Depression and they never spoke of monetary policy. They were quite firm about the dangers of debt though.

        2. “Not a single word about loose monetary policy…”

          I remember the GSEs dutifully raising their jumbo lending limits whenever California housing sales slumped.

    3. From the article: “But half of those units are in the “pre-application” stage, which means a developer has met with city planners to discuss an idea, according to the Community Development Department tracking report. It doesn’t mean a formal application will follow.”

      Time will tell to see if these developers are savvy enough to no go through a formal application. I’m seeing more talk of ‘economic slowdown’, ‘bear season’, and recession for 2019 and 2020. In fact, the Bend Bulletin had this article right next to another headline on a local company “Deschutes Brewery lays off 10 percent of its workforce”.

      Uh…oh (spaghetti-O!)

  2. ‘A combination of inexpensive materials and a shortened economic life cycle mean the stud-and-drywall apartments that are sprouting up won’t last’

    And long before they are torn down it will look like crap. Check out that particle board beauty at the top of the D Magazine article. Beep-beep!

  4. The dramatic increase in rents following 2006 to 2012 , along with reducing interest rates, initiated the price boom which is in its sunset now.

    So imagine what will happen now that we have reverse conditions. Rental income is the last support and the rent bubble is beginning to erode. Not a matter of what, but when and how much the drop will be and it’s affects on the overall economy. R word eminent.

      1. Adjective
        incipient:
        In an initial stage; beginning, starting, coming into existence.

        … After 5000 years, incipient Qualitative Ea$ing $uddenly appeared.

        $ynonyms
        (beginning): beginning, commencing, emerging, $tarting, inchoate, na$cent

  5. “With close to 1,000 apartments completed in the last two years, one developer thinks Bend could become a renter’s market. And recent rental data backs up that notion.”

    Having visited Oregon on a regular basis over recent years, I have to say that Bend is way out there in the middle of nowhere. How does one explain an apartment construction boom in such a forlorn outpost?

    1. It would be difficult to find a place in the United States which was crushed worse than Bend, OR last bust. If I could short housing in any market, it would be Bend. What’s funny, the locals have bought into the “real estate only goes up” hype, AGAIN, hook, line and sinker. Unbelievable when you consider how bad things were less than a decade ago.

      2. Being a local, the “real estate only goes up” wool isn’t being pulled over my eyes. I would say it’s the cause and effect of the influx of folks fleeing areas of high housing prices (i.e. West Coast cities). They see the prices of homes here and think ‘wow, property is so cheap!’ which is only relative to where they’re coming from. The irony is, it’s that mentality feeds the insane increase in housing costs that is so far beyond affordability for those that work here. As the Prof states, ‘Bend is way out there in the middle of nowhere.’ A true statement that those of us who’ve lived here long enough, know all to well. This area will feel a slowdown in economy very acutely, and there are only a limited amount of jobs out here.

        1. “…and there are only a limited amount of jobs out here.”

          Especially family supporting jobs with real paychecks and benefits commensurate to a STEM degree.

          1. The equity locusts who flee high cost-of-living areas and cash out and then move to relatively lower cost-of-living areas and overpay, thus pushing up prices, will not be hurt as much as those locals who are trying to compete with said equity locusts. A lot of the CA transplants have rode an undeserved equity bubble. If they timed it right, they have exited and maybe purchased in a different local. Sure, when the tide recedes their purchase in Phoenix, Tahoe, Boise, or Salt Lake will look silly. But it will hurt a lot more for those locals who tried to compete and “won” the bidding war but don’t have an inflated prior home sell to cushion the downturn.

  6. ft.alphaville
    Part of the Someone is wrong on the internet series
    The bitcoin price is wrong
    an hour ago
    By: Jamie Powell

    In 2017’s winter months, crypto-shills were everywhere. On television, at the gym, driving your Uber, at your mother’s book club, and strewn across the face of “respectable” media:

    “Everyone is Getting Hilariously Rich and You’re Not”

    That’s from the New York Times before you ask. Date? 13 January. Bitcoin is down 76 per cent since then; Ethereum, 93 per cent. Hilarious.

    But after the heart-attack in crypto-thingies over the past year, you’d think some corners of the financial world would have dialled down on giving airtime to those pushing a decentralised future. After all, crypto has turned out to be a total nonsense. And an expensive mistake for some.

    But no.

    Here’s a piece, published Thursday, from a very serious financial institution called Bloomberg on bitcoin bull Thomas Lee. Apparently he’s still long. And he wrote a note about why, so why not uncritically reprint some of it? Cool.
    …

    1. The “crypto bubble” will be looked back upon as the dumbest bubble in the history of bubbles. Speculators buying and selling “nothing” to each other, running the price of these nothings as high as almost $20k “apiece.”

      1. Marketwatch.com reporting today that bitcoin is within 5% of breaking down thru $3K.

        Congratulations Bitcoin for yet another non-productive, capital wasting scam! Did you take your cues from the REIC?

  7. “‘…I don’t think these buildings will be around in 40 years. They’ll collapse and be maintenance problems,’ says Denver-based writer Michael Paglia….”

    Here in the OC, a number of issues:

    1) Quality of materials is at an all time low. Can’t believe the junk materials used currently to build homes.

    2) Lack of skilled tradesmen or [additionally] tradesman who give a flying f* about craftsmanship.

    3) Buyers who simply don’t know the difference between a quality, correctly constructed home and the junk currently marketed.

    Part of the issue, is that Joe Average has never *entered* a quality home so he doesn’t know what to look for.

    4) Big box “hardware” [term used loosely] that sell junk and only junk.

    Not to be politically incorrect, but virtually all of this junk is made Chindia.

    Sadly, in the OC, there are a few traditional lumber yards, construction material businesses, hardware stores still around, but their ranks are shrinking.

        1. Forced “EXERCISE!” compliance routine in a dome$tic $etting. (cancel$ the fitne$$ member$hip + bring.home.the.germs vector)

    2. “Part of the issue, is that Joe Average has never *entered* a quality home so he doesn’t know what to look for.”

      What $alary does Jane or Joe Average require to enter e$crow on a “quality home” $helter in Thee.Oh.$ee these day$?

      1. Estimate 20% down, household income >>$300K required.

        However, if rates for a typical 30yr mortgage return back to historical levels, (>7%) , household income >>150K required.

        This example is Exhibit “A” why loose monetary policy (thank you Fed for QE) has killed home ownership for so many.

  8. Multifamily builders overbuild every cycle in proportion to availability of cheap credit/low rates. This time around they’ve outdone themselves, as well as overshooting into the next year or more with projects that are well underway and can’t easily be stopped. False economic signals from the Fed led to epic malinvestment; somehow, mostly “luxury” apartments are getting built, while most demand is at lower tiers. Brilliant. Somehow, the lower end apts. don’t “pencil out”, although I don’t pretend to understand this strategy, but it seems to be due to said false economic signals. BTW, based on the D Mag. article, it turns out that those “lux” apts. aren’t really so “lux” (read cracker boxes).

    Anyway, rents lead housing (among other indicators), and so the cycle is turning, since rents are starting to decline. The “shortage” narrative is falling flat now in both single and mult-family, since single-family speculation is dead and multi-family massively overbuilt, along with major affordability issues now in both markets.

    It will be interesting to see how this plays out, but I’ll wager, “it’s not different this time.” Credit leads the economic cycle and it’s contracting. The economy is VERY sensitive to interest rates, due to ginormous debt levels. The Fed can’t raise rates much more, but can’t not raise rates either or they won’t have anything to address the next recession (read “between a rock and a hard place”). The Fed – and by way of our centrally-planned, command economy – the 99%’ers are – once again – screwed as “The Everything Bubble” is popping and there’s really not much that can be done at this point, since the artificial stimulus is being withdrawn and the ensuing and significant contraction is “baked into the cake.” On the positive side, there should be some really great bargains on RE coming up in the next 2-3 years, assuming the vulture-capitalists don’t scoop everything up again this time. I smell another round of taxpayer bailouts, but maybe torches and pitchforks this time instead (?). Boom/bust as far as the eye can see. End the Fed.

    1. . . .meanwhile, the NAR are currently saying that we have a housing shortage to the tune of 2.4 Million! Reminds me of a lecture I went to in 2009 where the speaker’s main point was that California still had a shortage of homes, so prospective buyers shouldn’t worry about home prices falling any further.

    2. This is the kind of building you get when you have land bubbles. Someone was talking about zoning changes in Utah to address “affordable housing” – IN THE DESERT WHERE THERE’S LAND AS FAR AS YOU CAN SEE.

      This whole situation is one big joke created by the Fed and the government. But it’s not a funny joke, it’s going to be a very, very painful one.

      1. ” … it’s going to be a very, very painful one.”

        Being a paid “e$crow gold member” of the “True.Beliver$” club does have its cost.$

          1. In Utah, the problem is pollution. The mountains trap the vehicle pollution and during the winter months the dreaded “inversion” hits where the PM 2.5 just hangs out and wreaks havoc on air quality. Asthma exacerbation, chronic obstructive pulmonary disease, higher incidence of stroke/heart attack, pneumonia, etc. It’s nasty stuff.

            Also, land use is actually a bad problem along the I-15 corridor. All the cities are basically full and just run one to another. Some in-fill is still happening, but Utah has a strong NIMBY-ism drive to limit high density (two major developments failed). So the developers build out in the sticks, which creates more traffic due to long commutes, and more inversion. Ultimately, more wasted life spent in a vehicle, and shorter life spans from the pollution. This is what “success” looks like according to the governor.

    3. assuming the vulture-capitalists don’t scoop everything up again

      What ever they might dream of doing, we’ll see them get their asses handed to them quite seriously first.

  9. “In a sense, what we are seeing being built in Dallas and across America is the perfect architectural expression of our age: hyper-commodification, computer-driven formality, an over-attention to surface considerations, generic, inconspicuous façades papered-over with the promise of pseudo-luxury amenities.”

    These soulless, Soviet-style drab apartment buildings, shoddily constructed so developers can maximize their profits, perfectly exemplify how our Keynesian central planners have given us a command economy where the financialization of everything reins supreme.

    1. “In a sense, what we are seeing being built in Dallas and across America is the perfect architectural expression of our age: hyper-commodification, computer-driven formality, an over-attention to surface considerations, generic, inconspicuous façades papered-over with the promise of pseudo-luxury amenities.”

      That’s the best line this week… possibly this month!

      1. Agreed. It does sound rather poetic, no? It might make a good for a good vinyl wall art on some tacky McMansion.

  10. Oh dear – now that the Fed has presided over a tripling of public and private debt since 2009, the inevitable debt downgrades have begun in earnest as FBs and speculators are pulled under by the riptide of unpayable debts and sinking valuations. Now the mind-boggling fraud of allowing greedy corporate CEOs to borrow recklessly to buy back their own stock at bubble valuations is going to come back to haunt “the markets.”

    https://www.zerohedge.com/news/2018-12-14/credit-verge-crisis-176-billion-rated-bonds-downgraded-bbb-q4

    1. “When you combine ignorance and leverage, you get some pretty interesting results.” – Warren Buffett
      and
      “You never know who’s swimming naked until the tide goes out.” – Warren Buffett

      🙂

  11. Good morning!

    “Economists have repeatedly issued warnings in the past several years about skyrocketing global debt caused by central banks flooding national economies with cheap money. In 2008, global debt was only $177 trillion, compared with $247 trillion today. In the U.S. economy, household debt has dramatically worsened, automobile loans are far exceeding their 2008 peaks, and unpaid credit card balances are just as high as the period preceding the Great Recession. -Newsweek”

    Have a nice day!

    CFOs Predict A 2020 Market Crash And Recession In 2019
    http://www.shtfplan.com/headline-news/cfos-predict-a-2020-market-crash-and-recession-in-2019_12132018

    1. “Have a nice day!”

      Dimini$hing Global QE II disbur$ements = “dotted line$” $ignaturee’s using “di$appearing” ink signing implement$.

      (plug in the “$mall return$”algorithm tool) to predict po$$ible future outcome$)

    2. By definition, I believe a recession is three quarters of negative growth. Not gonna happen in 2019. Maybe summer of 2020.

      1. ” … a rece$$ion is three quarter$ of negative growth”

        Cast yer eyes @ Mr. Ben’s HBB … or … con$ult an “e$crow weatherper$on”, … deci$ions decision$.

        Bob Dylan sings: “… a hard rain$ gonna fall”

  12. Denver has tens of thousands of “luxury” rental units sitting vacant that nobody wants to rent.

    “This sucker could go down” — George W. Bush

    1. Denver has tens of thousands of “luxury” rental units sitting vacant that nobody wants to rent.

      Didn’t you help build them? 🙂

    2. “This sucker could go down” — George W. Bush

      Translation: “how to a$$it a democrapt to get elected”

      1. Jib$ & Jab$ reply$: The Federal Re$erve is a non government entity, that function$ “independently”, to a$$ist other Wanker Banker$, more or le$$.

  14. inventory 20% lower hear in gov funded oblast s of central soviet
    Melania cut some ,but trump is spending more

  15. As a 96 year old man, it is to visualize what has happened in the past years. My first home I bought was 1,000 square feet, concrete slab, in new subdivision, which cost me $11,500 with payment of $55 per month,which indicated that it cost the developer $10 a square foot to develop and build. 1954, Salary $350 per month

    First home, 1954, salary $350, home 1,000 sf, concrete slab , stucco$1comp shingle home 2 years old, cost $11.500, cost per sf, $11.50
    Second home, 1958, salary $650, 1400 sf, shake, stucco, built in, 4 br,cost $14,500 cost per sqft, $10 in Santa Barbara county
    Next home 1962, salary $800,1400sf, bi, slab, stucco, air conditioned, shake, cost $14,500, in Kern county;
    Next home, 1966, 1400, redwood siding, good tract, 8,000 foot lot basement ,down slope, hardwood, bi’s, furnace no air, cost $25,000 salary $1,000 cost, about $20 per square foot.
    present value about $600,000 or about
    cost per sf,$400
    The first house is about $600K the second house about $900K the third house about $300 K, according to Zillow

    really strange how that all happened.

    5

    2. really strange

      Are those houses where people are now paying 9 x their salary vs you paying 2+ x salary? Strange indeed.

        3. “My first home in 1953, original price when developed was $9,995”

          According to the Minneapolis fed “avg-cpi” data…
          $9,995 * (250.5 / 26.7) = $93,773

          That’s 1953 dollars converted to 2018 dollars!

  16. “I am a debt guy. I am a low interest guy.” Suckers!

    In Just 2 Years, US Debt Grew The Size Of The Entire Brazilian Economy

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