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The Market Softening Has Proven Painful For Some Firms

A report from the Real Deal on New York. “When sales launched at the Baltic in Park Slope back in 2016, the condo building had the market to itself. But then things started softening, and more nearby developments started launching sales. By the end of 2018, there were about 1,000 condo and rental units on the market in just that one neighborhood.”

“As developers have rushed into Brooklyn at an accelerated rate in the last five years they have created a big batch of condos and rentals. And over the next three years another large wave of residential projects is slated to come online.”

“The market softening has proven painful for some firms that shelled out for pricey sites, said Dennis Sughrue, a partner at Pryor Cashman, who has worked with developers in Brooklyn. ‘You do have developers who bought land at high costs and are now looking at maybe adjusting projections,’ he said. ‘It’s an unpleasant exercise.'”

The Hollywood Reporter on California. “A new genus of luxury housing is set to bloom in the desert of Palm Springs and the Coachella Valley during the next 20 months. Three massive hotel development projects, all of which include a sizable portion of branded luxe condominiums, are in the works in La Quinta and Indian Wells and are set to offer turnkey second-home options with wraparound services.”

“And these condos will come to market just as many experts say a slowdown in California’s real estate boom is nigh. The year-over-year median price in Palm Springs fell 5 percent, according to Douglas Elliman, while the number of properties for sale climbed nearly 12 percent in the same period.”

“Montage International’s Tina Necrason says that when her team was conceiving the project, the lack of similar properties raised questions about pricing. ‘Normally when we enter a new market, we have a competitive set to draw from, but in this case we really didn’t,’ she says. ‘But we think there is a need that we are going to fill.'”

“The Montage will offer 30 ‘Golf Villas’ averaging about 3,200 square feet and costing in the range of $3.2 million.”

The Journal and Courier in Indiana. “Wandering West Lafayette’s Village, a few blocks from Purdue University, Friday morning, Sam Tressler couldn’t help noticing – and stating – the obvious. For one: ‘This place is a ghost town today,’ Tressler, a 1997 Purdue grad from Indianapolis, said.”

“For another: ‘It’s looking a lot different around here,’ she said. On that second point, she was referring to the skeletons of Rise on Chauncey and Hub Plus, a pair of high-rise projects expected to start leasing apartments to the Purdue student crowd in time for the fall 2019 semester. ‘So tall,’ she said. ‘So many cranes.'”

“Once finished the two projects on State Street, near the corner of Chauncey Avenue, will be part of what a new report from the Tippecanoe County Area Plan Commission calls ‘the greatest increase in multi-family units in the city’s history.'”

“As redevelopment plans come together for the nearly three acres at Chauncey Hill Mall and rumblings continue for another high-rise on the other side of State Street at Chauncey Avenue, the report said the city should ‘require compelling data from developers that supports significant increases in student-oriented residential density, particularly along the fringe areas of the campus.”

“‘We’ve certainly had overtures from developers on new projects,’ said Ryan O’Gara, APC’s assistant director. ‘We’ve told them, ‘Neat idea, just not right now. I think the point here is, we’d be wise to take a pause and catch our breath.'”

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This Post Has 42 Comments

  1. Eeee-bola Palm Springs!

    ‘You do have developers who bought land at high costs and are now looking at maybe adjusting projections,’ he said. ‘It’s an unpleasant exercise’

    Unpleasant for them, not for me or thee. All these babies and their recession rattles are annoying. Yeah, sure they paid too much. Suck it up big boys. You might have to drive your own car for a few years or (gasp) get a real job. Recessions are how stupidity like this gets worked out.

    1. “You do have developers who bought land at high costs”

      And it’s not just developers. Empty pocketed goobers everywhere paid too much. And if you paid more than $500/acre, you got burned.

      1. Yes, and I caution that the statement that Developers paid too much is big BS for many…here in the PNW where I live in areas where developers and contractors (mini developers) bought tons of average 20+ yrs ago and play time the market game. I watch plot by plot – if prices are low…they wait it out…they wait exactly until the Crook Estate Agents some how “in the know” say GO…meaning, raise the price by 40% for some poor sucker while the frenzy is in full bloom. Sure enough, some sucker buys 5 Acres to build and like a new car, the procedure has already dropped significantly in one yr.

        I decided to start listing to my once in a while gardener as he sees all the activity going on around the region as a part of his living. I remember when this big plot next to me sold, he snickers and said he had passed on it when it was half the price as due diligence “before making any offers” revealed that the cost to put in water, sewer, electricity from the street would cost more than value of the property.

        Now, a nice Gen Y couple is stuck with it, running around for months trying to get their construction loan approved as the rates keep rising.

        1. “I decided to start listing to my once in a while gardener as he sees all the activity going on around the region as a part of his living.”

          Is this the PNW equivalent of a Wall Street shoeshine boy?

  2. “Montage International’s Tina Necrason says that when her team was conceiving the project, the lack of similar properties raised questions about pricing. ‘Normally when we enter a new market, we have a competitive set to draw from, but in this case we really didn’t,’ she says. ‘But we think there is a need that we are going to fill.’”

    A white elephant in the desert. Good luck with that, Tina.

    1. Whenever you see condos becoming apartments or hotels, or vice versa, somebody fudged up. I covered the hotel bubble years ago:

      3 May 2017
      Which US hotel markets are on the bubble?
      As the hotel industry continues on the path toward a downturn, it’s time to begin looking at warning signs for which markets are poised to experience a large drop.
      By Jack B. Corgel, Managing Director, CBRE Hotels’ Americas Research

      “At a recent gathering, I was involved in a group conversation with hotel property investors who agreed that they have been “choking on the numbers” in certain U.S. hotel markets. Stated differently, their spreadsheet models explode once either acquisition prices or development costs are entered to evaluate hotel opportunities, especially in red-hot markets.”

      “They asked, “Should we pay such high prices now, given that the boom may turn into a bust?” As a college professor, I offered the standard response: “It depends, what do you think?” As a hotel market forecaster, I promised to think and write about hotel property market bubbles with regard to their questions, and likely those of others, about current pricing in local markets.”

      “Boom and bust experiences over the past few decades—with tech stock prices and housing prices, for example—have generated an avalanche of books and articles about short-term, extraordinary asset pricing volatility. A summary of these writings appears as follows.”

      https://www.hospitalitynet.org/opinion/4082501.html

      1. Hotel downturn? Don’t tell the folks building the huge new Resorts World hotel on the north Strip here in Vegas.

  3. “‘You do have developers who bought land at high costs and are now looking at maybe adjusting projections,’ he said. ‘It’s an unpleasant exercise.’”

    Isnt this whats Ben been saying all along????

    1. Jul 24, 2017
      Is the real estate double bubble back?

      “Average U.S. commercial real estate prices are now far over their 2007 bubble peak, about 22 percent higher than they were in the excesses of a decade ago, just before their last big crash. In inflation-adjusted terms, they are also well over their bubble peak, by about 6 percent.”

      “In the wake of the bubble, the Federal Reserve set out to create renewed asset-price inflation. It certainly succeeded with commercial real estate – a sector often at the center of financial booms and busts.”

      https://www.rstreet.org/2017/07/24/is-the-real-estate-double-bubble-back/

      Check out the graphs. And NYC’s bubble is even bigger. In NYC CRE prices doubled from 2014 to 2016.

      1. “In the wake of the bubble, the Federal Reserve set out to create renewed asset-price inflation. It certainly succeeded with commercial real estate – a sector often at the center of financial booms and busts.”

        There will be plenty of victims of the Fed’s incredible asset price inflation success!

    2. A lot of the developers in PNW sat on huge plots for ever, sold to suckers in spring 2017. They had owned those plots a long time prior to the last downturn.

      The house we have now sits on five acres and the contractor who built it timed it perfectly, selling it in 2005 for top dollar…then it crashed….went to REO….we swooped in at the bottom, now watching it happen all over again around us. We like the house for the most part we decided so will be here for a long time.

      1. we swooped in

        You’re not alone here. We have some other proud swoopers. May that swoopy thing comfort if prices drop way below that “bottom”.

        1. Many who bought circa 2012 seem oblivious to the false bottom the Bernanke Put created for housing in the post-2009 financial rescue operation. It remains to be seen whether the Powell Fed will continue the established practice of propping up prices if somebody on high deems market equilibrium prices to be inappropriately below the requirements of the Fed’s financial sector constituents.

  5. ‘This place is a ghost town today’…referring to the skeletons of Rise on Chauncey and Hub Plus, a pair of high-rise projects expected to start leasing apartments to the Purdue student crowd in time for the fall 2019 semester. ‘So tall,’ she said. ‘So many cranes.’

    And the developers want to build more. Why? Because they plan to flip them. Even now there are tens of billion$ pouring into new student housing (luxury of course) without regard to capacity or need.

    1. “Luxury” student housing is just got to be the biggest scam on the planet.

      Any student with common sense holding sizable student debt [yet another scam] isn’t going to spend money on non-essentials.

      If they don’t have common sense they probably shouldn’t be in college.

      1. actually they should…it makes them a better slave to the company. Cant have these youngstas freely changing jobs and moving to a new town/state because they want to.

        1. Advice to prospective college students: do first 2 years at a reasonably priced in-state community college. Transfer to a 4-year state university with a good reputation. Make sure you are majoring in something that has has a decent chance of increasing your earning potential, and try to make it coincide with something you don’t hate.

  8. “If they don’t have common sense they probably shouldn’t be in college.”

    They are about to get their best education.

    1. “They are about to get their best education.”

      With luck this “best education” they are about to get will be with them for the rest of their lives.

      😁

  9. Three massive hotel development projects, all of which include a sizable portion of branded luxe condominiums

    Like having strangers in your basement

  11. Where is Denver’s housing market headed in 2019?

    Into a massive CRATER.

    Denver Business Journal provides the following Realtorbabble narrative of lies:

    “While high prices and low inventory in Denver’s housing market dominated headlines well into 2018, 2019 is likely to see a softened market.

    That’s according to Jill Schafer, chairwoman of Denver Metro Association of Realtors’ (DMAR) Market Trends Committee.

    Though total inventory is still low, the still-significant increase has allowed buyers to take their time “a little bit more,” Schafer said. Houses have started to remain on the market a tad longer, as well – a whopping two weeks instead of three days in some cases, she joked.

    “Buyers will like the market in 2019 better,” she said. “It won’t be as frenzied.” She added that when a person is looking to buy what will likely be their largest asset — a house — they don’t want to be rushed or forced to spend every last dime.”

    https://www.bizjournals.com/denver/news/2019/01/02/denver-housing-market-2019.html

    “Forced” to spend every last dime, LOLZ loosers.

  12. Oh Professor Bear, i$ you following the high bouncing ball, whil$t biting on her Apple?

    “Look @ the rubberball bouncing UP a$ it goe$ DOWN the stair$, where will it end$ up?”

    1. AAPL down 8% today. Who know that a tech giant offshoring virtually its entire manufacturing base and supply chains to China could ever be vulnerable to trade wars & rising Chinese nationalism. But Apple is getting vulnered, all right.

      1. Citigroup’$ Panic/Euphoria model hit panic level$ after a ma$$ive drop in $tock price$ last month, says Tobia$ Levkovich, the bank’$ chief U.$. equity $trategi$t.

      2. There’$ I$ @ lea$t x5 Inve$tors whom think that they’$ can only tolerate$ so much pain @ a certain level of de$truction, can you name x4? … Eye’$ had all$ eye can $tand & eye’m knot taken anymore$!!!

    1. Feb 12, 2014,
      Making Sense of the “Bouncing Ball” In the Market

      The bouncing ball was an animated device used in the old Fleischer Studio films in the mid-twentieth century. Words to a song were displayed on the screen and a little ball would bounce from one word to the next to illustrate the rhythm of the music so the audience could sing along. I still remember old reruns of these films that would play on the local UHF station during the summer when I was growing up.

      By John Jagerson AND Wade Hansen, Editors, Strategic Trader

      Old $chool, up next: “The $linky” $chool of inve$ting during a “$lippery $lope” down.i$.up her$ on Wall $treet!

      1. The bouncing ball was an animated device used in the old Fleischer Studio films in the mid-twentieth century. Words to a song were displayed on the screen and a little ball would bounce from one word to the next to illustrate the rhythm of the music so the audience could sing along.

        Cool, thanks for the lesson. I honestly thought that was invented for karaoke.

  14. The realtor doubletalk is truly nauseating. Just like 2006-7. “little less frenzy” “great opportunity to buy now or near future” “great opportunity to save money” etc. etc. etc.

    Isn’t Colorado one of the more highly impacted places? Hope buyers are not relying on the realtor talk in making a purchase decision. Like watching livestock walking up the ramp on the outside of the meat packing plant. Sad and seen it all before. Like a bad prophetic dream.

    Will soon see stories here like the angry guy in China lamenting over the condo purchase a few months ago where the units are now selling for less. I believe this is the next step and will probably put an end to the flowery realtor talk, or maybe not. Actually there will probably be more “great time to buy” stories when that happens.

    3. Isn’t Colorado one of the more highly impacted places?

      Yeah, “impacted”. Kind of like John Wayne’s last days.

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