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Every Day Multiple Price-Reduction Announcements Pour In

A report from GlobeSt on Florida. “A Franklin Street broker who recently completed the sale of a ‘workforce’ housing complex here explains the several factors behind continuing investor demand. ‘This includes a fear of oversupply in the Class A+ new constructions, a lack of construction in apartments and single family for the workforce segment, and a lower perceived downside risk,’ Darron Kattan, managing director of multifamily investment sales at Franklin Street’s Tampa office, tells GlobeSt.com.”

“He observes that there is already a trickle down if Class A stumbles that is already starting but there would have to be a significant shift in that space to have a real dent in the workforce segment of the market.”

From King 5 News in Washington. “What would it take for you to sign a lease right now? A good price? A $1,000 Amazon gift card? Kim Reidy is Director of Relocation at the Seattle Rental Group. She has a good pulse on the region’s rental market and says now is a good time to sign a lease.”

“According to Zillow, rents in Seattle are down 4 percent compared to this time last year. ‘Having the vacancies that we’ve had this time of year, I certainly think this is a great time for people to get out and rent,’ said Reidy.”

“What is extraordinary is the amount of incentives that new buildings are offering to fill vacancies. ‘They’re usually attached to large big buildings that are just opening, they’re sitting there with 300 openings, they’re not going to fill them all in one month so they can incentivize,’ said Reidy.”

The New York Times. “More than 20,000 new apartments in New York, both for sale and for rent, will open their doors this year — and likely just a fraction will find residents by year end.”

“The affordable ones, of course, will attract thousands of applicants, but the bulk of the new units — in gleaming towers, many of them conceived at the height of the last housing boom — will enter a saturated market, where buyers and renters have ample choice and little incentive to rush.”

“At the current rate of sales, it will take more than six years to sell all of the new development in Manhattan alone, which totals almost 8,000 units, said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers and Consultants.”

“‘I still haven’t seen it,’ said Ann Cutbill Lenane, an agent with Douglas Elliman, of the two-bedroom she bought for herself after closing on a similar unit for a client. Ms. Lenane, who went into contract about 18 months ago, said she was impressed by the amenities. ‘Did I buy it a little high? Maybe,’ she said.”

From Crain’s New York. “The city’s real estate market has become a prime example of a national housing market that may be in the throes of a downturn. Home prices in Manhattan slid more than 3% in November versus the year before, according to StreetEasy data, with 18% more homes on the market that month than during the same period in 2017.”

“Frederick Peters, Warburg CEO, emphasized that properties most likely will linger on the market if sellers cannot adapt to the shift in dynamics. ‘Every day in our office, multiple price-reduction announcements pour in via email; sometimes it takes two or even three such reductions before a property enters the salability zone,’ Peters said.”

The Los Angeles Times in California. “The first step into a posh new apartment building near Marina del Rey feels like a mistake. There’s no lobby — instead the door opens to a lounge and kitchen. The idea is to encourage mingling, which is part of the appeal of a building where tenants have their own bedrooms but share common areas with people they don’t know.”

“Welcome to ‘co-living’ in a time of sky-high rents. And while stretching out on a sofa with a stranger may strike many as unusual, it is not much of a leap to people already comfortable with Uber and Airbnb, said Ken Kahan, founder of the Los Angeles-based development company.”

“‘People get in other people’s cars and sleep in other people’s bed’s,’ he said. ‘This is a natural expansion of the housing market in the shared economy.'”

“Individual tenants at C1 pay at least $2,000 a month in the nearly $40-million building, which just opened. C1 even offers Netflix and maid services to head off squabbles over whose turn it is to vacuum the floor and scrub the sink.”

“A portfolio of buildings in an established property class can get funded by banks, purchased by pension funds and even securitized in real estate investment trusts.”

This Post Has 69 Comments
  1. ‘He observes that there is already a trickle down if Class A stumbles that is already starting but there would have to be a significant shift in that space to have a real dent in the workforce segment of the market’

    These are the types of people your pension fund is riding on.

    ‘People get in other people’s cars and sleep in other people’s bed’s,’ he said. ‘This is a natural expansion of the housing market in the shared economy.’

    I’ve long said one of California’s biggest problems is people out there do too much drugs.

      1. It sort of is. As they state, their target is the post-collage, per-marriage single person with their first ‘professional’ job, who doesn’t yet want to bother with a lot of the overhead and maintenance of a more traditional apartment (hence the maids, and bundled utilities).

        It’s a niche market and going to stay one.

        Did you notice the “4 weeks free” sign on the building in the first photo? Even with the competitive and lower rents they claim, they need to offer discounts. I wonder if there some disease spreading in the area? EeeBowl LA LA ?

          1. I still don’t get why outfits can’t figure out video capable work-at-home. I understand that some jobs are best done in person, but a hi-tech startup could do better. Especially if they need to pay LA salaries.

          2. There is nothing special to figure out. I spent the last 15 years working remotely and it is pretty easy to do. You know that I took the “remote” part of it to an extreme. It is very efficient, no commuting costs for me and no office overhead for them.

            I did however avoid the video part of conferencing. I didn’t think having a beach in the background was a good idea when talking to my cubicle dwelling colleagues.

          3. I still don’t get why outfits can’t figure out video capable work-at-home.

            They can. They choose not to.

  2. ‘A portfolio of buildings in an established property class can get funded by banks, purchased by pension funds and even securitized in real estate investment trusts’

    So they just plan to flip it. How original…

  3. Here’s an interesting read …

    “Confessions of an Economic Hit Man – Wikipedia”

    (snip)

    “Economic hit men (EHMs) are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign ‘aid’ organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet’s natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.”

    Personally I think this an excellent business plan, one I enjoy implementing on any of my numerous customers that are stupid enough to fall for it. Which is most of them.

    https://en.m.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man

    1. (another snip)

      “According to his book, Perkins’ function was to convince the political and financial leadership of underdeveloped countries to accept enormous development loans from institutions like the World Bank and USAID. Saddled with debts they could not hope to pay, those countries were forced to acquiesce to political pressure from the United States on a variety of issues. Perkins argues in his book that developing nations were effectively neutralized politically, had their wealth gaps driven wider and economies crippled in the long run. In this capacity, Perkins recounts his meetings with some prominent individuals, including Graham Greene and Omar Torrijos.”

      I like it, I love it, I want some more of it.

      1. neutralized politically, had their wealth gaps driven wider and economies crippled in the long run

        Karma is proving to be a b*tch.

    2. Really interesting. I’ve added him to my reading wishlist.

      From a quick bit of reading it seems there a some who want to discredit him as nothing more than a guy who found some false Schick that sells books, yet it’s a story that we’ve seen little signs of being true all of my life. My hunch is that there’s some of both – core rarely acknowledged truths, which the author found success selling (thus the books that follow) so he packages it the best he can.

      1. I would say don’t read, you’re not missing much. I listened to this one on Audible awhile back and it just wasn’t that interesting. You’ve basically got the gist of everything you need right now.

  4. “Welcome to ‘co-living’ in a time of sky-high rents. And while stretching out on a sofa with a stranger may strike many as unusual, it is not much of a leap to people already comfortable with Uber and Airbnb“

    Im not to confident this will fly over well with most but…. this could work out for the struggling realtors! Even if they can’t afford the rent they can squat for a few months, setup the kitchen as a a ramen and moonshine bar, watch repeats of flip this house in the common tv area, sit together on the rooftop lounge and warm it up by adding a few trash can fire pits. A true realtor commune!

  5. From Forbes: Should You Wait To Invest In Real Estate Until The Housing Market Crashes?

    “I’ve been seeing a lot of posts on Facebook about another housing crash coming. Many people assume there will be a crash just as bad or worse than the last crash we had about 10 years ago. Since the markets are obviously going to crash, they reason, they will wait to buy real estate until prices plummet…”

    ——————————————————————————————-

    Word is starting to get out. The mania has ended. The prophecy should self-fulfill. We continue to wait, but the light at the end is growing nearer by the day.

    1. I recall reading this article. Another “don’t spook the herd or it will actually happen” warning from a realtor.

    2. “I am certainly not sitting on the sidelines hoping for a crash that may or may not happen, and neither should you.”

      The article was, of course, authored by a broker who is trying desperately to continue luring the Greater Fools in.

  6. “What would it take for you to sign a lease right now? A good price? A $1,000 Amazon gift card?”

    Is it me or are these UHS peeps sounding a bit desperate…

  7. The Glut Has Indeed Come To Pass

    April 19, 2018

    From Bisnow on Florida. “‘Palm Beach is completely on fire,’ said Todd Michael Glaser, a high-end homebuilder who made his name in Miami but has lately been concentrating on Palm Beach County. ‘I’ve never seen the amount of $8M to $70M homes as in the last three and a half, four months. It’s staggering.’ It’s not just single-family homes that are hot, but a new wave of high-end condos and mutifamily apartments, especially in downtown West Palm Beach.”

    “Kolter Urban President Bob Vail, who is developing the Alexander, said that there is something of an arms race for amenities in the new supply of high-end homes. ‘You see that across the U.S. There are [apartment] buildings in Atlanta, Denver and Dallas that are nicer and more fully amenitized than condominium units, because that’s what it’s going to take to get people to choose that building,’ Vail said. ‘It’s just sort of a differential advantage. It’s really become a race in those more in-demand markets.’”

    “Though the market is healthy now, the developers agreed a slowdown is possible as new supply takes time to be absorbed, construction costs rise and actionable sites get harder to find. Low salaries in Palm Beach County mean that not many workers can afford high rents. When an audience member asked whether they were concerned with an economic downturn, Vail responded half-jokingly, ‘Condo developers, we don’t forecast those kind of things, you know what I mean? We’re just go, go go,’ he said. ‘And the faster we go, the faster we get to the closing, and then, I’m not going to say we don’t care, but … ‘ The audience chuckled as he trailed off.”

    http://thehousingbubbleblog.com/?p=10407

  8. Morning email:

    “17 open houses today in Santa Cruz and nearby”

    Looking back at previous emails the max throughout the year has been no more than 10 and average 2-3. Hope them realtors brought some cleaning supplies. Raining non stop for the next 10 days

  9. ‘The city’s real estate market has become a prime example of a national housing market that may be in the throes of a downturn’

    Note how this concept is creeping into the MSM language. Last week it was succumbing to the global downturn or something like that. This is how the Titanic dodged that iceberg.

    But how can these global markets be…

    It’s Not Just Toronto And Vancouver: A Synchronized Global Housing Downturn Is Here

    https://www.msn.com/en-ca/money/homeandproperty/its-not-just-toronto-and-vancouver-a-synchronized-global-housing-downturn-is-here/ar-BBRQkE4

    You read it here years ago.

      1. Careful Oxide, I listened to this one last week:

        https://www.npr.org/sections/health-shots/2018/12/31/679832549/when-too-cute-is-too-much-the-brain-can-get-aggressive

        When Too Cute Is Too Much, The Brain Can Get Aggressive
        NPR
        John Hamilton
        December 31, 2018

        “”When people feel this way, it’s with no desire to cause harm,” Stavropoulos says. The thoughts appear to be an involuntary “response to being overwhelmed by a positive emotion.

        “Cute aggression is often baffling and embarrassing to the people who experience it. Stavropoulos says they think, “This is weird; I’m probably the only one who feels this way. I don’t want to hurt it. I just want to eat it.””

        1. “I don’t want to hurt it. I just want to eat it.”

          A cat’s secret thoughts about its master…

      1. I skied in my youth back when bindings still had a cable. I saw several broken tibia injuries on the slope… skeletal trauma just dampens the mood.

  10. “There’s no lobby — instead the door opens to a lounge and kitchen. The idea is to encourage mingling, which is part of the appeal of a building where tenants have their own bedrooms but share common areas with people they don’t know.”

    A common kitchen area is a great way to encourage roach infestations. I remember well from my college dormitory experience which included this feature. I had a choice to either clean up after my roommates or develop a tolerance for roaches. The little critters were gross, but the dishes were worse.

    1. Naah. You only need to make $159k to qualify to rent the cheapest 3 bedroom apartment listed (4396/mo @3x gross income).

      According to my ex-wife who hasn’t worked in nearly 30 years, “there are hundred thousand dollar paying job on every corner”* so there should be plenty of prospective renters.

      * referring to a smaller town in Texas at the time, about 15 years ago. She also believes she is entitled to alimony despite having remarried.

      1. “She also believes she is entitled to alimony despite having remarried.”

        A former co-worker’s ex-wife filed her taxes claiming the kids as her dependents while he was paying all of the expenses. The IRS turned her down, again and again, but each year she pulled the same stunt just to lengthen his tax return wait. It was mental harassment, but nobody in the court system would hold her feet to the fire.

        1. I don’t want to get started on all the crap ex wives and soon to be’s can and do pull. I’ll be here for month.

          It’s totally politically incorrect, but when it comes to divorce, my direct observation (of many, not just my own) is that the wife almost always has a massive sense of entitlement as to what “she is owed” by virtue of having convinced someone to put a ring on her, that far out-shadows anything similar that her husband may have.

          Ugh.. I need to change topics.

          1. My (non-ex) wife’s thoughts are nothing like that. She always errs on the side of giving too much.

          2. My (non-ex) wife’s thoughts are nothing like that. She always errs on the side of giving too much.

            My ex was an unselfish person for the first dozen years or so. She apparently had bipolar triggered by medical use of steroids Jane-Pauley-style and turned into a very selfish person. “In sickness and in health” got me through about another 10 years but in the end wasn’t enough. Even with the move to the trailer park it was not possible to stay solvent when married to someone that was determined not to.

            The things that can happen to you in life are kind of amazing sometimes.

          3. “In sickness and in health”

            My Ex refused treatment for bipolar. She dissipated everything and then left. There was nothing left to fight over. There were four children, but she was willing to leave them behind. They and I survived together.

            “Until death…” I could go to the edge of that but not all the way. There were four children to sway me, thankfully.

            My “trailer park” phase was redemption.

          4. “Until death…”

            Oh yeah :-). I’ve told people…I wasn’t suicidal and I wasn’t homicidal. But at one point I did really wish one of us would die and I didn’t really care which one. And then I finally broke and moved on.

      2. To be fair, those numbers usually those income requirements are typically the entire household. So if you had 3 individuals making roughly $55k, that would suffice. This is how we do it at the complex I manage.

        1. True that. Even so, that specific complex means three people making median income or higher for a bedroom + bathroom and a shared kitchen & living area.

          Off topic:

          What I noticed when I was living on the north end of the island a few years ago was the very intense competition for rental houses suitable for a single family with kids.

          The most common situation I encountered talking to people would be that some guy from outside the state in a MCOL of LCOL area got a job with Amazon or similar and this paid better than what the could find in Kansas, South Carolina, etc. This would be a guy with a wife (maybe worked, but not tech usually) and 2 or more kids. Coming from a non-big city, they decided they needed a back yard and good schools and all that goes with it. Dad’s new job was paying $130-$160K, but the big deal was the stock grants … *IF* he could make it long enough to vest. Amazon’s initial hire grants are 4 years – vesting 5% in year 1, 15% in year 2, 40% in years 3 and 4 – which is great for them as over half their hires don’t make it past year 2. Anyway, they guys could afford to pay $3000 to $4000 (or a bit more) a month to rent a house and there were more of them than available inventory. They were trying to avoid a 1 to 2 hour commute (easy to hit if you have transfer buses, or are too far down I-90 or I-5/405) and there just weren’t any 3-bedroom apartments to be found in the city. (all the units targeting the younger employees).

          Not even sure why I am rambling on tonight…

    2. I visited Denver once. I wasn’t impressed, but that was 20 years ago. It seemed kind of like Kansas, since the mountains were so far away.

      1. The mountain view from downtown Salt Lake City or even Los Angeles on a clear day is more impressive than Denver’s.

    3. Yes, Denver is too expensive, as is most of the rest of the U.S., due to housing bubble 2.0, courtesy of the Fed, who replaced your $ with FRNs (aka monopoly $). print.

      https://www.denverpost.com/2019/01/04/denver-housing-hot-cold-2018/
      Denver housing market suffers dramatic swing in 2018
      Heated first half was followed by a frigid ending
      ““The big issue right now is that we have a larger amount of inventory, which is great for buyers,” said Sunny Banka, an Aurora Realtor. The question is, where did the buyers go?”

      Apologies to Pete Seeger –
      “Where have all the buyers gone,
      Long time passing,
      Where have all the buyers gone,
      Long time ago,
      Where have all the buyers gone,
      Priced out of the market, every one,
      When will they ever learn?
      When will they ever learn?”

      A couple of selected comments from the article:

      1) “There isn’t a house on the market worth the price. These same houses I remember seeing for a 3rd of cost. Did the house get better? NO… were there upgrades? NO … Did ANYTHING change with the house that was 1/3 of the price? nope… It’s just been years of one sucker after another paying too much and passing the cost onto the next… But are the houses worth it? Not for anyone that can do math. These days, to just not take a loss, you better be in that house a minimum of 10 years. All we are is a society that overprices and overvalues so you can get yours and screw the next guy. Products (houses) dont’ improve, people simply get convinced they are magically worth 3 times more… ah the power of marketing and suggestion with dime-store logic to fool the working man. There are MUCH better lower volatile ways to spend your hard earned cash without a commitment and chance to lose everything. They simply pray on all the out of staters that have more money and willing to overpay because it’s cheaper than where they came from.”

      2) “Come on buyers!!!! Last chance to buy at PEAK HOUSING BUBBLE 2.0 PRICES!!!! Don’t worry the FED got your back! If the market crashed like in 2008 they will blow a third bubble to save you LOL”

  11. I’ve been reading this guy’s articles in Seeking Alpha and while I’m not 100% convinced, I nevertheless find his ideas thought-provoking. He sees the housing crises in a different way than I initially did. Frankly, his hypothesis is growing on me.

    Rich Cities Created the Housing Shortage

    Kevin Erdman
    The Wall Street Journal
    Jan 6th, 2019

    “But what if that understanding of what happened is wrong? What if, even at the peak of building in 2005, the problem was too little housing rather than too much? And what if we still haven’t diagnosed the true cause of the crisis, let alone resolved it?”

    “For decades leading up to the crisis, closed-access cities accumulated rules restricting new construction. This produced trillions of dollars of wealth for existing urban owners and prevented millions of Americans from moving to where they could be teachers, nurses and custodians for the companies and employees who design software, medical devices and autonomous cars.”

    https://outline.com/SqSxVX

    1. we still haven’t diagnosed the true cause

      Let’s start with a global flood of cheap and easy credit. It was never about a housing shortage.

      1. Your Statement is true but the author is conflating different causes, timelines, effects, etc.

        For example Marin County CA had a tight supply of available land to develop before bubble 1.0 because the do-gooder Marxists (not going to even call them liberals) thought it would be a good idea to use tax many to buy up a good portion of land for ‘green spaces’ due to Humans being evil and a pox on the environment (other than themselves of course). THEN they wonder why their teachers, firefighters, etc live miles away and can’t afford to live where their little darlings go to school.

        The explanation of cheap and easy credit is why all prices went up pretty much everywhere during bubble 1.0 and 2.0.

    2. Geezuz, man, you and the shortage thing. You’re like Rental Watch 2.0. Is it any coincidence you’re also now “in the industry?” Wake up, there’s no shortage.

  12. Did you notice how talk of a bear market ended pretty much overnight? Must be time to back up the truck and load up on stocks.

  13. Opinions on which loans go bk/ broke fastest?
    Smelly Mel watt 3%
    Usda commie farmer loans?
    Why in he’ll is Usda subsidizing re loans

  14. Ms. Lenane, who went into contract about 18 months ago, said she was impressed by the amenities. ‘Did I buy it a little high? Maybe,’ she said.”

    Hope she plans on a lifetime of spinsterhood, box wine, and adoring cats. Nothing is more unappealing to a man, other than the most pathetic beta wallet, than having to assume responsibility for his prospective wife’s poor life choices and gross financial mismanagement, especially when she’s this glib about it.

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