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I Wonder If The Market Is Softening A Little Bit

A report from Bisnow on California. “The health of San Diego’s commercial and residential properties in 2019 probably depends on job creation more than any other economic metric. In the apartment market, construction will continue unabated, except for a few markets that are overbuilt with high-end apartments — such as San Diego and Orange County, Xpera Group Director of Economic and Market Research Alan Nevin said.”

“‘In those markets, I anticipate that high-end projects scheduled to move forward in 2019 will take a breather,’ Nevin said. ‘That is going to happen until the developers can be convinced that newly completed units are being rented, and without serious concessions and at rental rates that match their pro formas.'”

The San Francisco Chronicle. “Bay Area rents are expected to grow a little more slowly this year, thanks to an expected increase in new apartment completions. ‘The demand is there, but it’s tough to digest that much new supply at once, especially given the luxury price point for pretty much all of that product,’ said Greg Willett, chief economist with RealPage.”

“Allison Landa and Adam Sandler were bracing for the worst when they got an eviction notice in August from the owner of the one-bedroom cottage in Berkeley they had rented for 13 years. The owner, who lived in the main house, was selling the property.”

“But Landa found the market ‘better than I expected. The open houses were not as competitive. We were offered several places. I wonder if the market is softening a little bit,’ she said.”

“In the San Francisco metro area, which also includes San Mateo and Marin counties, RealPage expects that about 4,000 new units will be completed this year, about double last year’s number. In San Jose metro (Santa Clara and San Benito counties), the number will nearly triple to about 6,400. And Oakland metro (Alameda and Contra Costa counties) could see as many as 6,800 completions compared with about 1,000 last year.”

From LA Downtown News. “In a supercharged development scene, it barely counts as news anymore when a Downtown housing project opens. Eight market-rate developments are coming online in the South Park area in the space of about six months, bringing a total of more than 3,300 rental units.”

“The development at 1200 S. Figueroa St. consists of a pair of curving, 35-story towers with a total of 648 luxury-priced units. The project is 25% leased, according to general manager Chad Vasquez of Greystar, which is managing the building. Full occupancy is expected by the end of 2019.”

“Steve Basham, senior market analyst with the firm Costar, said Circa will likely be a local draw, with people relocating from the Westside. He noted that many people already commute to Downtown from Santa Monica and West Los Angeles.”

“However, Basham pointed out that the potential tenant pool at this price point is limited. ‘There are only so many households and families that can afford that much a month for an apartment, he said. But Downtown has become more of a viable option for those who can.'”

From Curbed Los Angeles. “Just three weeks after a family from the Inland Empire moved into their El Sereno home, they found graffiti on their fence signaling they weren’t welcome in the Northeast LA neighborhood. ‘F*** gentrification,’ the graffiti said.”

“The homeowner, who did not want to be named, said the fence was spray-painted the night of January 4. Her residence, a flip on Templeton Street, is one of several that has been defaced with anti-gentrification messages.”

“Since late October, pictures of flipped or newly constructed homes in El Sereno marred by tagging have made the rounds on social media sites like Nextdoor and Instagram. An advertisement for real estate agent Mike Antonelli was tagged with the word ‘gentrifier,’ and his image was defaced with a tail, pitchfork, and horns to liken him to a devil.”

From Sonoma West. “At the Dec. 19 meeting of the Windsor Town Council, Ken MacNab, the Community Development Director and current interim town manager, presented the annual growth report for Windsor.”

“According to the report, in 2018, 18 building permits were issued for construction of 23 new residential units. Ten of the permits were for new single-family homes and eight were for new accessory dwelling units. Five permits for new temporary residential units were approved this year under the town’s Temporary Housing Ordinance for victims of the 2017 Nuns and Tubbs fires.”

“In 2018, a total of three units were completed and occupied, down significantly from 43 units in 2017. Of those three units, one was for a new single-family residence and the other two were for new accessory dwelling units. The estimated population increase resulting from the units coming ‘on-line’ in 2018 is projected to be nine.”

“The total number of residential units in the ‘pipeline’ is 1,652. ‘The idea of the pipeline bothers me,’ said Mayor Dominic Foppoli. ‘Its a flashpoint in the community, that ‘they are coming’ and the fact is, most aren’t coming. It creates a focus on hypothetically built rather than what will be built. We have a horrible housing crisis, and it was made worse by the fire, and I look here and see a grand total of three units finished in Windsor after the most devastating fire in our history and that’s a problem.'”

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This Post Has 28 Comments

  1. ‘The project is 25% leased…Full occupancy is expected by the end of 2019’

    Greystar is dragging these Chinese firms under with their cutting edge property management and consulting. How many millions will you lose before you realize you built a white elephant?

    BTW, I finally got the RSS feed set up. The link is at the bottom of the sidebar.

  2. From the last link:

    ‘It appears that no projects that were approved via the merit system have been built. The approvals have all expired, and in the case of the most recent one, a project on Hembree Lane, the developer informed the town that the project was not financially feasible.’

    ‘The largest of these projects, the Jensen Lane Annexation and Subdivision project, is located on property that is outside of town limits but within the Urban Growth Boundary. One pending application from 2017, the Hembree Lane Subdivision project, was withdrawn from further consideration. The developer advised staff that current market conditions and construction costs made the project financially infeasible to pursue at this time.’

    Not financially feasible/Infeasible equals no one can buy these over-priced shacks. If they thought they could they would.

    ‘We have a horrible housing crisis, and it was made worse by the fire, and I look here and see a grand total of three units finished in Windsor’

  3. ‘In the apartment market, construction will continue unabated, except for a few markets that are overbuilt with high-end apartments — such as San Diego and Orange County’

    Wa happened to my shortage?

    ‘That is going to happen until the developers can be convinced that newly completed units are being rented, and without serious concessions and at rental rates that match their pro formas’

    They are fooked.

  5. ‘The demand is there, but it’s tough to digest that much new supply at once, especially given the luxury price point for pretty much all of that product,’ said Greg Willett, chief economist with RealPage.”

    Much of the cr@p coming online are all luxury stuffs…hence the prices increase. Now alot of them are also sitting empty. How does that factor into the rental prices

    1. “FBI corruption probe of L.A.”

      LOLZ. The FBI is corrupt. Should start with an outside investigation of the FBI.

  8. ‘That is going to happen until the developers can be convinced that newly completed units are being rented, and without serious concessions and at rental rates that match their pro formas.’”

    Fat chance. These newly completed units were planned back when trillions of Yellen Bux were sloshing around the world looking for a place to ascend into debauched currency heaven. But proles struggling to make ends meet in our oligarch-looted economy will never be able to afford them. So developers better adjust their “pro formas” to a little something called grim reality.

  9. “Just three weeks after a family from the Inland Empire moved into their El Sereno home, they found graffiti on their fence signaling they weren’t welcome in the Northeast LA neighborhood. ‘F*** gentrification,’ the graffiti said.”

    I think I see a new business model at work here. First, the Always Be Closing crew pitches Greater Fools on an “up and coming neighborhood.” Then, once the FBs overpay, a gang paid off by the same corrupt REIC hustlers tags the fences to frighten the FBs into dumping their shacks for a song and scurrying back to more hospitable territory. Then the realtor puts up a new fence and lines up another set of marks. Wash, rinse, repeat.

  11. @BlueSkye

    Responding to your question on the other thread: No, I haven’t placed an order for a model 3. We couldn’t have availed ourselves of the full $7500 tax credit since I was only working part-time as an RN last year, mostly staying at home taking care of my 3-year-old. Wife’s teacher salary doesn’t put us at a high AGI. My father has a P100D that he bought about 2 years ago, which is gorgeous. I won’t spend that money (nor can I afford it like he can), but I will buy eventually. I think I need to see a $45k option. But I may consider other brands too.

  12. Is the symbiosis dead?

    The Financial Times
    The Big Read US politics & policy
    Why Trump’s America is rethinking engagement with China
    The more aggressive US approach is part of a strategic shift that goes well beyond the trade war
    Demetri Sevastopulo in Washington an hour ago

    When Donald Trump sat down to dinner with Xi Jinping last month at the G20 summit in Buenos Aires, the US president did not know about the diplomatic bomb that was about to explode. At about the same time, police in Canada arrested a Chinese telecoms executive after an extradition request from Washington.

    The detention of Meng Wanzhou, chief financial officer of Huawei, was extraordinary because the US justice department had not told the White House about the warrant to arrest the daughter of the founder of the telecoms group, one of China’s most successful and influential companies.

    But the importance of the arrest went well beyond the immediate circumstances. It is the most striking symbol yet of the dramatic deterioration in relations between China and a US that is increasingly suspicious of Beijing’s motives and actions. Reinforcing the rupture, the US several weeks later charged two Chinese nationals with conducting a global hacking campaign to assist the Chinese intelligence services.

    While the trade war has received the most attention, the economic tussle is part of a much more profound shift in the US that has seen Washington reverse important elements of the strategy of engaging with its Asian rival that was first introduced more than 40 years ago by Richard Nixon.

    Support for this change in approach has a broad base in the US. Officials across the US government have become significantly more hawkish towards China— over everything from human rights, politics and business to national security. At the same time, US companies and academics who once acted as a buffer against the harshest views are now far less sanguine.

    “China has for some time underestimated the extent to which the mood in the US has shifted,” says Hank Paulson, the former US Treasury secretary. “The attitude that they would implement reforms at a timetable that made sense to them missed the fact that this was no longer sustainable if they wanted the US to keep its markets open to them. And the US business community now supports a harder line.”
    …

    1. “China has for some time underestimated the extent to which the mood in the US has shifted,” says Hank Paulson, the former US Treasury secretary.

      Has the mood really shifted that much? Maybe the policy has. Middle America has been hawkish all along, the only difference is that they finally won an election.

    1. Call me Nostradamus, but I see a new wave of mortgage-center closings and headcount reduction coming. Gosh, I sure hope none of those fired mortgage drones have house payments to make.

    2. “What these numbers reveal, is that the average US consumer can barely afford to take out a new mortgage even at a time when rates are once again sliding. It also means that if the Fed is truly intent in engineering a parallel shift in the curve of 2-3%, the US can kiss its domestic housing market goodbye.”

      Glorious ending to that article! ZH is often a bit of a “fake news” site IMO but this one seems to be inline with reality.

    1. 25 percent said buyers pulled out simply because of “economic uncertainty,”

      Think you refer to this as fear of getting schlonged or FOGS.

      After sales stats show a even more downturn in RE for the dec report, we will be sure to hear about how this is all to blame.

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