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Real Estate Pros Encourage Their Clients To Sell, Sell, Sell

A Q and A from Willamete Week in Oregon. “How many apartments are under construction and expected to come online in 2019? I see their unoccupied, half-finished bulks everywhere and wonder: Are we about to see a glut and resulting rent reductions all over town? —Scott R.“

“The answer to your second question, Scott, is basically yes. Real estate pros agree the Portland housing market—for both renters and buyers—cooled in 2018 and will continue to slow in the coming year. To the extent markets are a form of mass hysteria, this belief alone—as said pros encourage their clients to sell, sell, sell—could intensify the effect. In-migration and job growth in Portland have slowed, and—as you could have scarcely failed to notice—a substantial number of new apartments have been built.”

“CoStar counted 11,000 new units under construction as of last September, and Fannie Mae predicts supply will outstrip demand by 1,500 units over each of the next two years.”

The Times Free Press in Tennessee. “With nearly 1,000 apartment units and town homes coming online soon on Chattanooga’s Southside, occupancy rates are falling. ‘The Chattanooga market is not quite as good as we might think it is,’ said John Clark, a long-time residential and commercial developer. ‘We continue to build more units than we can absorb even as our absorption rate is declining.'”

The Real Deal on New York. “Equity Residential has finally gone into contract to sell 800 Sixth Avenue for $240 million. Equity Residential’s former CEO, David Neithercut, previously said in July that the company had been looking to offload its apartment buildings on the West Side of Manhattan, where an oversupply of rental apartments had pushed down pricing.”

From WICZ in New York. “Dozens of residents made their ways to Binghamton’s City Council Chambers on Monday, to share their thoughts on proposed renovations to the historical landmark – Decker Mansion. The overwhelming consensus from many local residents that stood up to spoke was against turning the landmark into student housing, with one man even saying ‘the main problem in Binghamton is the city is over saturated with rental units especially student housing.’ A response that drew a round of long applause.”

The Tampa Bay Times in Florida. “The Hermitage apartments in downtown St. Petersburg have sold for $107.6 million, a near record price per unit for a rental project in the Tampa Bay area. Although more than 2,000 new apartments already have been built in and around downtown St. Petersburg, Darron Kattan of the Tampa brokerage Franklin Street, thinks the market can handle more.”

“All of the projects are billed as ‘luxury,’ with rents to match. Kattan acknowledged a lack of affordable housing and said apartment developers building luxury units might feel ‘some short term pain’ if rents continue to rise faster than wage increases.”

From Bisnow on Georgia. “While rent growth through the third quarter overall was 4.3%, much of that was pushed up by rising construction costs necessitating developers seek higher rents. Plus, there was a flight to affordability as mid-rise apartments outperformed high-rise apartment towers, said Ladson Haddow, an Atlanta-based multifamily consultant. ‘I think it’s a ceiling as to how much rents can rise. I think the top of the market is topped out,’ he said.”

“The next test on the durability of apartment rents comes this year as developers release another 5,200 new units in metro Atlanta, according to Haddow & Co. ‘We are generally very bullish on Atlanta in 2019, but I wouldn’t want to be the guy delivering [new apartments] this summer,’ said RADCO CEO Norman Radow. ‘How many people can afford $2K rents?'”

From Boise Dev in Idaho. “A downtown Boise project received taxpayer funds to build new housing units. Now, part of the project is being used for hotel-style rentals instead. LocalConstruct of Los Angeles opened The Fowler at 5th St. and Broad St. in 2018. The City of Boise paid LocalConstruct $159,000 as part of its Downtown Boise housing incentive program. It got $1,000 for each of the 159 apartment units in the building.”

“Instead of housing, dozens of the units are operating as part of short-term rental business Stay Alfred. The Spokane-based company positions its properties between a hotel offering and Airbnb.”

“Stay Alfred has 30 units available in the building, or about 18% of the overall inventory. Signage on the building points Stay Alfred guests to a dedicated lobby set aside for check-in. The hotel-like atmosphere pushed residents Lisa McGrath and Paul Carew to move out.”

“‘Two months after we moved in, The Fowler announced that Stay Alfred was converting numerous units in the building into short-term rentals,’ McGrath told BoiseDev. ‘Overnight, (the building) became a hotel – random strangers everywhere, loud fights every night, constant disturbances, theft, a sharp decline in cleanliness – the exact opposite of a neighborhood building.'”

“McGrath says her issue goes beyond the issues they experienced as residents. ‘Why did the City of Boise pay housing incentives earmarked for residential housing to a company that converted numerous units into glorified Airbnbs,’ she asked.”

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  1. ‘How many apartments are under construction and expected to come online in 2019? I see their unoccupied, half-finished bulks everywhere’

    ‘We continue to build more units than we can absorb even as our absorption rate is declining’

    Since the media doesn’t seem capable of asking, I’ll say again: how can such a large industry run straight off a cliff in every major metro in the US?

    They aren’t responding to supply and demand. They are acting to cash in on the oceans of cash being throw around like confetti. Just like the condotels in Vietnam. True demand? Screw that, we’re all gonna be rich!

    1. Here’s an example:

      Seattle still has the most cranes in America
      Construction isn’t losing much steam.

      “Seattle still has more construction cranes than any other U.S. city, as developers keep building high-rises in the fast-changing city. The city of Seattle has 59 cranes sprouting out across the skyline, down slightly from the 65 counted six months ago. But that’s still 15 more than Los Angeles, the next-highest city.”

      “Portland has 30, San Francisco 29, New York City and Washington, D.C., 28, Chicago 26 and Denver 17. Outside of a lull a year and a half ago, Seattle’s crane count has hovered around 60 since 2016, when it took over the national lead in cranes.”

      “As has been the case for years, most of the cranes are helping build apartment high-rises, although some of those housing projects recently have begun switching to condos. Most of the cranes are in the core of Seattle, especially in South Lake Union, but it’s easy to spot them across the city, from Ballard to West Seattle to Sodo.”

      “There’s nothing to suggest the construction craze is about to die down. Although apartment rents have flatlined over the past year, developers continue to build housing at the same pace as before, and the pipeline for possible future projects hasn’t changed.”

      http://www.union-bulletin.com/news/business/seattle-still-has-the-most-cranes-in-america/article_6453592c-19aa-11e9-a107-5ff5bd93339f.html

      1. ‘There’s nothing to suggest the construction craze is about to die down’

        Uhhh…’Although apartment rents have flatlined over the past year’

        Rents are down Seattle Times and you know it. Anyone who is paying attention knows it. Why the lies?

        ‘some of those housing projects recently have begun switching to condos’

        Nothing to suggest the “craze” is about to die down? Entirely re-purposing a multi-billion industry doesn’t suggest these guys are losing their shirts?

        1. Rents still have a long, long, long way to fall. Chintzy little price cuts and Amazon gift cards along with a free month or two are not nearly enough for the median income worker to afford a place. Just a room and shared bathroom (sometimes 3 guys using the same bathroom) in somebody’s rotbox is going for $800 per month.

      2. Ha, someone dusted off “Craneopoloy” … left it on veranda besides the “Game.of.Life” … where’$ the organic popcorn $tashed one wonder$.

      3. “Portland has 30”

        Again in the top 5 while being the 26th-ish most populous US city.

        Sum ting wong.

        1. 156 Trillion$? …

          ” And this doesn’t even consider the over-the-counter derivative$ market, whose notional value is e$timated at around $693 trillion $.”

          “What’$ the world worth?” + “think Big” + 9 > Billion$ two.legged’$ that hold their future$ between$ their oppo$able thumb$ … Oh, Garçon, more whine please. Entertaining, quite!

        1. With absolutely no end in sight. Now they’re dialing back QT and pausing rate hikes. And grandma’s cat food has really gotten expensive. LOLZ.

          1. It’s over five years too late for action, so now taking action is difficult if not impossible to carry through.

            Powell Voiced Concern in 2013 Fed Bond Buys Were Warping Markets
            Rich Miller
            Christopher Condon
            January 11 2019, 8:57 AM
            January 13 2019, 3:18 PM

            (Bloomberg) — Federal Reserve Chairman Jerome Powell voiced concern that the central bank’s bond purchases were distorting financial markets and pushed for an early start to reducing them back when he was a governor in 2013, transcripts of meetings that year show.

            Powell, who took over as chairman in February 2018, had advocated beginning to scale back the Fed’s quantitative-easing program as early as June of that year, according to the record of policy makers’ conversations released Friday with their customary five-year lag.

            The central bank didn’t actually begin to cut back its purchases until December, after the markets were spooked in the middle of that year by hints the plan would start sooner — the so-called taper tantrum.

            “I believe that we ought to take the next plausible opportunity reduce the pace of purchases, and I hope that time will come in June,’’ Powell said at the Federal Open Market Committee’s April 30-May 1, 2013 meeting.
            …

      3. For the US, it appears that line begins to really take off during the early years of the Reagan Administration.

        2. Ronald Reagan and Margaret Thatcher made households, corporations and governments feel good again with liberalized credit policies.

  2. To the extent markets are a form of mass hysteria, this belief alone—as said pros encourage their clients to sell, sell, sell—could intensify the effect.

    Shelter – a basic human need – should never be subject to “mass hysteria.” There’s a special place in hell for the policymakers, REIC scum, and corporate media touts and shills who created this state of affairs.

  3. I was driving around Milpitas (a suburb just north of San Jose, CA) yesterday (yes, bad decision to visit on a heavy winter storm day but had to!) .

    What I noticed was a huge number of apartment/townhome buildings coming up. And the ads were all over the place – on city buses, billboards, roadside banners – you name it. At one place on Montague Expwy, I counted six builders’ ads stuck by the side of the road like Burma Shave signs. As I drove around, I saw a lot of the construction. Some have just begun while some seemed to be about half done. I couldn’t even recognize some parts of the town and had to look at street names and intersections to figure out where I was.

    The same appeared to be happening in Sunnyvale, CA too. But on a smaller scale since they don’t seem to have much empty space.

    1. The shortage talk looks more like horse hockey every day, doesn’t it? As I pointed out to the supply and demanders here long ago, this shortage BS is coming from the exact same mouths as it did 12 years ago. How can people be so bamboozled – twice?

    2. Downtown San Jose, Fremont, Redwood City, Hayward, Pleasanton. Just a few other nearby Bay Area towns that I personally drive through often that are also building like crazy. Even Scott’s valley which is next to me, has hundreds of units being built. 2019 should be interesting

    4. whirlaway, I live in Milpitas near the great mall. There are 3 BIG newly constructed apartment complexes near the new BART station being built there. I have posted many times here that they have ton of available units but it starts 3.4k or 3.5k for 2BR! That’s a lot of money even for a tech worker!

      1. I live in Milpitas near the great mall.

        I kinda liked that New York pizza place close to there. And the Cajun shrimp boil place a few blocks farther east by Baskin Robbins was amazing. I’ve checked out every equivalent in the Sacramento area and they are all lame compared to that. Just missing the food lately even if I’m not missing anything else.

  5. The crane numbers are inaccurate- In NYC, tower cranes have 80mm insurance requirements, so they are used only in 50+ story jobs. 3 ton and mobile cranes are used instead. The nyc.gov/buildings website has a map of ongoing projects. Key here is union (80/hr) vs. non-union (20/hr). Scabby the Rat is busy.
    Amazon was a dead cat bounce for the NYC/Queens market- the real driver here is the wholesale replacement of the population as Queens is an illegal refuge for immigrants. Middle class indians buy a business and bring in 50 friends- and they all get preference over Americans for MWBE contracts and jobs.
    Imagine if a country paid you to come and gave you preference over the existing residents? My Chinese clients laugh and say that this is revenge for the 19th century.

    1. “My Chinese clients laugh and say that this is revenge for the 19th century.”

      Wut? Tell your Chinese clients it was Britain, not the US. Friggin’ commies really did a number on China, wiped out their history, replaced it with BS propaganda.

      1. US in China 19th Century-
        I was recently in Chefoo / Yantai. US Naval base til 1938. Lady Lex was docked there in 1937. We were just as colonial as the others. Google image of USS Augusta parked off of Pudong in 1937.
        You can just as easily use 1997- or 2017. Hundreds of millions make 99 cent store junk for us then steal high tech plans and citizenship. Chinese are desperate to get out before we go to war. I get emails all the time regarding “Tech Fairs” where they try to recruit scientists back to the motherland. NSA better learn Mandarin.

        RE NYC- Front lines- Building is continuing as the sharks will swim until the chum is gone. NYC wants a 30% cut in “Inclusionary” housing. Sales weak but nobody cares – the lenders are the clients, not the buyers.

        1. No, I don’t think so. I don’t care what was docked where. The 1900s were the 20th century, not the 19th. Were Americans involved with China during the 19th century? Yes, but at their invitation. Throughout most of the 19th century, the US was just trying to survive, especially post Civil War.

          https://www.heritage.org/asia/report/the-complicated-history-us-relations-china

          Except for the Chinese Exclusion Act, the US pretty much gave China a fair shake.

    2. “$cabby the Rat is bu$y.”

      & Diver$ified, … repo$$essions, foreclo$ures, payday loan$, pawn $hops, ca$h.now handout$ … But eye digre$$ . ..

      “bidne$$ is bidne$$”

    3. Minority and Women-owned Business Enterprises (M/WBE)

      Had to look that up.

      My Chinese clients laugh and say that this is revenge for the 19th century.

      When the Chinese take over politics in certain areas do you think they will keep MWBE ?

        1. Tiger Moms will slap anybody that mentions “safe spaces”.

          Women have no problems starting businesses in China. Minorities on the other hand…

  6. Want to see Yellen bucks going to money heaven?

    https://www.vrmintel.com/8-most-surprising-vacation-rental-industry-developments-in-2018/

    “Not everyone is bullish on this sector. In a panel at Phocuswright, we asked Vacasa CEO Eric Breon, in light of his purchase of Oasis, if we could expect to see a Vacasa/Sonder or Vacasa/Stay Alfred acquisition or partnership.”

    “The space scares me a lot right now,” Breon answered. “There’s a lot of bidding. They’re trying to get growth by buying market share by outbidding each other on spaces. I think that’s an unhealthy climate for the long term. When you look at individual homes, it’s ridiculously sticky.”

    “The shift to 24-7 support has been challenging. For in-market companies, the challenge is in staffing qualified on-site staff. For multi-destination managers, national call centers do not have in-market knowledge. In the article Instant Gratification and the Five-Minute Golden Window Alexa Nota writes, “Expediency is a nonnegotiable, especially for pre-booking questions—but also the in-home (I-can’t-work-the-toaster).”

    1. “The figures show home sharing can be a lucrative business for Albany homeowners, with typical Albany host earnings twice the average for West Australian hosts. However, Airbnb’s growing popularity in the Great Southern and across the world has hit traditional holiday accommodation providers such as hotels, motels and bed and breakfast operators.”

      “Albany’s Three Chimneys Bed and Breakfast owner Craig Dixon raised such concerns in October, saying his industry had been hit since Airbnb entered the market in 2012 — with some rates in Albany dropping 20 per cent to compete. “There’s been a massive price drop through the town . . . it’s affecting everyone,” he said. “Eventually nobody can make any money.”

      https://thewest.com.au/news/albany-advertiser/airbnb-hits-holiday-stay-businesses-ng-b881051141z

      QE is ultimately deflationary.

    1. yep sell down stocks and I put it in VUSXX cause I pay enough state tax.

      Reason I have any money at all is cause I sold RE in 2006, certainly not being a W2 wage donkey.

      Vanguards Jack Bogle died a champion of the common investor. At the end he also advised to sell down stocks.

  9. The Spokane-based company positions its properties between a hotel offering and Airbnb.

    So which regulations are “between” a hotel and Airbnb? Ugh, AirBnb just get worse. It was supposed to be a platform to rent out extra rooms in your own home, not second-home house parties.

    Of course hosts will parrot the same-old libertarian refrain of “I should be able to do what I want with my own property.” Well, no. When you bought that property, you agreed to all the zoning and covenants associated with that property. Don’t like it? Choose a different plat.

    1. “I should be able to do what I want with my own property.”

      Hookers turning Airbnb apartments into brothels
      By Dana Sauchelli and Bruce Golding
      April 14, 2014 | 2:19am

      Hookers are using the controversial Airbnb home-sharing Web site to turn prime Manhattan apartments into temporary brothels, The Post has learned.

      One escort service is even saving a bundle by renting Airbnb apartments instead of hotel rooms for clients’ quickies, says a 21-year-old call girl who works for the illicit business.

      “It’s more discreet and much cheaper than The Waldorf,” said the sex worker, who spoke on condition of anonymity.

      “Hotels have doormen and cameras. They ask questions. Apartments are usually buzz-in.”

      The prostitute, a buxom brunette who charges up to $500 an hour, said her escort service generally rents an Airbnb apartment in the Financial District or Midtown West for up to a week at a time — then cycles numerous hookers through the place for trysts around-the-clock.
      …

      1. “The pro$titute, a buxom brunette who charge$ up to $500 an hour …”
        Boy, that would never happen in an Evangelical, gawd fearin’, Red state like, North Dakota!

    2. Hah! A friend of mine and his friends drop north of $3000 on an AirBNB that is far away from other houses so avoid noise complaints. Then him and ~50 of his raver friends all get together to have a huge EDM dance party in the place. It’s massive, though is said the bass travels down the lake and triggered a noise complaint from 1/2 a mile away. None the less, they clean the place after the party to where it looks better than they found it and have 5 star A+++ ratings on airbnb.

      I find it humorous.

    3. Most Airbnbs are flops, you just don’t hear about it in the media. There is only so much money in the economy available for shelter, period, it doesn’t matter if we’re talking about permanent, temporary or otherwise.

      We didn’t all of a sudden have some sort of miraculous wealth increase where people can throw extra cash at Airbnbs every weekend, hotels, etc. This money, if there even is any, is borrowed. The Airbnb thing is a symptom of a bubble where people overpaid and are trying to hang on by getting financial help with their payments.

      Now there are sites dedicated to renting out your garage, your acreage for camping, whether by tent or RV, etc. This isn’t about “supplementing” income, it’s entirely due to people having overpaid and becoming desperate. Who else would want to invite a stranger into their house to use a bedroom? Not me, I can tell you that much. If it’s a separate entry that’s another thing entirely, but I’d still rather have a full time tenant who cleans up after themselves and pays me a monthly rent. Who wants to be a housekeeper daily?

  10. New excuses today from UHS Yun: “In response to a survey the association conducted last week, 25% of realtors said the government shutdown had dissuaded their clients from buying homes, either because of delays in getting financing through non-functioning government agencies or because of general concern about the economic environment.”

    2. Only another 2500 or so points up on the Dow to get back to the October 2018 highs, and with the Fed lightening up on its punchbowl removal program, I don’t see any reason why Mr Market shouldn’t be able to pull this off by October 2019.

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