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In The Midst Of A Building Boom, And With More Supply Than Demand

A report from the Denver Post in Colorado. “New apartments continue to pour onto the market, pushing down average rents in metro Denver for the second quarter in a row and boosting the vacancy rate a tad, according to the latest Denver Metro Area Apartment Vacancy and Rent survey.”

“Adjust for inflation, and apartment rents are actually down 2.6 percent, said Teo Nicolais, an instructor specializing in real estate at the Harvard Extension School in Denver. ‘We are seeing a ton of new supply and seeing rents go down. It is all about supply. That supply is what makes housing more affordable,’ he said.”

“The vacancy rate rose from 5.5 percent in the third quarter to 5.8 percent in the fourth, which represents 20,237 empty units. By comparison, there were only 5,577 homes and condos for sale in metro Denver at the end of December, according to the Denver Metro Association of Realtors. Developers added 12,324 new apartments to the market last year, an annual volume that is three times greater than the historical average. Of those, 3,876 came just in the fourth quarter.”

The Boulder Daily Camera in Colorado. “Availability of new apartment units in Boulder and Broomfield counties brought down average rents in the area in the fourth quarter of 2018, according to the Apartment Association of Metro Denver.”

“Additional supplies tend to push rents downward, said Teo Nicolais, an instructor specializing in real estate at Harvard Extension School. In 2017, only 622 new apartments became available in the two-county area. Boulder and Broomfield counties built more apartments in 2018 than the previous three years combined, he said.”

“The two-county vacancy rate in fourth quarter 2018 was 5.4 percent, up from 4 percent in the third quarter. It’s the highest in the last eight years, and that’s good news for renters, Nicolais said. ‘No one knows what’s going to happen next,’ Nicolais said.”

“There are about 1,000 apartment units under construction in Boulder and another 661 planned, according to Apartment Insights New Construction Report.”

The Bowling Green Daily News in Kentucky. “Warren County’s apartment building boom, trending skyward for the past couple years, may be coming back down to earth. Statistics provided by the City-County Planning Commission of Warren County show that the growth curve for multifamily housing, once seemingly headed for the exosphere, may at least be settling back to the stratosphere.”

“Aiming to meet the needs of younger residents and newcomers not ready to buy a home, developers have put up a slew of apartments. The approval activity of the two record-setting years showed up in 2018’s figures on building permit reviews. That number went from 2,037 in 2017 to a record 2,121 last year.”

“‘We had a huge June for multifamily housing, said Brent Childers, director of neighborhood and community services for the city of Bowling Green. ‘But since then we have seen a decline. We’re definitely seeing a slowdown, but we couldn’t keep up the rate of growth we had been seeing.'”

“With apartments still coming online, Cassi Nushart, director of operations for SKY, does worry about reaching a saturation point. ‘We haven’t felt that dip in terms of the market being saturated, but I know that’s a concern,’ she said. ‘Do we anticipate a dip? Probably so.'”

From Curbed New York. “NYC is in the midst of a building boom, and with more supply than demand, buyers often have the upper hand in getting the best deals. Furthermore, the real estate market has been experiencing a downturn of late (particularly in Manhattan), and prices are expected to go down further, according to Stephen Geller, a broker at Corcoran. The city is being flooded with a record number of homes, and experts contend that this will prompt prices to drop, particularly in Manhattan and Brooklyn.”

“‘We are definitely in a buyer’s market right now,’ says Carol Staab, a real estate broker at Douglas Elliman.”

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This Post Has 24 Comments

  1. ‘which represents 20,237 empty units. By comparison, there were only 5,577 homes and condos for sale in metro Denver at the end of December, according to the Denver Metro Association of Realtors. Developers added 12,324 new apartments to the market last year, an annual volume that is three times greater than the historical average. Of those, 3,876 came just in the fourth quarter’

    Yet for years we’ve had to endure people saying “we aren’t building enough!” Jeebus, they finished almost as many apartments in last quarter as the entire city has shacks for sale!

    Hey media, how about asking some of the expert how they flubbed it so bad? Here an answer from the last link:

    ‘The most recent push in pricey real estate occurred following the financial crisis in 2008, as the markets began to recover, Miller says. Capital poured in from across the world that prompted developers to go on a building spree. With the limited amount of space available in the city, the high cost of construction, and the expensive land values, developers choose to build luxury developments—like the developments on Billionaires Row—and in turn drove up prices citywide’

    In other words it didn’t have anything to do with true demand.

    1. “Capital …”

      … was conjured up out of thin air and …

      “… poured in from across the world that prompted developers to go on a building spree.”

      Creating wealth in the process! A miracle!

      “With the limited amount of space available in the city, the high cost of construction, and the expensive land values, developers choose to build luxury developments—like the developments on Billionaires Row—and in turn drove up prices citywide’”

      Driving up prices citywide produces equity wealth for entire neighborhoods! Another miracle! Why, an entire economy can be based – entirely based – on these miracles!

      1. “…the high cost of construction…”

        Local governments, not content with their exploding tax coffers from insane bubble valuations, increased all of their taxes and fees and added layers and layers of extra ones. Sickening.

      2. Why, an entire economy can be based – entirely based – on these miracles!

        Just occurred to me how simple it really is. If X amount of products are being produced in the world, and all the RE comps double, who has the money to buy the lions share of those products? The people who own the RE assets, all else being equal. They automatically have the most buying power as long as Mr. Banker is around to help them liberate their equity. So really, if you can control a bubble it’s a way to control who gets to enjoy most of the world’s production. And who doesn’t. The only way it can go wrong is if you overplay your hand to the point that production starts to decrease because you’re killing or at least demotivating the producers.

        1. … who has the money to buy the lions share of those products? The people who own the RE assets, all else being equal.”

          2And hence the products will be produced to meet the demand.

          So what happens when the prices of these same RE assets are marked down? The money to buy products goes poof, does it not? And this means the demand for the products go poof, and this means a lot jobs everywhere goes poof.

          1. Whomever it is that controls the money valves controls the various economies.

            Whenever the money valve is open pukes bid up prices of assets. Rising prices of assets is seen to be the creation of wealth, wealth that can be cashed out and spent.

            Millions of jobs depend on the spending of this cashed out wealth, meaning millions of people depend on prices of assets to be forever rising, meaning millions of people depend on having the money valve being forever open.

            Again, whomever it is that controls the money valves controls the various economies.

    2. “The vacancy rate rose from 5.5 percent in the third quarter to 5.8 percent in the fourth, which represents 20,237 empty units.”

      Holy freakin’ cow, 20k+ empty apartments in Denver? That is an astonishing number. It looks to be a renter’s market for DECADES.

      2. 20k is about the number of just Texans who move to Denver every year, not even counting all the New Yorkers and Californians. As long as Denver sucks less than CA, NY and TX there will be a steady flow of people.

  5. “Public Service Loan Forgiveness”
    https://www.mauldineconomics.com/the-10th-man/public-service-loan-forgiveness

    Requirements:

    — Borrowers must have Direct Loans as opposed to other types of loans.

    — They have to be in a specific repayment plan, and of course, they have to work in the right type of job.

    — Most importantly, borrowers must make 120 successful payments, which don’t need to be consecutive.

    — And the payments have to be for the exact minimum amount, or else the loan is in “paid-ahead” status, and disqualified.

    ***

    In a nutshell: Broke a$$ losers.

  6. *** Electric is paying up to 44 hours of overtime a week to build a new rental complex in Boulder. 7 to 7, Monday to Sunday, LOLZ

  8. I really get a lot of satisfaction telling realtors no. Have legit backed out of so many potential buy situations since selling my place last April lolz 😆
    Last minute have changed my mind and has served me well.

  11. In 1988 I was construction project mgr over a 180 unit new apt project in Round Rock TX (just north of Austin). The S&L debacle was in full swing, at the same time rental rates had been dropping in the Austin area. My project was already closed into Const Loan status and due to new project slowdown, subcontractor and material prices were quickly dropping. I recall my prefinished, installed with countertops cabinet deal was around $350 per kitchen. Ready mix concrete was at $26/CY.
    The client was Emkay Development ( Morrison- Knudsen… builders of Hoover Dam). They were not easy to deal with, but we were glad to have the work. I was laid off in late 1989. Self employed one man GC until 1994, by then apartment construction was picking up again. Back to regular paychecks for me. Shut down my little biz.

    1. I was a high-rise window cleaner back then subcontracting for janitorial firms in the SF bay area. Unfortunately the liability insurance had shot through the roof causing many property management firms to cut-back on their frequency of window cleanings as higher expenses were priced-in. The result was too many window cleaners competing for fewer contracts and lowering their bids along the way. A true lesson in supply side economics!

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