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There Are Signs Of Oversupply Because Of Easy Access To Capital

A report from Bisnow. “When is the commercial real estate property bubble going to burst? Depending on whom you speak to, a market correction or even a recession is already happening or could occur later this year or next year or 2021 or 2022. No one is quite certain the date. No one is quite certain of the impact. But what experts do know is a downturn is bound to happen.”

“Real estate advisement group RCLCO’s sentiment survey found that 20% of respondents believe the downturn has already begun. Nearly half (46%) believe either the downturn has begun or will start sometime this year. However, while almost one-half of the survey respondents believe that the downturn is here or coming, nearly all of the respondents said they were not concerned. Banks are more guarded and conservative with the loans they hand out. The unemployment rate is low. And mostly, investors are smarter with their money.”

From Multi-Housing News. “Multi-Housing News sat down with Norman Radow, CEO of RADCO Cos. How has the influx of purchasing Class B properties changed the dynamics of the multifamily industry?”

“Radow: The influx of Class B purchases has drastically changed the way we do business in the multifamily industry in several profound and transformational ways. First, until a few years ago, Class B properties were allowed to age into Class C properties. Now, with the urgent need for more affordable housing options, Class B property buyers invest capital to reset the economic clock on these communities. Second, institutional capital is planning to dish out billions of dollars to invest in value-add communities. This capital is chasing yield. Simply put, more capital is being raised than there are Class B deals to invest in.”

From Mansion Global. “Though the U.S. housing market recovered dramatically in the years since the recession, there are concerns that stock market volatility, rising interest rates, and global trade tensions, could compound the slowdown of the real estate market, and some are bracing for another recession.”

“However, there’s no such thing, even at the high end, as an entirely recession-proof investment, real estate analysts agree. ‘No class of real estate is immune to recessions,’ said Richard Green, director of the USC Lusk Center for Real Estate. ‘Recession-proof implies that if we’re in a recession and someone needs to dispose of a property, they can get all their money back.'”

“That simply does not happen, he added: ‘No investor should think any investment they make is recession-proof.'”

“However, in certain locations, post-recession development booms have led to a large supply of multi-family properties, which could make it more challenging to generate substantial rental income. In New York City, for instance, 20,000 new apartments, for sale and rent, will come onto an already soft luxury market this year.”

“‘There are signs of multifamily oversupply because of easy access to capital after the financial crisis, and rent trends are showing signs of weakness,’ said Jonathan Miller, president of appraisal firm Miller Samuel.”

From AZ Big Media on Arizona. “Homebuilders like Fulton Homes, Mattamy Homes, Meritage Homes and others have been busy buying parcels of land at major intersections. ‘Chandler has seen several undeveloped commercial corners rezoned to residential,’ said David de la Torre, planning manager for the City of Chandler. ‘There are probably many more empty or undeveloped parcels that are currently zoned or planned for commercial that may never be developed as commercial due to the oversaturation of commercial currently in the market.'”

The Idaho Mountain Express. “Safe Haven Health Care, which owns two nursing facilities in Bellevue—Bell Mountain Village and Care Center and Safe Haven Assisted Living Homes—announced in bankruptcy court that it is pursuing liquidation of its two Wood River Valley facilities to lessen their financial burden as the company proceeds through Chapter 11 bankruptcy.”

“Safe Haven’s financial advisor, Walter Denekas, said Safe Haven defaulted on the payment to Citizens Bank due to overestimated revenue projections. Revenue was down across the board for Safe Haven, partly due to a lack of patients in its Boise facility, as well as a competing nursing-care facility opening up in Hailey several months ago, he said.”

This Post Has 35 Comments
  1. ‘defaulted on the payment to Citizens Bank due to overestimated revenue projections’

    Lots of that going around.

    ‘Revenue was down across the board for Safe Haven, partly due to a lack of patients in its Boise facility, as well as a competing nursing-care facility opening up in Hailey’

    Senior housing is probably the weakest in multi-unit right now. Like everything else, there’s way too much and the industry refuses to stop building.

    1. Reckon the 10,000 boomer$ $igning up for $$i (PER DAY), don’t have enough$ dispo$able income to pay $afe.Haven$ monthly fee$.

      Boi$e, where old folk$ go, knot to bee cared fer$.

  2. ‘The influx of Class B purchases has drastically changed the way we do business in the multifamily industry in several profound and transformational ways. First, until a few years ago, Class B properties were allowed to age into Class C properties. Now, with the urgent need for more affordable housing options, Class B property buyers invest capital to reset the economic clock on these communities. Second, institutional capital is planning to dish out billions of dollars to invest in value-add communities. This capital is chasing yield. Simply put, more capital is being raised than there are Class B deals to invest in’

    A perfect description of how a recession is created. And note it goes a long way to explaining how they jacked rents up so much. Chasing yield, with government backed loans too, right Mel?

    1. Meanwhile, all the hedgies and deep pockets keep pouring into real estate. They’ll own everything at a certain point.

      1. None.dare$.call$.it.a.CON$pricy!

        Behold!, thee new modern qua$i.$erf.$lave!

        A $erf was not a piece of personal property. They belonged to the land, rather than the individual person. Their job was to work the land. … A $lave could be owned by an individual, and could be ordered to do any kind of job, though many slaves were bought for specific types of work.

        What is the difference between $erfs and $laves? – Quora

        1. “A $lave could be owned by an individual, and could be ordered to do any kind of job, though many slaves were bought for specific types of work.”

          A debt slave also is owned by an individual but the individual that owns the debt slave is the slave himself.

          The merits of this arrangement is the care and feeding of the debt slave is tasked entirely to the debt slave.

          The proceeds of the debt slave’s work, ideally the majority of it, is passed along to a third party, a third party who was clever enough to entice an ignorant puke to voluntarily, probably eagerly, sign a dotted line or two that insures that his dim and dismal future is hosed.

          God’s Plan.

      2. Meanwhile, all the hedgies and deep pockets keep pouring into real estate. They’ll own everything at a certain point.

        And where does their money come from? Eventually the Fed and friends of the Fed own it all if we continue on this path. But to get there the unwashed masses have to accept their cramdown. Jury’s still out on that.

  3. “There Are Signs Of Oversupply Because Of Easy Access To Capital”

    So let’s keep doing it, the same thing over and over. Cheap money, cheap money, cheap money. The Fed has stopped raising and will stop drawing down their balance sheet. This is insanity.

    1. “This is insanity.”

      This is finance, which happens to now be a huge part of today’s economy.

      No Child Left Behind, aka Dumb ’em down and profit.

  4. “No investor should think any investment they make is recession-proof.’”

    I assure you, when you buy a prime property in the trough of a crash, it’s recession-proof.

    1. Speaking of Seberia & N.Djokovic …

      These guys weren’t $mart enough to have such “forward.thinking”

      The Altai region of Siberia was inhabited for parts of the Pleistocene by at least two groups of archaic hominins$—Denisovans$ and Neanderthal$. Denisova Cave, uniquely, contains stratified deposits that preserve skeletal and genetic evidence of both hominins, artefacts made from stone and other materials, and a range of animal and plant remains. The previous site chronology is based largely on radiocarbon ages for fragments of bone and charcoal that are up to 50,000 years old; older ages of equivocal reliability have been estimated from thermoluminescence and palaeomagnetic analyses of sediments, and genetic analyses of hominin DNA. Here we describe the stratigraphic sequences in Denisova Cave, establish a chronology for the Pleistocene deposits and associated remains from optical dating of the cave sediments, and reconstruct the environmental context of hominin occupation of the site from around 300,000 to 20,000 years ago.

      Article | Published: 30 January 2019

      Timing of archaic hominin occupation of Denisova Cave in southern Siberia
      Zenobia Jacobs, Bo Li, Michael V. Shunkov, Maxim B. Kozlikin, Nataliya S. Bolikhovskaya, Alexander K. Agadjanian, Vladimir A. Uliyanov, Sergei K. Vasiliev, Kieran O’Gorman, Anatoly P. Derevianko & Richard G. Roberts
      Naturevolume 565, pages594–599 (2019)

      1. “I assure you, when you buy a prime property in the trough of a crash, it’s recession-proof.”

        “Maybe so but there hasn’t been a cra$h in at least 25 year$.”

        Reply

        May bee $o, … But 1960’$ “plastic$” = GE’$ Ronnie raygun’$ gifted Pacific Pali$ades home!

        (No one’$ flee’in Pacific Palisade$! Imhto)

          1. “Nancy Reagan says that one of the objective$ was to accentuate the view. As one walks through the 5,000-$quare-foot hou$e, the city and the Pacific Ocean are visible from all the main rooms. And when it came to cutting-edge accoutrement$, G.E.’s technicians went all out. “I can’t tell you how many refrigerators, ovens and fancy lights G.E. gave us,” Nancy Reagan recalls. “They even put in a garbage dispo$al, which was unique for the time.”

    2. “I assure you, when you buy a prime property in the trough of a crash, it’s recession-proof.”

      You mustn’t have heard of the “A$$e$$or.”

      (Apologies to Hwy for stealing his style)

      1. (Apologies to Hwy for stealing his style)

        Nun.needed … Eye’$ a “free.thinkin'” sorta fella!

        1. “You mu$tn’t live in CA with Prop 13.”

          InDEED$.eye.do … 31 acre$ | $462.00 per annual + ($400.00hroa PER year) … $862 / 360 = $2.39 each & every.day . … Woe$.i$.me … ( $ounds.iffin’ .eye’m.abraggin’, but really just a $urvivin’ as eye.know.how $.too!)

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