Archive for category: Housing Bubble Blog

A report from Bloomberg. “U.S. household debt rose slightly in the third quarter, reaching the highest level ever. Total debt increased 0.6% to $14.35 trillion from $14.27 trillion in the second quarter, the Federal Reserve Bank of New York said in a report. The gain was led by a surge in new mortgage loans, mostly refinancings, which reached $1.05 trillion, the second highest in data going back to 2003 and rivaling the historic refinance boom 17 years ago.”

“Borrowers who postponed their monthly mortgage payments offer a glimpse into the impact the looming cliff could have. Americans who took advantage of programs that allowed them to skip mortgage and auto bills tended to have much lower credit scores and higher delinquency rates than those who didn’t, the New York Fed data show. Lenders reported these borrowers as current on their bills, temporarily boosting their credit scores and possibly masking underlying distress, according to the New York Fed.”

From USA Today. “Competition in the housing market has cooled slightly since the summer. The typical home currently gets four or five offers, compared with eight or nine in September, according to Redfin. Don’t get greedy – ‘An overpriced home is still going to sit on the market,’ Jason Gell, president of the Greater Boston Association of Realtors, says.”

The Los Angeles Times in California. “The Southern California median home price rose sharply in October compared with a year earlier. October’s median price of $605,000 was down slightly from a record $610,000 in September. Economists say the large median price increases in recent months show values are rising but caution that values are rising less than the median indicates. Because the median is the point at which half the homes sold for more and half for less, it also reflects a change in the types of homes sold.”

“So one thing that has made the median price rise so much in recent months is that members of higher-income households have been less likely to have lost their jobs in the pandemic, leading a greater share of home sales to be in the luxury segment now than at the same time last year.”

From Bisnow New York. “The world’s largest brokerage is shuttering one of its New York Tri-State area suburban locations and downsizing its staff next year. CBRE is permanently closing its Westchester office at 70 West Red Oak Lane in White Plains and laying off 35 of its employees in February, according to a worker adjustment and retraining notification filed with the New York State Department of Labor. CBRE cited economic reasons for the closure.”

“In New York City, investment sales in the first half of this year were down 50% year-over-year and office availability is at its highest point in 16 years. CBRE’s total profit for the third quarter was $184M, down 28.2% from $257M during the third quarter last year, according to the financial results it released for the quarter. The company anticipates sales and leasing volume will be down between 30% and 40% overall for the year.”

“CBRE has already made cuts to its staff to save on expenses since the pandemic hit. The brokerage was also making cuts before the pandemic began to ravage the U.S.. In February, it laid off 40 engineers in the New York City office. Before layoffs, the company cut pay for senior staff members, GlobeSt. reported in May.”

The New York Times. “Real estate developers are seeking opportunities to buy student housing from strapped universities and convert them into apartments for white-collar workers. Thirty percent of American universities, both public and private, are running deficits, according to Moody’s Investors Service, and the pandemic has only added to financial pressures. ‘It is absolutely a perfect storm,’ said Michael Jerbich, president of B. Riley Real Estate Solutions. ‘The only thing they can do is turn to real estate or other hard assets.’”

“The shift has been playing out for years as universities face shrinking enrollments and ballooning debts, but as the pandemic worsens, college real estate will increasingly be redeveloped or sold, experts say.”

From Capital Hill Seattle in Washington. “One quarter of the first batch of units in the new Capitol Hill Station mixed-use development have been leased, as of early this month, according to the complex’s general manager. Coronavirus has shaken the local housing market, with rents down 14% since March, according to data from ApartmentList. The median one-bedroom apartment rents for just under $1,500 and two-bedrooms for $1,849. Rents have been going down for months and they were down 4.2% between September and October.”

“Seattle is obviously not alone in seeing rents plummet, with New York City down over 15% and San Francisco down a staggering 21.7% since March, according to ApartmentList. Meanwhile, local apartment buildings are also giving more concessions to renters, such as a month of free rent. Over 70% of large Seattle-area buildings constructed since 2017 are giving such deals to leasers, according to The Seattle Times. For example, the Capitol Hill Station developers are advertising two months of free rent on some units to prospective tenants.”

“14th Ave’s REO Flats, for example, is touting two rent-free months, a waived deposit and application fee, and $500 off move-in costs. The Capitol Hill Station development is offering a similar deal on ‘select’ units.”

The Nevada Current. “Henderson began regulating STVRs last year. This year through August the city imposed and collected $6,100 in fines on properties where owners or renters violated the rules, according to spokeswoman Kathleen Richards. Attorney Alex Velto of Hutchison Steffen confirmed he’s consulted with the group about possible legal action regarding property rights. ‘All of my clients are paying over market value for these homes,’ Lowman told the City Council in September, imploring members not to place distance and other restrictions on STVRs.”

“‘It’s good for sellers,’ Lowman told the Current, adding investors ‘are willing to pay above market value (by a good $10,000+) knowing they will make it back easily in the first month they rent it. STR(s) can bring in a lot of money if you run them correctly and have them set up right. With the distance rule, this will stop happening and values will not keep going up.’”

From Now Toronto in Canada. “A one-bedroom apartment in the old City of Toronto cost $1,922 on average in October, according to Rentals.ca’s National Rent Report. That’s a 2.3 per cent drop month-over-month, and 17.3 per cent drop, year-over-year. Dragging rental listing prices down is the oversupply, particularly in the city. There’s an oversupply of investment unit rentals due to new builds coming into the market. Owners of former Airbnb units are looking for long-term rent with the lack of tourism. And then there’s an exodus from the downtown core since so many people are working from home and looking for more space.”

“‘People are starting to say, ‘I don’t need to be in the concrete jungle,’ says Re/Max Hallmark Realty broker Meray Mansour.”

From Reuters on Canada. “Eager to move his young family into a house with a backyard amid the pandemic, Dale-Paul Jordan listed his Toronto condo for sale last month and prepared to start bidding on detached homes. But the condo didn’t sell or get a single viewing. And when another seller in the building slashed their asking price, Jordan and his wife pulled the unit off the market and decided to delay their dream until spring at least. ‘One of the things we’re handcuffed to is selling our condo to help with the downpayment,’ Jordan said.”

“The couple are among a growing cohort of would-be buyers in Canada keen to move up the property ladder, but are trapped by a flood of condos in the Toronto and Vancouver markets. The situation is only expected to worsen with a near-record number of new condos under construction. As more people find themselves in the Jordans’ position, there will be fewer buyers for detached homes, real estate experts said, and that could have a trickle-down effect on the red-hot detached home market.”

“The cracks appearing in the condo market may well become the fault-line in Canada’s housing market. Some agents say they have had clients on the brink of reneging on detached home offers, because of worries they won’t be able to sell their condo. ‘We came very close a few times but we got the deal done,’ said Thomas Mirkovich, a Toronto-based broker. ‘I had to have a lot of ‘come to Jesus’ moment conversations.’”

“Add in other pressures – Canada’s still-high unemployment rate, a sharp drop in immigration, and the winding down of mortgage deferral programs and emergency pandemic benefits – and conditions could be ripe for a reckoning. ‘Now people can’t sell their condos downtown. Nobody wants to buy a condo,’ Hilliard MacBeth, a portfolio manager and author of ‘When the Bubble Bursts,’ said in an interview. ‘The government support means the real start of the recession has just been delayed.’”

The Daily Mail on the UK. “Big city rents are dropping by up to 45 per cent as swathes of tenants no longer have to live near their workplaces. A Zoopla repor said average rents in London are now 5.2 per cent lower than they were a year ago – while those in Birmingham, Manchester and Edinburgh are also dropping. Some of the more drastic cuts include a two-bedroom flat in central London’s Baker Street which is down from £4,312 a month in May to £2,600 last month, while rent on a four bedroom flat around Bloomsbury dropped from £3,476 in June to £2,210, the Times reports.”

“Postcode W9, which covers parts of Maida Vale and Paddington, has seen the second biggest rent price drop (20 per cent), followed by SW1 (17 per cent), which covers Westminster, Belgravia and Pimlico. Matt Hutchinson, director at SpareRoom, noted: ‘Once again, London dominates the headlines in terms of falling rents, and it’s generally the most expensive neighbourhoods that are worst affected. ‘What we’re seeing might just be a temporary shift in the rental market, or it may be the start of the UK’s rental map being redrawn permanently.’”

From Dublin People in Ireland. “Dublin Central Labour Party Senator Marie Sherlock said she believes a ‘dangerous precedent’ is being set by Dublin City Council in approving applications to allow student accommodation developments to take bookings from tourists during term-time. Cabra-Glasnevin Councillor Declan Meenagh said: ‘At a time when tourism is on its knees and the supply of tourist accommodation is already over-saturated, we have to ask whether anyone’s interests are really being served by this application.’”

From Cyprus Property News. “Luxury real estate may see a dramatic downturn next year, as the Cyprus Investment Program is no longer available to foreign investors, plus the pandemic has made market conditions even worse. A bad taste left by Al Jazeera videos pushed the retreat by foreign buyers further and may send prices spiralling to 2013 era levels. Foreign buyers – who have helped fuel the push in premium homes and high-rise building apartments (mainly in Limassol and Paphos) – are on the wane.”

“According to DANOS International Property Consultants and Valuers, the volume of foreign purchases will see a sharp drop in 2021. The reasons include limits on taking cash out of foreign countries, anti-corruption laws taking effect, market saturation, rising property prices, the lack of citizenship incentive and concern about the stability of the EU economy, market and political situation.”

“The Limassol real estate market should slow significantly as sale volumes across the town are expected to fall by at least 25%. The average price for a high-rise tower apartment is expected to fall in the last quarter of this year and continue falling in 2021, as well. If you look around Limassol at all these, 15-28 storey modern towers with starting prices at €6,000 per square metre for a luxury apartment, people living in Limassol, are not buying them.”

“Also, because of the pandemic – economic uncertainty, we are seeing people in Cyprus, selling their property to save money or simply to pay back their bank debts. It is serious – people can’t rely on their business for enough income.”

A report from Bloomberg. “It was considered one of the root causes of the global financial crisis, and regulators have spent over a decade trying to stamp the practice out. Yet Kroll Bond Rating Agency Inc.’s $2 million fine this week shows how in the securitized-debt market, the battle against ratings shopping was never truly won. Kroll settled with the U.S. Securities and Exchange Commission over its failure to adhere to credit-rating standards for commercial-mortgage bonds and collateralized loan obligations, just months after rival Morningstar Credit Ratings LLC was hit with an even larger penalty by the regulator.”

“The recent fines are fueling concerns that rosy credit grades are masking deeper structural problems with the securities. The risks are particularly acute in the CMBS market, where shutdowns stemming from the coronavirus pandemic have battered revenues for malls, hotels and other commercial properties that back the debt, spurring a raft of downgrades.”

“‘The issue of ratings-shopping and grade inflation is still unresolved,’ said Jeffrey Manns, a law professor at George Washington University. ‘In good times, these problems don’t matter very much, but in bad times, these intrinsic problems become more salient. It would not be surprising if an economic downturn such as the current one exposes the structural problems of securitization ratings, and that this becomes a focal point.’”

“‘The ratings system is broken, unfortunately,’ said Marc Joffe, a senior policy analyst at Reason Foundation, a libertarian think tank, and a former employee of Moody’s Analytics and contractor for Kroll. ‘While this recession may not be as deep as the last one, there are some similarities. Last time, there was a housing bubble. This time, there was a commercial-property bubble. It just takes one thing to pop it, and this time around, it was Covid.’”

From Bisnow New York. “Some heavy hitters that leased big office spaces propped New York City’s office market up a bit in the third quarter, which ended Wednesday, but asking rates and sublease listings show it is still taking a beating from the disruption and uncertainty brought on by the coronavirus pandemic. Overall leasing volume in Manhattan rose by around 50% over Q2, and asking rents suffered their worst quarterly drop in more than 10 years, according Colliers International’s Q3 office report released Thursday. Sublease space now makes up its highest share of office inventory since the Great Financial Crisis, according to Colliers and Savills’ Q3 report.”

“The year-over-year drop-off far surpasses the last two recessions, said Frank Wallach, senior managing director of research at Colliers. ‘If leasing activity continues at the same pace for the rest of the year, we’re going to end 2020 with still the lowest year of leasing so far in this century,’ he said. ‘This is a period in the market where we’re seeing echoes of what we saw in the Great Recession.’”

From Bisnow Washington DC. “The coronavirus pandemic is continuing to hurt the office market in the nation’s capital, with demand for office shrinking, a host of sublease space becoming available and vacancy reaching another all-time high. CBRE’s report found negative net absorption of 177K SF in the District, bringing the year-to-date occupancy loss to 780K SF. It pegged D.C.’s vacancy rate at 15.4%, a new record high for the market.”

“Savills Research Manager Devon Munos said she doesn’t see much new demand from tenants on the market. Savills, a tenant rep firm that defines vacancy as the availability rate, pegged D.C.’s rate at 18.1%. ‘I think that in the coming quarters we’re going to see demand significantly drop,’ Munos said. ‘There’s really just fewer and fewer tenants willing to start the leasing process unless they’re forced to by an imminent lease expiration.’”

“The General Services Administration is continuing with its effort to save taxpayer money by consolidating offices and reducing its real estate footprint, which results in negative absorption for the D.C. office market. ‘The trend we’ve seen the past couple years of government downsizing is likely to continue, and that has contributed to increasing vacancy,’ Cushman & Wakefield Senior Director of D.C. Metro Research Nate Edwards said.”

The Boston Herald in Massachusetts. “A bill that would halt evictions and freeze rents for a year after Gov. Charlie Baker lifts the coronavirus state of emergency has cleared its first major hurdle but faces staunch opposition from landlords who say it would lead to foreclosures, slums and worse.”

“‘The further people get behind in their rent, the less likely they will ever be able to pay it. If we don’t deal with this problem and we wait another year, there’s a lot of money that will never get paid,’ said Greg Vasil, CEO and president of the Greater Boston Real Estate Board. ‘It’s the property owners who lose. We’ll see foreclosures and properties will start to fall into disrepair.’”

The Puget Sound Business Journal in Washington. “With Amazon and other tech companies expected to add tens of thousands of jobs on the Eastside in the coming years, developers of multifamily housing are swarming the area. They may be a little early, however. ‘I think there’s a lot of excitement in Bellevue, but I think people might be getting a little overly enthusiastic,’ said appraiser Brian O’Connor of O’Connor Consulting Group, a Seattle company that advises multifamily developers.”

“Across the Puget Sound region, demand for multifamily housing has dropped significantly due to Covid-19 while supply increases, he said. The Eastside is not immune. Still, this has not deterred developers. ‘Demand will probably grow, but the development community — they don’t wait for it to grow, they just charge right in,’ O’Connor said. ‘There’s already an oversupply, especially in the Totem Lake/Redmond area.’”

The Sacramento Bee in California. “It’s been a tumultuous year in downtown Sacramento. Coronavirus sent state workers away, leaving offices empty and sidewalks bare. Restaurants faltered and failed. Civil unrest hit downtown streets, prompting storefronts to board up. Hundreds of housing units are under construction and hundreds more are planned to start soon. Some of the new housing being built will be affordable to residents with lower incomes. However, much of it will be aimed at young, well-paid workers, including emigrees from the Bay Area. The enticements often include dog spas, bicycle parking rooms, pools, gyms and communal barbecue areas.”

“Downtown City Councilman Steve Hansen said projects that weren’t quite ready to go when the virus hit face tougher challenges. That includes a key housing project planned at the empty, fenced off Eighth and K streets corner, where developers had hoped this year to build apartments that would have created some much-needed oomph for K Street.”

“Instead, they are stuck trying to find new lenders. ‘The question is how many that are conceived more recently will be able to go forward given the economic circumstances that could drag our city and downtown into one of the most dramatic recessions we’ve ever seen,’ Hansen said.”

The Bay Area Newsgroup in California. “High costs, remote work and shuttered bars, restaurants and shops have taken a toll on city living in the Bay Area. And during the covid pandemic, it’s showing up in plummeting Bay Area rents since March, according to a new study by Apartment List. Monthly rent dropped 17.8 percent in San Francisco, the steepest decline in the nation, 9.5 percent in San Jose, 7.9 percent in Oakland and 6.3 percent in Fremont.”

“Overall since March, rents are down in 41 of the 100 largest U.S. cities, according to Apartment List. Other cities that have seen big drops are New York (down 11.6 percent), Seattle (off 9.9 percent) and Washington, D.C. (down 8 percent). Omar Maissen, an agent at FM Partners in San Francisco, said sales of apartment buildings and investment condos have fallen as pandemic movers have searched for more space. Small apartment buildings, he added, are ‘getting crushed.’”

From the Globe and Mail in Canada. “Scotiabank strategist Hugo Ste Marie noted that apartment rents in Toronto and Vancouver are ‘skidding’ lower. ‘The pandemic has caused some distortion in the supply-demand relationship. On the demand side, fewer foreign students, less immigration, people likely moving out of city centres toward the suburbs, and the rapid adoption of the WFH trend, which we believe is here to stay, could be issues for the sector. On the supply side, less tourism has also likely created an influx of short-term rental units (think of all the folks being unable to rent their condos on Airbnb anymore) on the LT rental market (competing against apartments)… the number of apartments listed in Toronto has sharply increased this year. All those factors pushed the average rent of a two-bedroom unit down 5.5% YOY in Q2, according to the Toronto Real Estate Board … However, another source providing more timely data (PadMapper) has the average rent for a two-bedroom unit off 12% YOY in September in Toronto (-14% in Vancouver).’”

From Mortgage Broker News in Canada. “The Vancouver condo sector might become a buyers’ market soon amid steadily growing inventory and sustained price declines, according to CBC analyst Mark Ting. The market’s average home sales price saw its last peak in January 2018, at $751,632 – a level approximately 8% higher than the reading this month. Meanwhile, active listings swelled to more than 6,000 units, with much of the new volume entering the market in July and August.”

“Prices will likely drop further due to surges in Vancouver’s inventory, largely stemming from owners forced to sell because of lost employment. ‘Many investors who bought multiple units near the peak of the market that no longer provide cash flow will be forced to sell at a loss,’ Ting said.”

The Express and Star on the UK. “Robin Lloyd reckons he got off lightly. When his new tenant refused to pay rent, he was £12,000 out of pocket by the time he managed to evict him. ‘The average amount amongst other landlords I spoke to was £33,000,’ he says, adding the experience with his other rental property, in Shropshire, was even worse. ‘I had drugs being sold to kids in my garden by someone who killed one of them with his sword,’ he says. ‘The judge said he was convinced he had acted in self defence. Curtains were set on fire by the said drug seller, and furniture slashed. Okay, he was a guest of the tenant but you do not need it do you?’”

“Mr Lloyd tells how one of his ex-tenants had begged to rent his flat from him, after he was found sleeping on a pallet in the basement of a café with his pregnant wife. ‘The sensible thing to do was walk away. No references, a recent immigrant, benefits, part-time work as a labourer,’ he says, but he took pity on the man. ‘As soon as he was in there he said, ‘this is my home now, I live here’ and refused to pay rent.’”

“Mr Lloyd adds that the man continued to claim housing benefit while living rent-free, and even complained about the lack of a view from the window. ‘Property no longer makes a profit for me,’ he says. ‘I hang on for my pension to kick in. If not for that I would be ‘financially embarrassed’ as they say in polite society.’”

“Bernie Lewis, chairman of Wrekin Landlords Association, says the group has lost 18 members over the past three years because they had decided being a landlord was no longer worthwhile. ‘When people used to ask me where to invest their money, I always used to say that property was the best investment you can make, but I wouldn’t recommend it today,’ he says. ‘We’re all very concerned. It’s nowhere near as attractive as it was 20 years ago, and it’s getting worse.’”

“Another problem is ‘accidental’ landlords, who maybe through bereavement or a change in family circumstances, find themselves with an empty property they are unable to sell. Mr Lewis says they very quickly find they are ill prepared for the work required. ‘They think ‘I’ll rent that out’, but they have no idea of what you have to do,’ he said of the work involved.”

From Bloomberg on Hong Kong. “There’s a saying in Hong Kong property circles that if the city’s richest man, Li Ka-Shing, is selling, you don’t want to be the buyer. Now, a group of investors who paid $5.2 billion for Li’s stake in The Centre almost three years ago — making it the world’s most expensive skyscraper — is finding out why. After initially making quick profits flipping floors in the 73-story tower, the combination of anti-government protests, the coronavirus pandemic and escalating US-China tensions has seen vacancies surge, rents drop and dealmaking dry up.”

“Just one sale has been made this year — at a 35 per cent discount to early 2019 prices, according to property-data provider Real Capital Analytics. Almost one-fifth of the building is empty — one of the highest vacancy rates in Hong Kong’s sought-after central business district — and rents are down about 20 per cent from a year ago.”

“‘It was a reasonable investment decision back then,’ said Thomas Lam, an executive director at Knight Frank LLP. ‘Market prices were higher than the average cost the group paid, and flipping floors seemed easy. But now, as rental yields and office demand decline amid the worsening economy, buyers are much more reserved.’”

“All that has put the buyers in a hole. ‘These guys were hoping to flip the properties at a 30 per cent gain straight away, but they’ve been caught out by other factors,’ said Phillip Zhong, a real estate analyst at Morningstar Investment Service. ‘Rental income may not cover interest payments on loans to finance the deal, meaning even selling at the initial cost price would mean taking a big hit overall.’”

“The most high-profile members of the group are Ma Ah-muk and Pollyanna Chu, who initially took 13 and seven floors respectively. Chu had a lengthy spell as Hong Kong’s richest woman, but despite her family empire now spanning hotels and watchmakers, her net worth today is a fraction of what it used to be.”

A report from the Wall Street Journal. “In the years leading up to the coronavirus pandemic, rental apartments were one of the hottest property types. Things are different now. Even stronger markets are seeing declines of about 5% in effective rent rates, which takes into account landlord concessions like months of free rent when leases are signed, according to John Pawlowski, an analyst with Green Street Advisors.”

“In harder-hit markets, like New York and San Francisco, effective rents are down 15% to 20%. Shares of public REITs have fallen about 30% since mid-February when Covid-19, the illness caused by the new coronavirus, began spreading in the U.S., Mr. Pawlowski said.”

From Zillow. “Rental concessions on Zillow® listings are now nearly twice as common as they were in February, as landlords strive to attract new tenants in a rental market that has softened considerably. The share of rental listings on Zillow that advertise some form of concession rose from 16.2% in February to 30.4% in July. Renters will most often find discounts in Washington D.C. — 57.5% of listings advertised at least one type concession in July. Charlotte (53%) and Austin (47.1%) had the next-highest shares. These are all up dramatically from July 2019, when 27.4% of rentals in Washington D.C. were offered with concessions, Charlotte had 29.4% and Austin just 15.3%.”

From CBS Boston in Massachusetts. “As moving vans and college students once again descend on Boston, real estate experts say thousands of apartments are still empty and unrented due to the pandemic. Landlords are finding it difficult to fund buildings typically crammed with college students. Experts estimate more than 10,000 apartments in Boston remain up for grabs. ‘The biggest decrease we’ve seen so far was a $1200 decrease for a 5 bedroom in Brighton,’ said John Puma, Chief Operating Officer for apartment search website Places for Less.”

“In downtown Boston, there are still ads for brand new luxury apartments but, on average, Puma says rents are down roughly $200 to $600 a month. ‘We’ve seen 2 to 3 months rent free. Other incentives like free parking, waived deposits, waived pet fees, all kinds of incentives,’ said Puma. ‘We expect by this weekend that there will be another round of price reductions because it’s finally going to set in what September 1st looks like,’ Puma said.”

From NBC Boston in Massachusetts. “Faneuil Hall – an area usually bustling with tourists and street performers – has become a near ghost town as businesses are hit hard by the pandemic. At least 20 tenants have closed for good or have not reopened since the beginning of the coronavirus pandemic, according to the Boston Globe, representing nearly one-fourth of the properties. Tenants that are open also say business is down up to 90% from this time last year.”

From Bisnow New York. “Between January and July, New York City investment sales dropped by half from the same period last year, the lowest it has been since at least 2015, according to the Real Estate Board of New York’s Biannual Investment Sales report. Hotels were the hardest hit asset class, according to the report, with investment sales volume down 81% year-over-year to $294M total. The price tag on these transactions — just under $49M — dropped by 37%.”

“Multifamily investment sales dipped 51% year-over-year with a 50% year-over-year average price drop to $17M as apartment vacancies continue to rise and rent prices continue to drop across all boroughs. Since the onset of the crisis, real estate lobby groups have pushed for federal funding to aid the city’s gaping budget holes.”

From NPR on New York. “Adam Johnson enjoys going into the office. It helps that he works in one of the nicest buildings in Midtown Manhattan. He shares the sixth floor with a real estate showroom and an assortment of hedge funds. They all left months ago. ‘I am the only person who’s been coming in here since April 1st,’ he says. ‘This is what happens when people move out,’ Johnson says, gesturing to a massive conference room with million-dollar views over Central Park.”

“Jeff Blau, CEO of Related Companies, one of the world’s largest commercial landlords, cites the example of companies like Google, which announced it will let employees continue to work from home until at least July 2021. When that happens, he says, temporary relocations can become permanent ones. Apartments lie vacant; restaurants and shops continue to fail. ‘Everyone thinks that they’re just going to come back here July of ’21, or whatever the date might be, and find the city in the same shape it was,’ Blau says. ‘And that’s just not going to be the case.’”

The Jacksonville Daily Record in Florida. “The multifamily investment sector in Northeast Florida slowed in March amid the uncertainty of the coronavirus pandemic. During the quarter, 715 vacant units were rented while communities completed 928 units. There are 4,928 apartment units under construction. ‘The annual demand for new units in the market is roughly 2,000 and annual completions are around 3,300,’ said Bradley Coe, senior director of Multifamily Investment Services with Colliers International Northeast Florida.”

“Federal relief helped apartment owners ‘ride this thing out,’ he said. ‘They are saying my collections are still good, my income is still good and occupancy is strong. Why should I sell an asset that may have to be discounted anywhere from eight to 12%?’”

The Las Vegas Sun in Nevada. “Danielle Eldridge, a Salvation Army case manager who works with financially distressed families in Henderson, said the next six months are likely to bring more pain for residents struggling to pay their rent or mortgage. ‘Unfortunately, I see a lot of people losing their homes,’ Eldridge said. ‘Some people may have family members who can assist, but that usually can only go on for so long, especially in the economy that we’re in, nationwide. When they can’t receive assistance from family members any longer, they come to me.’”

“The state’s unemployment rate, which sits at just over 16%, skyrocketed in the spring after Nevada’s nonessential economy was closed. Since March, Eldridge said the city has helped more than 50 clients with housing payment assistance, although the assistance is limited to one month. ‘A lot of the people I work with are very vulnerable,’ Eldridge said. ‘A lot of them have never asked for assistance in their lives. Right now, they’re having to swallow their pride and reach out. They’re close to being evicted or close to being homeless. For some, this is their last straw.’”

From Greenville News in South Carolina. “Evictions are back. In South Carolina, early September is expected to bring an alarming and possibly record number of evictions, said Mark Fessler, head of S.C. Legal Service’s housing unit. It is being called a coming ‘tsunami’ of evictions and more people will likely lose their housing stability than at the peak of the 2008-2009 recession because this time the jobs lost are disproportionately from lower-income fields like hospitality and restaurants, said Bryan Grady, chief research officer of S.C. Housing, a state agency.”

“‘Everything we are seeing suggests it’s going to be huge, 2008-2009? It’s going to dwarf that,’ said Adam Protheroe, a litigation attorney with S.C. Appleseed, a low-income advocacy group in the state. ‘Everything that drives evictions in normal times is now on overdrive.’”

The Orange County Register. “California lawmakers released plans Friday, Aug. 28 for a new eviction moratorium that would protect tenants with COVID-related financial hardships from getting thrown out of their homes through January for not paying rent. Daniel Yukelson, chief executive of the Apartment Association of Greater Los Angeles, characterized it as ‘another knee-jerk attempt to stabilize housing on the backs of rental property owners who are being forced to carry interest-free loans’ for renters. ‘This bill,’ he said, ‘will be a complete disaster for housing providers.’”

“‘AB 3088 is a risky, high-stakes legislative solution that falls short of being fair and equitable,’ said David Cordero, executive director of the Apartment Association of Orange County. ‘AB 3088 will result in a wave of smaller rental property owners being driven into bankruptcy.’”

From Cal Matters. “California renters financially impacted by the coronavirus pandemic will be protected from eviction until at least next February, while small landlords will be offered some foreclosure protections, under a measure approved by lawmakers and signed by Gov. Gavin Newsom late Monday night. Without money coming from the state, small landlords may wonder how they expect to meet their mortgage payments if they can’t evict renters and re-rent apartments until next year.”

“An earlier proposal embraced by tenants, from Assemblymember David Chiu, a Democrat from San Francisco, would have forced banks to offer mortgage forbearance options to struggling small landlords. Those provisions also weren’t included in the final bill. Banks and credit unions are also a powerful force in the Capitol. But their leverage on the eviction issue in particular was amplified by the constitutional limits of state law, and the threat of legal action.”

“Both landlord and banking groups were skeptical that any type of compulsory mortgage forbearance would survive legal challenge. Both the state and federal constitutions have ‘contract clauses’ that limit government interference with private contracts like mortgages. California is also preempted from regulating certain banking activities in the federal government’s purview. Banking groups argued that any state incursion along the lines of mandatory mortgage forbearance for distressed small landlords could be dismantled in court.”

“Some lawmakers voiced frustration that banking groups did not offer more in the spirit of compromise, considering the concessions made by tenants and landlords. ‘The banks and the mortgage beholder are not doing a thing,’ said Sen. Hannah-Beth Jackson, Democrat from Santa Barbara. ‘And I can’t tell you how disappointed I am that they have not been willing to step up.’”

A report from The Real Deal on Florida. “The supply of unsold condos is growing in downtown Miami, as the pandemic continues to pummel South Florida’s economy. Greater Downtown Miami has more than 30 months — or two-and-a-half years — of supply of condos, and 100 months — or more than eight years — of supply of luxury units, according to an analysis of Multiple Listing Service data by Condo Vultures Realty. As of Tuesday, there were 3,579 condo listings in Greater Downtown Miami, asking an average price of about $758,000. Meanwhile, the average closing price for the first half of the year was $511,000.”

“The luxury market is faring much worse. Only 36 units sold between January and June, for an average of just six units sold a month. (Units asking at least $1 million are considered luxury.) ‘This is giving me flashbacks to 12 years ago in 2007, when the Miami condo market started to go bad,’ said Peter Zalewski, principal at Condo Vultures Realty. ‘Early indications are that this pandemic combined with the oversupply that already existed is going to turn this into a serious buyer’s market.’”

“Currently, about 600 luxury condos are on the market asking an average price of $2.05 million. Twenty-six luxury condo sales are pending, Condo Vultures’ data shows. It doesn’t help that the shadow rental inventory is also growing, Zalewski said. Individual condo owners who typically rent their units out are faced with a dilemma, he said. ‘Do they continue to pay their mortgage, or do they begin the process of trying to unload early?’ he asked.”

“Zalewski predicts that investors will continue to sell their condos at deep discounts compared to their purchase price, or to the market’s high. It’s already happening throughout South Florida. In July, billionaire hedge fund manager Clifford Asness sold his South Beach penthouse for $22 million, 15 percent less than he paid for it two years ago. ‘The day of the all cash buyer is coming, and coming quickly,’ Zalewski said. ‘Those all cash buyers are not looking to pay market value. They’re not even looking for a discount. They’re looking for a haircut.’”

From Travel Daily News. “A new national report shows that the hotel industry is facing a historic wave of foreclosures as the COVID-19 pandemic continues to devastate small business hotel owners and its workforce. Since the beginning of the pandemic the hotel segment has faced a historic number of delinquencies and is the most heavily hit sector of the commercial mortgage-backed securities (CMBS) market. The report, compiled by Trepp, shows that the percentage of loans that is 30 or more days delinquent is 23.4 percent as of last month—the highest percentage on record. By comparison, the percentage of hotel loans that were 30 or more days delinquent at the end of 2019 was 1.3 percent.”

“From a financial perspective, the report shows that $20.6 billion in hotel CMBS loans were 30 or more days delinquent as of July, compared to $1.15 billion as of December 2019. The highest volume of delinquent hotel loans during the Great Financial Crisis was $13.5 billion. The current percentage of loans that are delinquent now exceeds the highest level during the Great Financial Crisis by 53 percent.”

From Bisnow Washington DC. “The end of the summer is typically one of the busiest periods for College Park hotels, but the pandemic is preventing that activity from happening this year. The Hotel at UMD, a 297-room hotel with 43K SF of meeting space, which opened in 2017, temporarily closed in March and laid off 150 people. Additionally, two out of the four restaurants in the hotel closed, and its Red Door Spa filed for bankruptcy, said Southern Management CEO Suzanne Hillman.”

“‘There is a severe, significant impact on the hotel, and I do not see it coming back quickly,’ Hillman said. ‘People are generally afraid.’”

“National Harbor’s restaurants have also seen their traffic increase during the weekends this summer, said Peterson Cos. CEO Jon Peterson, but they are still facing the difficulties the restaurant industry has experiencing across the country. ‘The reality is not everyone is going to come out the other side of this,’ Peterson said.”

From RE Journals. “Cleveland, like most Midwest cities, was enjoying an active commercial real estate market at the start of 2020. Then came mid-March and the COVID-19 pandemic. ‘It was projected that the bankruptcies we are seeing today would occur over a 10-year period. We didn’t think they’d happen over just 10 weeks,’ said Doug Holtzman, vice president with Anchor Cleveland. ‘For those of us who touch, feel and see retail every day, we knew the antiquated models these retailers were working with. It was just a matter of time before they would have to file for bankruptcy.’”

“Ezra Stark, chief operating officer of Stark Enterprises, said that while the Cleveland multifamily market is solid as a whole, certain submarkets are performing better than others. Downtown Cleveland’s apartment market is sluggish. The reason? There is an oversaturation of development in downtown, something that COVID-19 only exacerbated. Stark said that he expects to see more challenges in the future as Cleveland’s economy continues to struggle as a result of the shutdowns imposed after the pandemic hit.”

“‘We are seeing an increase in concessions now,’ Stark said. ‘We are seeing an overall decrease in demand. It’s going to be a challenging environment for multifamily.’”

From Potrero View in California. “Commercial landlords in Dogpatch have temporarily reduced rent for retail and production, distribution and repair tenants forced to close during shelter-in-place. ‘I’ve heard anecdotally from people who’ve requested reprieves in their rent and they were not given them. It’s a little bit of Russian roulette for the landlord. If you lose that tenant, you might not find a new tenant,’ said Mark Dwight, owner of Rickshaw Bagworks at 904 22nd Street. ‘When I walk around town, the Financial District and Nob Hill, I see so many closed businesses. It’s going to take a while to come back. From ground level, it looks bleak.’”

“Workshop Residences, at 797 22nd Street, recently announced that it was permanently closing, Dwight said. He predicts 40 to 50 percent of San Francisco’s restaurants will go out of business. ‘Ground floor small retail and restaurant will see high vacancy rate,’ said Dwight.”

The Silicon Valley Business Journal in California. “Silicon Valley is expected to double the number of new apartment units added this year compared to the number of those added last year, with apartment construction in the region now at a five-year high, according to RentCafe. That’s based on data referring to apartment buildings with 50 units or more. The report found that the San Jose metropolitan area is projected to add 5,829 new apartment units to its apartment inventory by the end of 2020, more than double the 2,912 new apartment units added to the region by the end of 2019.”

From New York 1. “The annual Rent Guidelines Board vote is a spectacle closely watched by apartment dwellers: the setting of rents for nearly one million units in the city. The rent protections are taken for granted, but the law contains a poison pill: if five percent of the apartments are vacant, the rent regulations end. If the vacancy rate remains below five percent, the protections continue. ‘We’ve seen it fluctuate from two percent up to four, middle fours, but I don’t think it’s ever eclipsed five percent,’ said Jay Martin, the Executive Director of the Community Housing Improvement Program.”

“The Community Housing Improvement Program or CHIP represents landlords who own hundreds of thousands of apartments and says its member survey shows a vacancy rate of nearly 11 percent now up from 3.38% in February. CHIP’s executive director believes if the city conducted a vacancy survey now it would find a vacancy rate above five percent because so many people have left the city or changed their housing situation because of the coronavirus.”

“‘Once the housing vacancy survey is allowed to be conducted we will see some numbers that the city has never seen before,’ said Martin.”

From Real Estate Weekly. “One of New York’s biggest housing groups has accused the federal government of being ‘asleep at the switch’ as thousands of tenants flee the city. The Community Housing Improvement Program (CHIP) says skyrocketing vacancies and unpaid rent is hurting both owners and occupiers. The vacancy rate now stands at 10.78 percent, up from 3.38 percent in February, for our members. Although more pronounced at the high end of the market, CHIP found that the vacancy rate for apartments with rents below $2000 a month has more than doubled, coming in at 7.08 percent in August, up from 3.06 percent in February.”

“‘This indicates that even some of the city’s entry level apartments are not being rented anymore,’ said the group in a statement. ‘CHIP members report that they are significantly cutting rents and offering multiple months of free rent, and are still struggling to attract tenants.’”

“Commenting on the state of the sector, most CHIP members expressed dire concern for the growing number of vacancies in the city. ‘For the first time in 40 years, we have a tremendous oversupply in housing as families are fleeing the city,’ said one survey respondent. ‘Vacancy rates are killing our business. It’s not even pricing – there is a frightening dearth of demand,’ said another. Landlords also fear the pandemic is the death knell for small mom and pop commercial tenants.”

From Gothamist. “As some New Yorkers have long left the city and housing advocates fear an eviction crisis, the rental market itself is showing signs of weakening in Manhattan. A new estimate shows that the median residential rental price in Manhattan dropped 10 percent last month compared to July 2019, according to a report from real estate company Douglas Elliman. In Manhattan, the median rent for an apartment dropped from $3,521 in July 2019 to $3,167 in July 2020, a decline that the report called ‘most significant annual decline in almost nine years of record-keeping.’”

“Nancy Wu, an economist for StreetEasy, wrote that it wouldn’t be surprising to see rents fall even more into spring of next year. Those ‘leaving the city are not being replaced by others moving in. The new hires who typically move to the city are starting their jobs remotely. Fewer students will return to the city in September, when colleges in the city, such as Columbia and CUNY, begin the school year teaching most courses remotely,’ Wu wrote.”

A report from CBS New York. “As New Yorkers flee the city amid the coronavirus pandemic, parts of the city’s real estate market are rife with empty apartments. CBS2’s Jessica Moore reports the industry is dealing with nearly record low numbers of new condo and co-op sales. Apartment purchases for co-ops and condos in Manhattan fell by 80 percent in May. The high-end market took an even bigger hit – with sales of those valued between $5 million and $10 million down 90 percent. Home prices in Brooklyn fell at their fastest rate since the Great Recession.”

From Insider New Jersey. “A bill creating a plan for the empty homes which have been foreclosed upon in our communities cleared the Assembly Thursday, 74-4-0. The sponsors issued the following statement on the legislation: ‘New Jersey has the highest foreclosure rate in the country, in January 2020 foreclosures increased by 13%. Many foreclosed residential properties are vacant, undermining the health, safety, and economic vitality of neighborhoods, depressing their property values, and reducing revenues to municipalities.’”

“‘The availability of tens of thousands of foreclosed residential properties presents a unique opportunity for us in New Jersey. Enabling the purchase and dedication, or the rental, of housing units for low-income and moderate-income residents, will put to good use the overabundance of vacant foreclosed residential properties in the state and help families in need.’”

From Stars and Stripes. “Andrea and Army Capt. Jerry Bortner bought their first home on the same street as Jerry’s brother near their next duty station in northern Virginia, confident that their military housing allowance would cover the monthly mortgage payment. But a Pentagon stop-movement order issued in March in response to the coronavirus pandemic has left them paying for two homes: their new 4-bedroom home near Fort Belvoir and the home they’re stuck renting at Fort Riley, Kan., until the Army lets them move.”

“‘We’re paying for two houses in May, June and July,’ Andrea Bortner said in a phone call Thursday. ‘It’s a big mess.’”

“The Bortners are among tens of thousands of military families whose permanent change of station moves have been delayed by the order. Many of those families are facing financial difficulties because of the backlog, said Kathy Roth-Douquet, CEO of the California-based nonprofit Blue Star Families. ‘About a fifth of families with PCS orders polled have been paying two mortgages or leases,’ Roth-Douquet said in a phone call.”

The Wall Street Journal. “Former Under Armour CEO Kevin Plank has sold his historic home in Washington, D.C., to an unknown buyer for $17.25 million, down from its original $29.5 million asking price in 2018, according to a person with knowledge of the deal.”

From People on Tennessee. “Kristin Cavallari has officially moved into her new $5 million Nashville-area estate, which she purchased amid her divorce from Jay Cutler, a source tells PEOPLE. The exes relisted their Nashville house for sale in May for $5 million. They originally put the nearly 20,000-sq.-ft. home on the market in 2018, six years after the pair acquired the estate in 2012. It’s co-listed with Tim Thompson Premier Realtors and Sotheby’s International Realty for $4.95 million, a massive price cut from when they originally listed it in 2018 for a whopping $7.9 million.”

From TMZ on California. “Travis Scott’s new home looks more like a vacation destination, and one he paid all cash to get. Travis is the newest resident in Brentwood — one of L.A.’s ritzier neighborhoods — after dropping $23.5 million on the epic, 16,700-square-foot mansion. And, get this … he got it for a bargain! The mansion was first offered last summer at nearly double the price — $42 mil — before undergoing 2 big price chops.”

The Associated Press. “A Southern California woman was arrested Friday on charges of swindling investors, mainly from China, out of $21.6 million in a phony condominium and hotel complex project. Ruixue ‘Serena’ Shi, 36, of Arcadia, was taken into custody by FBI agents on a criminal complaint charging her with wire fraud, a statement from the U.S. attorney’s office said.”

“Shi owned Global House Buyer, a China-based real estate development company, and was CEO of a Beverly Hills-based development company, according to court documents. From 2015 to 2018, Shi solicited investments for what she claimed would be a 207-unit luxury condo and hotel complex in the Coachella Valley, near Palm Springs, prosecutors said. Instead of building the project, she spent a large chunk of the money on a lavish lifestyle that included luxury cars, travel and designer clothing, prosecutors said.”

“Most of the prospective investors were in China and she reached out to them through sales presentations at hotels, radio advertisements, and the Chinese-based messaging, social media and mobile payment app WeChat, authorities said. Victims who wanted to buy condos priced from $400,000 to $700,000 had to pay 40% of the price upfront as a down payment, prosecutors said. Others were told that investing in the project would allow them to obtain U.S. visas, authorities said.”

From Seattle PI in Washington. “Inventory continues to climb. We are now up 197 condos for sale (200) as of Monday. If you remove new construction, we have 176 units for sale. The key to analyzing condos for sale is to evaluate how many units are selling relative to the number of active sales. In the last 12 months, there were 441 condos that sold in the Downtown core. Or 36.75 units per month. With the current inventory of units (197) and the average sale per month of (36.75) we would have 5.3 months supply of inventory.”

“With that said, if you take the last 30 days of sales (23) and our current supply of inventory of (197) our months supply of inventory is currently 8.5 months. This obviously has a lot to do with the Coronavirus. We need to pay attention to the possibility that current owners are leaving the Downtown core for more traditional residential housing (with less density).”

Archive for category: Housing Bubble Blog

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