A report from the Dallas Morning News in Texas. “A lender that provided more than $388 million to finance one of Plano’s biggest real estate developments has filed to foreclose on the project. Beal Bank put up the debt for the redevelopment of the Campus at Legacy West in Plano. For more than three years, developers Silos Harvesting Partners and Dreien Opportunity Partners have been working to convert the former J.C. Penney headquarters campus on Legacy Drive into a more than $1 billion mixed-use development.”
“The Campus at Legacy West foreclosure filing is the largest of this economic cycle in North Texas. It’s bigger than last year’s $130 million filing on Frisco’s failed Wade Park development.”
From Crain’s New York. “The residential sales market was the worst it’s been in a decade—despite a strong economy. What happens to the market if we hit a recession this year? Pam Liebman CEO, Corcoran: Why isn’t the market stronger with all these positive indicators? It has to do with pricing and value. We have been in such a run-up, and then the SALT tax changes hit and had such a negative impact—it really was a killer. Plus, there was the mansion tax and additional transfer taxes, which scared the market. But I have talked to a lot of people, and December was a huge month for sales. I don’t hear talk about a recession. People are feeling good about jobs and wages. But there are so many really expensive apartments for sale, and that’s an issue.”
“What happens to all those ultra-expensive units? It depends on the developer’s financing. Some might try to rent to own or chop up big apartments into smaller units. Some will negotiate heavily, and some will try to ride it out. The most overheated sector of the market is the trophy apartment. There just aren’t enough buyers. I think it will hang over the high-end sector for quite a while, but I don’t think it will trickle down to the rest of the market. If I need to buy a car, I don’t care about who’s buying a Bugatti.”
The News Gazette in Illinois. “Even with several large apartment buildings constructed in the past few years and more on the way near campus, smaller landlords say they’re still able to attract renters. ‘There’s so much more building going on,’ said Carolyn Shlens, who runs Shlens Apartments, which has four buildings in Urbana. ‘I have no idea exactly what the occupancy rate on campus is, but it’s just getting much tougher to rent. You have to show them a bit more now. You have to keep them up.’”
The Spartan News Room on Michigan. “The increase in off-campus apartments could affect on-campus housing at Michigan State. Kat Cooper, chief communications officer of Residential and Hospitality Services, sees the influx as a complicated situation. Cooper says she thinks the off-campus market is becoming oversaturated and creates pressure for students to find housing too early in the school year. ‘I think it’s going to create market pressure and we’re going to have smaller complexes or older complexes really feel the pressure to update, to drop prices, to go after students harder.’”
From McKnight Senior Living. “For the year, net absorption totaled 15,643 units for senior housing, the most units demanded on a net basis for a full year since the National Investment Center for Seniors Housing & Care began reporting the data in 2006. Inventory growth decelerated from 21,479 units in 2018 to 16,750 units in 2019 but nevertheless was stronger than net demand, NIC said. ‘Demand was strong, but simply not strong enough to offset the growth in inventory,’ NIC Chief Economist Beth Burnham Mace said.”
From Senior Housing News. “It’s a common belief that many baby boomers will sell their homes and move into senior housing in the coming decade — but what happens if nobody buys those boomers’ houses? Baby boomers may have difficulty selling their homes in the future, a recent Zillow report found. The idea is that younger generations — particularly millennials — may have trouble affording these homes, or may simply find them unattractive, leading to a housing glut in some major metro markets over the next 20 years.”
“The Zillow numbers are not the only indication of this looming problem. A March 2019 Wall Street Journal story also focused on the issue, highlighting that more expensive homes in particular are already sitting on the market for long periods of time, and often selling for steep discounts. Warning that the problem likely will become more widespread in the next decade, the WSJ article noted that two of out five U.S. homes are owned by baby boomers today.”
“This trend could spell trouble for some senior living providers, as many older adults use their home equity to fund a move into senior housing. Some nonprofit life plan communities have already started to adjust pricing accordingly. Even senior living providers with rental fee structures should take heed of this burgeoning trend, according to National Investment Center for Seniors Housing & Care (NIC) Senior Principal Lana Peck.”
“‘Many seniors housing residents will rely on the proceeds from the sale of a home to fund a senior living lifestyle,’ Peck told SHN. ‘Affordability of seniors housing comes into play even more, as boomers who may have difficulty selling homes will wait longer to move, similar to what we saw in the Great Recession.’”
From Bisnow Washington DC. “The senior housing market has been one of the fastest-growing sectors in D.C. real estate, with developers bringing thousands of new units to the area hoping to capitalize on a demand bump from baby boomers. But recent market data shows demand hasn’t kept up with supply, leading to a decrease in occupancy levels. The occupancy rate for D.C.-area senior housing properties was 87.4% in Q3, down from 88.5% one year earlier and well below the peak of 93.5% in Q1 2016, according to the National Investment Center for Seniors Housing & Care, or NIC.”
“‘The downward trend in the occupancy rate in D.C. stems from the inventory growth which has exceeded net demand,’ NIC Chief Economist Beth Mace said. ‘Demand has not kept up.’”
“Since the start of 2016, developers have completed 26 senior housing projects totaling 3,362 units in the D.C. area, according to NIC. Another 18 developments are currently under construction that will add 2,069 units, and more are being planned that could grow the pipeline in future years. ‘It’s fair to say that when projects were underwritten, it’s likely they were underwritten to occupancy rates that are higher than what currently exists in the market,’ Mace said. ‘They’ll either have to modify their business plans to adjust to that, or it’s going to take them longer to lease up than what was in their business plans.’”
The Longmont Times-Call in Colorado. “For the second year in a row, rents throughout Boulder County remained relatively stable in 2019, suggesting the area’s housing supply has finally begun to catch up to demand. ‘With so many apartment starts coming to market in the last couple year years, and especially last year, it gives renters more options than they’ve ever had before,’ said Sam Radbil, a senior content and communications manager for Abodo, a national real estate research firm. ‘If you look at any major skyline, things are going up at a very high rate.’”
From Curbed San Francisco in California. “Palo Alto City Councilmember Eric Filseth served as the city’s mayor in 2019, while Adrian Fine assumed the mayor’s role this year; both mayors agree that the cost of housing in Palo Alto has strangled diversity in the community, and both agree that the city has underinvested in critical infrastructure like housing and transit. But when it comes to the roots of and solutions to the problem, the two mayors agree on little at all.”
“Adrian Fine: ‘Even with what they call ‘luxury housing,’ these new condos sell for $2 million, a single-family home for $3 million, but over time these units age and their prices come down, that’s absolutely true. If you want to see how today’s luxury home becomes tomorrow’s more affordable home, just go to Daly City.’”
From The Epoch Times. “Boston Fed President Eric Rosengren hit an upbeat tone on the economy while noting downside risks, including threats to financial stability. Still, he warned of risks to the hopeful forecast, admitting policymakers were navigating in largely uncharted waters in today’s low interest rate environment. ‘As a practical matter, central bankers do not have much historical experience with extended periods where interest rates are running below the estimated equilibrium level while unemployment rates are, simultaneously, historically low.’”
“Rosengren said loose monetary policy could lead consumers and businesses to take on riskier investments, or ‘reach for yield.’ Bubbles in asset prices might ensue, posing a danger to financial stability. ‘It is important to see and understand the risk that sustained low interest rates could place more pressure on real estate asset prices through reach-for-yield behavior—a scenario that preceded the 1990 and 2007 recessions. In certain scenarios, financial stability risks could potentially emerge as a problem for the otherwise benign forecast,’ he said.”