A report from Yahoo Finance. “In a client note this week titled ‘Escape From New York’, Jefferies chief market strategist David Zervos described how the coronavirus reversed decades-long trends of high-end gentrification for New York City. ‘I’m bullish on the get out of New York trade,’ Zervos told Yahoo Finance. ‘It’s a very difficult place to raise a family and do what we’ve done in New York for the last 10 or 15 years, which is really gentrify it beyond maybe where that gentrification should have gone, or maybe was inevitably unstable given the political backdrop of a city as complicated as New York, he said.”
The West Side Rag on New York. “New stats from Streeteasy show that median rents and apartment asking prices both fell more than 20% on the Upper West Side in November. The stats show that the median asking price for an apartment in the neighborhood fell 21.4% to $1.395 million (no, that doesn’t sound so low to us either). And the median rent fell 23.3% to $2,800. Streeteasy says that the median asking rent in Manhattan dropped 12.7%, falling to a 10-year low of $2,800 in November.”
From The Real Deal. “Churchill Real Estate’s Justin Ehrlich has seen a lot during his time as a developer and lender in New York. He witnessed the collapse of the real estate market during the 2008 financial crisis, followed by the mad rush to build luxury condo towers in some of Manhattan’s swankiest neighborhoods. But nothing compares to the past nine months, he said. ‘It’s not normal,’ Ehrlich noted. ‘It’s the worst I’ve ever seen.’”
“He pointed to an unusual rise in Uniform Commercial Code foreclosures by mezzanine lenders, which he sees as a canary in the coal mine for a mound of distress expected to hit the market in the next year. Matthew Mannion, who specializes in UCC foreclosures, has conducted at least eight auctions tied to mezz loans or so-called membership interests since March, according to an affidavit filed last month. And Mannion told The Real Deal that more are on the way. ‘This is the tip of the iceberg,’ he noted.”
In May, Beverly Hills-based Ohana Real Estate Investors sought to foreclose on the five-star Mark Hotel on the Upper East Side and sell the hotel through auction. Alexico Group, the hotel’s owner, filed a lawsuit, which led to a judge delaying the sale for 30 days. That bought Alexico time, and the two parties were eventually able to reach a settlement, which increased the principal and interest rate on the mezz debt, Bloomberg reported.
“The lawsuits can delay a sale, but ultimately a developer has to find money to pay its lenders. If not, Mac Avoy said, it will be similar to what occurred in the last crisis. ‘It’s the musical chairs … of different ownership,’ she noted.”
The Universal Hub on Massachusetts. “Boston has noted some dramatic shifts in apartment supply in 2020. The year has been marked by massive increases in vacancies, which has precipitated price drops throughout the 3rd and 4th quarter. A closer look at the data shows that there are a few areas that are being hit the hardest, particularly those nearest to the city’s largest universities. The following neighborhoods comprise the top 5 highest Availability Rates in Boston right now.”
“BOSTON – DOWNTOWN – 20.46%. BOSTON – FENWAY/KENMORE – 18.97%. BOSTON – NORTHEASTERN/SYMPHONY – 13.02%. BOSTON – MISSION HILL – 12.92%. BOSTON – ROXBURY – 12.71%. As a result of these vacancies, all of these areas have seen price reductions occurring since September. Some landlords were able to keep rents from falling too harshly by offering different tenant concessions. However, the second semester is right around the corner, and it appears like most of the areas Universities will remain remote in the spring. For this reason, we expect rent prices to fall even harder in January.”
The Star Tribune in Minnesota. “As 2020 winds down, Roers Cos. is ramping up. The Twin Cities-based apartment developer is responding to changing market conditions with a national expansion that has nearly tripled a development staff that will be tasked with doubling the number of projects it builds, especially rental housing for seniors and working-class renters. With many sectors of the economy still struggling and a glut of luxury rentals in the urban core and some inner-ring suburbs, Roers hopes to build a more diverse portfolio of rentals that are appealing to older and less wealthy renters in the Twin Cities.”
“In downtown Minneapolis and St. Paul, where thousands of units have been built over the past several years, the average apartment vacancy rate is hovering near double-digits and rent concessions have become common. In downtown Minneapolis the average vacancy rate during the third quarter was 11.1%, including new projects that are still in the lease-up phase, and as of the end of September another 900 units are expected to hit the market in 2021.”
“Ted Abramson, senior VP in CBRE’s Minneapolis Multifamily Investment Properties office, said that after a summer lull apartment investors are now back, and demand for projects like the ones Roers develops is once again robust. ‘Total volume is down,’ he said, ‘but the capital markets are still flush.’”
“Roers marketing and leasing director, Amy Johnson, said that making those projects affordable to build — and to rent — often means eliminating high-end amenities and designing smaller floor plans or incorporating tax-increment financing (TIF) to offset the lower rents. The company’s first workforce housing market in the Twin Cities is the Axle Apartments in Fridley, where rents are expected to be at around 80% of the current market rate.”
The Sacramento Bee in California. “A modern, Lake Tahoe waterfront estate with a six-story glass staircase is available for $32.5 million after getting a price cut in the middle of the coronavirus pandemic. Despite its extraordinary features, the home has been on the market for a while. First listed in 2011 at $43 million, the asking price fell to $32.5 million as recent as May 2020, according to realtor.com.”
The San Diego Union Tribune in California. “The median price for a single-family median home in November was $717,000, up 13.1 percent in a year. That was down from the all-time high of $730,000 reached in October. The resale condo median was $475,000, up 10.7 percent a year, and down from the record high of $485,000 in September. The newly built home median was $724,250 (up 7.4 percent in a year), down from the record $812,500 in October 2018.”
The Bay Area Newsgroup in California. “Jingyu Wu arrived in the U.S. in 2016, bought a small triplex in San Leandro and set about creating his own American Dream. He put his two sons in U.S. schools and became a landlord to pay college bills and make a living in his new country. When a young woman with small children arrived at his three-bedroom unit in January seeking shelter, Wu felt sympathy. The family needed a place to stay immediately, and they agreed to a one-year lease before the COVID pandemic struck.”
“But since February, they’ve racked up a total of more than $30,000 in unpaid rent, according to court records. Wu sued in Alameda County Superior Court to get them out. But Wu’s case, like hundreds of others in the Bay Area, has been stalled by a statewide moratorium on evictions. The tenant, after consulting with a legal clinic, countered with an offer in November: forgive the back rent, pay the family $12,000 to relocate and they’ll leave within weeks, according to correspondence from Wu’s attorney.”
“Wu said the rent he receives from his two other units doesn’t cover his monthly mortgage and bills. He’s losing nearly $3,200 a month in unpaid rent, and he’s had to borrow money from family members to pay his own household expenses. He’s unsure when he’ll get the property back. A trial date has been scheduled for March, and no payments have been coming in. ‘We also need justice,’ he said. ‘We have a systemic problem.’”
The Edmonton Journal in Canada. “Investing in real estate in the capital city does not look like such a capital idea, according to a recent report. But that doesn’t mean some investors aren’t seeing an opportunity to scoop up properties at lower prices and hold on for better days, says Jennifer Hunt, vice-president of research at the Real Estate Investment Network (REIN). Hunt is the author of REIN’s recent COVID-19 Special Edition: Real Estate Cycle Update that shows where major Canadian cities’ real estate markets are in the investment cycle.”
“All are in the slump phase of the cycle, but Edmonton is further along in this phase, meaning it may be the ideal time for investors seeking to buy a property, hold it and see its value appreciate over the next few years. Indeed prices are lower than they were during the peak of the market in 2014, she says. Investors are best advised to have capital to cover the cost of their properties for several months. The reason being that while REIN is certain about current conditions, it’s less so about the near future, Hunt says.”
“The challenge is renting out these properties may prove difficult. That’s due to a rise in competition in the rental marketplace. Hunt says Edmonton has seen a lot of multi-family purpose-built rentals come on line in the last few years. ‘While we can predict that the cycle moves from slump to recovery, we can never predict the duration of each phase because at any moment the outlook can change like, for example, by a pandemic.’”
From News.com.au on Australia. “Chinese buyers are being lured back to the Australian property market by generous government rebates of up to $50,000 on a new home, with calls to extend the incentive schemes past their expiry dates next year. ‘Australia will pay foreigners up to $50,000 to buy a new home,’ said Lily Chong, the Perth-based Australian head of Chinese property portal Juwai IQI. ‘Australia will pay Chinese up to $50,000 to buy a new home, Australia will pay Hong Kong-ers, Australia will pay Malaysians – it doesn’t matter where you come from. It’s all in the interests of supporting the economy.’”
“Juwai IQI co-founder Georg Chmiel said while it ‘sounds strange to pay foreigners to buy houses and apartments, in fact it makes sense. These incentives will reduce the housing shortage, stimulate the economy with construction jobs, and protect the housing market from a sharp fall.’”