A report from the Wall Street Journal. “The aging-in-place technology trend marks a challenge to the numerous real-estate developers who have been rushing to build senior housing to accommodate the roughly 72 million Americans born between 1946 and 1964. Developers continue to build new facilities. New senior housing in 2018 accounted for 3.2% of all senior housing, compared with 2.5% in 2015, according to real-estate research firm Green Street Advisors. The figure is expected to hit 3.5% in 2023.”
“But developers might have jumped the gun a bit and now some worry there is an emerging glut of senior housing. Senior-housing occupancy fell in the third quarter of 2019 to 88% compared with 90.2% in the fourth quarter of 2014, according to the National Investment Center for Senior Housing & Care.”
The Auburn Plainsman. “Ray Huff , who ventured into Auburn student housing in 1996, said that the student housing market is oversaturated — to an extent he has never seen before. And if the student base does not grow, and the excess rooms are not absorbed, Huff predicts that vacancy won’t decrease. ‘The effect of capping enrollment is gonna create a larger and larger vacancy rate,’ Huff said. ‘There’s gonna be more product available, and we’re gonna have the same amount of users to fill that product up.’”
“When property goes unused, it devalues very quickly, which Huff predicts will cause rent to fall in many complexes. To fill rooms in his properties, Huff has already started dropping rent prices and foregoing security deposits, a practice he calls, ‘not good business practice at all,’ but one that he says many complexes in Auburn have started doing in order to draw in potential residents.”
“Times like these can make it hard for Huff’s company, and others like his, to sustain itself. ‘If rent goes down then our fees go down, and we have less money to cover our bills with,’ Huff said. “It makes it very difficult to operate. ‘We’ve all weathered the storms,’ Huff said. ‘But this one’s gonna be the hardest one of all, I can tell you that.’”
The New York Post. “By the end of this year, brokers predict, there will have been enough sales to verify how badly the multifamily segment of the sales market was affected. ‘The game-changing rent laws have had an impact,’ says Douglas Harmon of Cushman & Wakefield. ‘It has halted sales with any semblance of rent stabilization.’”
“‘There are still trades being made because the law won’t change so fast,’ says Jay Neveloff, head of real estate at law firm Kramer Levin, adding that, so far, he’s ‘not seeing anybody jumping off a roof. I don’t see panic.’”
From Minnesota Daily. “Developers of a long-proposed 40-story condominium tower in Marcy-Holmes have canceled the development to look into possible rental units instead. Bob Lux, founder and principal for Alatus, said he was ‘extraordinarily sad’ to see the condominium project bust.”
From Curbed Boston on Massachusetts. “Unit 5C at the Seaport Lofts at 437 D Street in—where else?—the Seaport District features 18-foot ceilings and oversized windows. The two-bedroom, two-bathroom is on sale for $1,295,000 through Compass. That pencils out to $994 a square foot—a hefty sum, but still one that might be considered a bit of a steal in today’s downtown Boston. A report covering closed downtown condo deals during 2019’s third quarter pegged the average price per foot for such properties at $1,134, for instance.”
The Santa Cruz Sentinel in California. “A common type of fraud is occupancy fraud. The residential mortgage industry has three categories of occupancy: principal residence, rental property and second home. Mortgage lenders are on the lookout for fraud in every new mortgage that is originated. Since the home that is being purchased or refinanced is the security for the new mortgage, the mortgage industry is very sensitive about the intended purpose of the home.”
“Rental homes probably account for the most popular form of fraud. The good news about rental properties is that 75 percent of the projected rents can be used to help qualify the borrower for the mortgage; on the other hand, a down payment of at least 20 percent will typically be required. During an economic downturn, borrowers who lose their jobs or whose properties have lost value, are more likely to stop making payments on a rental property they own before they stop making payments on the home they live in.”
“A borrower who applies for a loan as a vacation home when he intends on renting it is the same as a homeowner stating he will occupy the new home when in fact it will be a rental. And, believe it or not, fraud is also committed when a borrower says he will buy the home as a rental (in order to count rents to help qualify for mortgage) and then moves in as his principal residence.”
“These are all examples of mortgage fraud and if discovered by the lender, the borrower, at the very least, will have to pay off the loan immediately or lose the home to foreclosure or, in an extreme case, could face 30 years in prison and up to a $1 million fine. Beware, lenders are known to send out representatives to knock on the door to ask questions if occupancy fraud is suspected.”
The Tampa Bay Times in Florida. “Joseph Erickson owned a condo in this beachfront community but the view was of the Intracoastal Waterway, not the beach. So when he saw that a gulf-front condo in a nearby complex was up for sale at a foreclosure auction, he decided to try his luck. On Sept. 23, 2018, Erickson won out over several other bidders and bought the condo for $385,000. He knew that $35,000 would go to the Happy Fiddler Condominium Association, which had filed the foreclosure case to collect unpaid dues. But he expected Pinellas County’s Clerk of Court would return the $350,000 ‘surplus’ to him. Erickson hired a contractor and started renovating his new condo.”
“Then came two shocks. Erickson hadn’t done a title search, so only after the auction did he learn that there was a $350,697 mortgage on the property. After getting over that jolt, he figured he had enough in the surplus funds to pay off the bank before it too foreclosed.”
“But Erickson never received the $350,000 surplus. A company called Locations of Pinellas Inc. claims that it is the condo’s true owner and asked the clerk’s office to give it the money. Erickson’s attorney filed an emergency motion to block the release but that sparked a legal battle that pits Erickson against a man who spent four years staving off foreclosure on a $1.6 million Tierra Verde mansion in which he had been living rent-free.”
“‘The first time I do this, it blows up in my face,’ Erickson, 53, said of his foray into foreclosure auctions. ‘It’s devastating, it’s life-changing. As far as any thought of retirement, that’s out the window.’”