A report from the Wall Street Journal. “U.S. home sales sputtered in January, the latest sign that some of the lowest interest rates in half a century are failing to offset the high prices and limited inventory keeping many buyers on the sidelines. Felicia Elkins was struggling to find a home in Oak Island, N.C., so she started looking at new homes further out of town. She recently bought a four-bedroom, two-story house in a newly built subdivision for $230,000. ‘We could have continued to rent, but that’s just like throwing money away,’ she said.”
“News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.”
From Crain’s Chicago Business in Illinois. “The market is flattening out after a historic construction boom that added more than 26,000 apartments to downtown Chicago over the past decade. But the expanding economy, and especially the strong downtown job market, has allowed the market to avoid a glut. Landlords have been able to keep their buildings full without slashing rents.”
“Still, some neighborhoods are out of balance, if only temporarily. Cook County Assessor Fritz Kaegi has hit many multifamily properties with big assessment increases over the past year, fueling worries that large tax hikes will follow. The city and state’s fiscal woes have added to the anxiety. As a result, some investors have become wary of buying here, a trend that ‘has caused some stall in the market,’ said Ron DeVries, senior managing director in Integra’s Chicago office.”
“‘A lot of people are stepping back from the market,’ he said. ‘Before you had 10 people making offers. Now you have four people making offers.’ That’s not good if you are a seller: Fewer buyers usually means lower prices. But the uncertainty could create a buying opportunity for investors willing to take a risk on the direction of property taxes, DeVries said.”
The San Francisco Chronicle in California. “It is a good time to be condo shopping in San Francisco — if you happen to be rich. From the Embarcadero to Yerba Buena Island to Nob Hill to SoMa, the wave of deluxe condo offerings washing over the city will test the upper reaches of one of the nation’s priciest housing markets. The latest crop of super-duper deluxe towers includes the 154-unit Four Seasons Private Residences at 706 Mission St., a glass-and-stone-tower and the penthouse is on the market for $49 million. There is the 120-unit One Steuart Lane — on the Embarcadero over looking the bay — where several penthouses are expected to top $20 million.”
“Investing in luxury condos has not always done well in San Francisco. The most obvious example — and definitely an outlier — is the Millennium Tower, where a design flaw caused the building to sink and tilt. A dozen units in that building sold in 2018 and 2019 for an average of $986 a square foot — well below the $1,400 a square foot the building averaged during its original sell out a decade ago.”
“But even investments in structurally sound buildings have not always offered healthy returns. In 2008, real estate mogul Victor MacFarlane bought three penthouses at the St. Regis for $30 million and then spent millions more combining them into a six-bedroom mansion in the sky. In 2008, he put it on the market for $70 million, where it sat until 2010, when he cut the price to $49 million. Eventually, the bank took the property back and sold it for $28 million.”
From Mansion Global on Florida. “J. Christopher Burch, the co-founder of the Tory Burch fashion brand, just bought a classic Miami Beach estate with spectacular views of Biscayne Bay and the Downtown Miami skyline for $14.2 million. The property, which had been on the market since November 2017 when it was listed for $19.75 million, sold on Feb. 18.”
From Multi-Housing News. “The U.S. student housing industry faces choppy waters as a Millennial-driven enrollment boom tapers off and many university markets struggle with oversupply. Growing risks to international enrollment, such as the spreading paralysis caused by the COVID-19 outbreak in China and elsewhere, pose further challenges to student accommodation providers. ‘It’s really the secondary markets that keep me up at night,’ said Laura Formica, vice president of operations at Homestead U. ‘Enrollment’s just stagnant, there’s been a ton of new development, and there aren’t the bodies to fill the beds.’”
The Auburn Villager in Alabama. “The Auburn City Council approved a 90-day moratorium on new student-housing developments in the city at its meeting on Tuesday night. To me, this is one of the most significant steps that this council could take to solve what I consider to be one of our most significant issues in this town, and that’s the saturation of student housing,’ said Auburn Mayor Ron Anders.”
The Louisville Business Journal in Kentucky. “A large apartment complex on South Fourth Street near the University of Louisville is more than halfway through a radical transformation and rebranding — and new tenants have started moving in. Birmingham, Ala.-based Capstone Real Estate Investments LLC has rebranded the former Arch Apartments on South Fourth Street near the U of L campus as Trifecta Apartments and is about 60 percent finished with a complete overhaul of the complex, said Christopher Mouron, executive vice president for acquisitions and development and principal at the company.”
“Mouron said in an interview with Louisville Business First last year that there’s an oversupply of this type of housing unit around the university. The oversaturation leads to lower occupancy and lower rents. As a result, Capstone chose to increase the number of units overall while decreasing the number of beds by renovating the property to include more single apartments. The company believes the investment will pay off due to the location.”
“‘It feels like there’s a lot going on there,’ Mouron said ‘… We feel the immediate area is trending in the right direction.’”
From Senior Housing News. “Faced with the realization that a ‘pivot to growth’ of its senior housing operating portfolio (SHOP) will not happen in 2020, Ventas on Thursday announced a strategic plan to turn around the struggling segment. Ventas’ SHOP same-store cash net operating income (NOI), which accounts for around 25% of its total real estate assets, continued the downward spiral that began in the second quarter of 2019. The segment posted a 7.5% loss in same-store cash NOI in Q4, after posting a 5% loss in the third quarter.”
“Ventas once again cited a confluence of market dynamics, particularly new competition and pricing, as the reason for the poor performance. Occupancy across the SHOP portfolio plummeted by 160 basis points year-over-year, from 87.9% to 86.3%. Ventas’ operators did not experience an expected seasonal lift and the occupancy gap widened materially in September, ending the month approximately 115 basis points lower than a year ago. There are also signs of distress in Ventas’ triple-net senior housing portfolio.”
“‘The trailing twelve month ended 3Q19 EBITDARM ratio held steady at 1.1x, which implies most operators are not making any money on the leased portfolios,’ RBC Capital Markets Analyst Michael Carroll wrote in a note to investors.”
From Crested Butte News in Colorado. “What’s up with the vacancies in local workforce housing units? There are at least eight up at this end of the valley right now. Income restrictions play a role and fitting into the open puzzle piece isn’t always a given. Government red tape is a contributor, as are rules like no dogs and no weed. I know there has been some recent worry that all the affordable housing projects in the pipeline will not fill up in a timely manner and leave local governments holding the debt. Others seem to think we could build a thousand more deed-restricted units right now and they’d fill up in a second. I don’t buy it—plus, bringing that many more people to the valley to fill the units would require more workers to service their needs.”
“When you consider the housing projects in the city of Gunnison, Crested Butte and Mt. Crested Butte, there are literally hundreds of potential workforce housing units on the drawing board and in the pipeline. The timing of them all needs to be coordinated so that the vacancy rates don’t pile up because there could be, God forbid, a glut of affordable housing units. Could it be that maybe all that Brush Creek controversy that delayed and then cancelled the project actually saved the developer a boatload of money?”