Tag Archives: Rent

New York Rents Plunge 12% In Queens

https://s13.therealdeal.com/trd/up/2013/08/6622.jpg66-22 to 66-44 Forest Avenue

Today in “free-market capitalism actually benefits consumers” news, rents are being slashed across the board in Queens as landlords make concessions to deal with a supply glut and keep tenants renting. This lowering of rents taking place in Queens – to the tune of 12% YOY was reported on by Bloomberg on Thursday morning:

For New York City apartment hunters, April was another good month to find a deal on rents. But no one fared better than those in northwest Queens.

Rents there dropped 12 percent from a year earlier, to a median of $2,646 a month after landlord giveaways were subtracted, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Those giveaways were offered on 65 percent of all new leases signed in the area, excluding renewals, a record share in data going back to the beginning of 2016.

The result from the price deflation that our Fed pins as the devil incarnate? More renters, more business and higher quality tenants:

The enticements brought in more renters. New leases in northwest Queens — Long Island City, Astoria, Sunnyside and Woodside — jumped 11 percent to 272, the firms said.

“More customers who were originally looking in Manhattan and Brooklyn are considering Queens,” said Hal Gavzie, Douglas Elliman’s executive manager of leasing. “It used to be just 100 percent a different consumer.”

New York City tenants are crossing borders to compare deals in a market groaning under the weight of new supply. Landlords, who’ve accepted they need to compete to keep their units filled, are working to attract new tenants and offering sweeter renewal terms to keep the ones they have, Gavzie said.

Who knew this could happen to industries and sectors where the government is not subsidizing or interfering with the pricing – and where free market capitalism is actually, in some facet, allowed to run its course?

https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/queens1%20%281%29.jpg?itok=wrojogT3

The consumer now has the control because the concessions landlords are making are benefiting the them. Bloomberg continued:

In Manhattan, 44 percent of all new leases came with a landlord concession, such as a free month of rent or payment of broker fees. In Brooklyn, the share was 51 percent, a record for the borough.

Still, the number of new leases in Manhattan and Brooklyn fell 3.5 percent and 1.6 percent, respectively, a sign that renters there found good reason to stay in their current apartments, Gavzie said.

“Tenants negotiating a renewal, they’ve looked around to see what deals they can get,” he said. “So their landlord gives them a sweet offer to stay.”

Manhattan rents in April, after subtracting concessions, fell 2.2 percent, to a median of $3,236, the fifth consecutive month of year-over-year declines. In Brooklyn, where rents have also fallen for five months, the decline was 2.9 percent, to a median of $2,686.

This comes just about one montafter we reported about downtown Manhattan basically turning into a ghost town due to just the opposite – prices rising and government overreach. Pricing out of tenants in some main downtown areas and shopping districts have caused vacancies in areas that have been occupied for decades.

The Fed loves to repeat how necessary and vital inflation is for economic prosperity, but in the case of midtown Manhattan’s “prime” retail real estate, it is doing nothing but helping cause once extremely prominent shopping areas become the very same “ghost towns” they turned into during the 2008 housing crisis.

Mayor DeBlasio’s asinine solution to this issue created in part by faulty government policy: more government and more regulation.

So much for the recovery.

As if brick and mortar retail didn’t have enough problems to deal with being methodically decimated by the ever growing behemoth that is Amazon, store owners are now facing rent that is simply so high it makes it impossible for most to open retail stores and do business in once prominent areas of downtown Manhattan.

Last month, the New York Post wrote an article confirming our writeup from late March suggesting that high prices are driving businesses out of town:

If you want to see the future of storefront retailing, walk nine blocks along Broadway from 57th to 48th Street and count the stores.

The total number comes to precisely one — a tiny shop to buy drones.

That’s right: On a nine-block stretch of what’s arguably the world’s most famous avenue, steps south of the bustling Time Warner Center and the planned new Nordstrom department store, lies a shopping wasteland.

To be sure, none of this comes as a surprise to us – or our regular readers – because in late March we recalled our own 2009 tour of Madison Avenue to discover that it also had turned into a ghost town. Just a week ago we told our readers that the ghost town that was New York’s “Golden Mile” was not surprising: after all the US economy had just been hit with the worst recession since the Great Depression, and only an emergency liquidity injection of trillions of dollars prevented a global financial collapse.

What is more surprising is why nearly 9 years later, at a time of what is supposed to be a coordinated global recovery, a walk along Madison Avenue reveals the exact same picture.

We would love for these two sets of facts to bludgeon the government and regulators over the head and make them realize that inflation isn’t the solution. Rather, they should realize from this that deflation can actually be a reward for capitalism, causing prices to fall, increased competition between sellers, and benefits for buyers.

Source: ZeroHedge

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Rent: Santa Monica Tops New York & Silicon Valley

Now referred to as “Silicon Beach,” Santa Monica’s rent rates for a one-bedroom apartment are approaching $5,000 per month.

https://s15-us2.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fcdn.rentcafe.com%2Fdmslivecafe%2F3%2F188180%2FCA_SantaMonica_21stStreetApartments_p0194856_2_img02_1_PhotoGallery.jpg%3Fwidth%3D580%26amp%3Bheight%3D385%26amp%3Bmode%3Dpad%26amp%3Bbgcolor%3D333333%26amp%3Bscale%3Dboth&sp=9fb8f03493f043d5a46451db62044986

According to the Apartment Guide, the average monthly rent for a one-bedroom in Santa Monica is the most expensive in the nation, at $4,799.20. Comparable rents in the local area are $3,922.67 in Venice; $3,780 in Playa Vista; and $3,320.67 in Marina del Rey.

New York is now the second-most expensive market, with an average one-bedroom apartment costing $4,562.72 per month. San Francisco, once the highest cost market, has fallen to an average $3,880.44 per month. New tech companies, including Snap, Inc., are drawing wealthy young professionals to the area.

Breitbart News has chronicled how apartment rental prices in New York City and Silicon Valley have fallenn about 8 percent, due to a glut of luxury unit construction. But the effective rent rates are down substantially more, because developers are giving multiple month rent concessions “to get heads in beds as quickly as possible,” according to Alexander Goldfarb, a San Francisco analyst with Sandler O’Neill + Partners.

In San Francisco’s trendy South of Market neighborhood, referred to as SoMa, four new high-rise apartment buildings are also offering super high-end amenities that include rooftop decks, state-of-the-art gyms and bike rooms. But despite free rent and nicer digs, none of the four buildings that opened in the last 18 months has achieved the 90 percent occupancy rate that developers need to flip their short-term high-interest rate development loans into low-rate long-term “take-out” financing.

Rent.com and the Apartmentguide.com websites predict that high rental prices should stay strong due to L.A.s’ median home price rising 348.1 percent in the last 30 years, from $116,061 to $520,000. The price jump was an even higher 349.3 percent in Orange County, where the price jumped from $143,210 to $643,483.

 

But according to mortgage banker Bruce Lawrence, the “term” period for construction loans is usually limited to 36 months, and the cost of that type of financing is at least twice the interest rate of 30-year “take-out financing.” Although the default rate for long-term apartment loans has been a tiny .01 percent, he believes that has been due to a “chronic lack of apartment supply,” which supply is beginning to overwhelm.

In the quarter ending December 31, 2016, Lawrence observed that a record 50,000 new apartment units in the U.S. were rented by tenants, or about six times the number in the year-earlier period. But new apartments completed and renting during the quarter hit 88,000, the highest number since the 1980s.

Looking forward, Lawrence believes that at least 378,000 new apartment units will be completed and start renting in 2017. With construction financing in place, he expects there will be no slowdown in building. Lawrence projects that by mid-year 2017, the U.S. will have a national glut of 100,000 new apartments, and in two years that number could be over 300,000. At that point, Lawrence sees rent “getting whacked.”

Bruce Lawrence comments that Santa Monica is a special case for high rents, because the city adopted rent control three decades ago. But with no limit on the rents for new units, California’s state bird is now the “construction crane.”

by Chriss W. Street | Breitbart

Rents Set To Keep Rising After Latest Multi-family Starts & Permits Report

https://s17-us2.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Frortybomb.files.wordpress.com%2F2012%2F03%2Flow_wages_high_rents.jpg%3Fw%3D640&sp=aecabb6c72b99a9aa7114d8eedb1c4e0Unlike recent months when the Census Bureau reported some fireworks in the New Housing Starts and Permits data, the April update was relatively tame, and saw Starts rise from an upward revised 1,099K to 1,172K, beating expectations of a 1,125K print, mostly as a result of a 36K increase in multi-family units which however remain depressed below recent peaks from early 2015, which will likely stoke even higher asking rents, already at record highs across the nation.

But if starts were better than expected, then the future pipeline in the form of Housing Permits disappointed, with 1,116K units permitted for the month of April, below the 1,135K expected, if a rebound from last month’s downward revised 1,077K.

The issue, as with the starts data, is the multi-family, aka rental units, barely rebounded and remained at severely depressed levels last seen in 2013: at 348K rental units permitted in April, this is a far cry from the recent highs of 598K in June.

One wonders if this is intentional, because based on soaring asking rents, as shown in the chart below, with Americans increasingly unable or unwilling to buy single-family units, rental prices have exploded to 8% Y/Y based on Census data.

Should multi-family permits and starts remain as depressed as it has been in recent months, we expect that this chart of soaring median asking rents will only accelerate in the near future, and will require a whole host of seasonal adjustments from making its way into the already bubbly CPI data.

Source: ZeroHedge

California Renter Apocalypse

The rise in rents and home prices is adding additional pressure to the bottom line of most California families.  Home prices have been rising steadily for a few years largely driven by low inventory, little construction thanks to NIMBYism, and foreign money flowing into certain markets.  But even areas that don’t have foreign demand are seeing prices jump all the while household incomes are stagnant.  Yet that growth has hit a wall in 2016, largely because of financial turmoil.  We’ve seen a big jump in the financial markets from 2009.  Those big investor bets on real estate are paying off as rents continue to move up.  For a place like California where net home ownership has fallen in the last decade, a growing list of new renter households is a good thing so long as you own a rental.

The problem of course is that household incomes are not moving up and more money is being siphoned off into an unproductive asset class, a house.  Let us look at the changing dynamics in California households.

More renters

Many people would like to buy but simply cannot because their wages do not justify current prices for glorious crap shacks.  In San Francisco even high paid tech workers can’t afford to pay $1.2 million for your typical Barbie house in a rundown neighborhood.  So with little inventory investors and foreign money shift the price momentum.  With the stock market moving up nonstop from 2009 there was plenty of wealth injected back into real estate.  The last few months are showing cracks in that foundation.

It is still easy to get a mortgage if you have the income to back it up.  You now see the resurrection of no money down mortgages.  In the end however the number of renter households is up in a big way in California and home ownership is down:

owner vs renters

Source:  Census

So what we see is that since 2007 we’ve added more than 680,000 renter households but have lost 161,000 owner occupied households.  At the same time the population is increasing.  When it comes to raw numbers, people are opting to rent for whatever reason.  Also, just because the population increases doesn’t mean people are adding new renter households.  You have 2.3 million grown adults living at home with mom and dad enjoying Taco Tuesdays in their old room filled with Nirvana and Dr. Dre posters.

And yes, with little construction and unable to buy, many are renting and rents have jumped up in a big way in 2015:

california rents

Source:  Apartmentlist.com

This has slowed down dramatically in 2016.  It is hard to envision this pace going on if a reversal in the economy hits (which it always does as the business cycle does its usual thing).

Home ownership rate in a steep decline

In the LA/OC area home prices are up 37 percent in the last three years:

california home prices

Of course there are no accompanying income gains.  If you look at the stock market, the unemployment rate, and real estate values you would expect the public to be happy this 2016 election year.  To the contrary, outlier momentum is massive because people realize the system is rigged and are trying to fight back.  Watch the Big Short for a trip down memory lane and you’ll realize nothing has really changed since then.  The house humping pundits think they found some new secret here.  It is timing like buying Apple or Amazon stock at the right time.  What I’ve seen is that many that bought no longer can afford their property in a matter of 3 years!  Some shop at the dollar store while the new buyers are either foreign money or dual income DINKs (which will take a big hit to their income once those kids start popping out).  $2,000 a month per kid daycare in the Bay Area is common.

If this was such a simple decision then the home ownership rate would be soaring.  Yet the home ownership rate is doing this:

HomeownershipRate-Annual

In the end a $700,000 crap shack is still a crap shack.  That $1.2 million piece of junk in San Francisco is still junk.  And you better make sure you can carry that housing nut for 30 years.  For tech workers, mobility is key so renting serves more as an option on housing versus renting the place from the bank for 30 years.  Make no mistake, in most of the US buying a home makes total sense.  In California, the massive drop in the home ownership rate shows a different story.  And that story is the middle class is disappearing.

Hooray! Huge Rent Hikes Coming

In news that is bound to make the inflationists at the Fed as well as property owners happy, Landlords Will Hike Rents by 8% this Year.

Some 88% of property managers raised their rent in the last 12 months and 68% predict that rental rates will continue to rise in the next year by an average of 8%, according to a survey of more than 500 of Rent.com’s property management customers, which the site says represents thousands of rental properties and hundreds of thousands of rental units. That’s nearly three times the wage increase that most employees can expect this year.

What’s more, 55% of property managers said that they are less likely to offer concessions or lower rents in order to fill vacancies. One reason why they’re getting even tougher: They are in a stronger position than they were this time last year.

More than 46% of property managers surveyed reported a decrease in rental vacancies in Rent.com’s survey and, in the second quarter of 2015, vacancy rates in the U.S. for rental housing was 6.8%, the lowest it has been in almost 20 years, according to data from the U.S. Census Bureau.

Despite this, many renters are spending more than 30% of their income on rent (the amount generally recommended) and need help qualifying for the lease.

Yardi Survey

Mish reader “BJ” is retired but works part-time a number of hours each week, surveying apartments for rent. He reports …

I am retired but work part-time for Yardi from my home, surveying apartments for rents. Yardi runs a full survey 3 times a year, Jan, May and Sept. These generally run about 6 weeks.

Yardi has the country divided into 24 sectors and we normally work 6-7 sectors once a month for a week on a rotating basis.  Toward the end of the survey, we can work any market and I’ve been keeping track of a few select places. From what I see, rents are up and up a lot. Some of the places I watch are up 7% or more than last year for the same apartments.

The absolute worst places to be looking for a rental unit are San Fran and North LA. If anyone does answer the phone in those areas, it’s either a new building just opening, or they don’t have anything. You can’t even get on a waiting list. I’ve seen apartments in tight areas where they want you to make 3X net before they will talk to you.

Portland, Seattle, Washington DC, northern NJ, Miami and Boston are also difficult. I talked to a complex in Portland last week that had 3500 apartments under management with a total of 7 open apartments.

I am amazed by the amount of apartments that are either tax credit or subsidized in some manner. All of them have long waiting lists.

Measuring Housing Inflation

The Fed wants inflation. But how do they measure it?

Read more on Mish’s Global Economic Trend Analysis

Rents Have Been Skyrocketing In These 13 US Cities

Seven years ago, the American home ownership “dream” was shattered when a housing bubble built on a decisively shaky foundation burst in spectacular fashion, bringing Wall Street and Main Street to their knees. 

In the blink of an eye, the seemingly inexorable rise in the American home ownership rate abruptly reversed course, and by 2014, two decades of gains had disappeared and the ashes of Bill Clinton’s National Home ownership Strategy lay smoldering in the aftermath of the greatest financial collapse since the Great Depression.

In short, decades of speculative excess driven by imprudence, greed, and financial engineering and financed by the world’s demand for GSE debt had come crashing down and in relatively short order, a nation of homeowners was transformed into a nation of renters. 

It wasn’t difficult to predict what would happen next.

As demand for rentals increased and PE snapped up foreclosures, rents rose, just as a subpar jobs market, a meteoric rise in student debt, tougher lending standards, and critically important demographic shifts put further pressure on home ownership rates. Now, America faces a rather dire housing predicament: buying and renting are both unaffordable. Or, as WSJ put it last month, “households are stuck between homes they can’t qualify for and rents they can’t afford.”

We’ve seen evidence of this across the country with perhaps the most telling statistic coming courtesy of The National Low Income Housing Coalition who recently noted that in no state can a minimum wage worker afford a one bedroom apartment. 

In this context, Bloomberg is out with a list of 13 cities where single-family rents have risen by double-digits in just the last 12 months. Note that in Iowa, rents have risen more than 20% over the past year alone.

More color from Bloomberg:

Landlords have been preparing to raise rents on single-family homes this year, Bloomberg reported in April. It looks like those plans are already being put into action.

The median rent for a three-bedroom single-family house increased 3.3 percent, to $1,320, during the second quarter, according to data compiled by RentRange and provided to Bloomberg by franchiser Real Property Management. Median rents are up 6.1 percent over the past 12 months. Even that kind of increase would have been welcome in 13 U.S. cities where single-family rents increased by double digits.

It’s more evidence that rising rents have affected a broad scope of Americans. Sixty percent of low-income renters spend more than 50 percent of their income on rent, according to a report in May from New York University’s Furman Center. High rents have also stretched the budgets of middle-class workers and made it harder for young professionals to launch careers and start families.

“You’re finding that people who wouldn’t have shared accommodations in the past are moving in with friends,”says Don Lawby, president of Real Property Management. “Kids are staying in their parents’ homes for longer and delaying the formation of families.”

And for those with short memories, we thought this would be an opportune time to remind you of who became America’s landlord in the wake of the crisis…

Source: Zero Hedge