From Bloomberg:
Rents Peak in U.S. Housing Glut; New York Landlords Escape Drop
The glut of U.S. properties for sale is about to hit the rental market.
A record number of homeowners who can’t sell condominiums and houses are competing for tenants with the country’s biggest apartment owners led by Chicago-based Equity Residential, said Jack McCabe, the founder of Deerfield Beach, Florida-based McCabe Research & Consulting LLC. Rents in metropolitan New York, where demand for housing exceeds supply, may be the only place where rents increase, albeit at a slower pace, he said.
“Competition already is forcing the big apartment owners to offer concessions like two months free rent,” McCabe said.
Vacant rental apartments rose to 6.1 percent in the U.S. during the first quarter, the most in almost two years, even as the average monthly rent reached a record $991, said Sam Chandan, chief economist of New York-based real estate research company Reis Inc. New York had the lowest vacancy rate in the first quarter, he said.
Nationwide, 2.8 percent of houses for sale were unoccupied in the first quarter, the highest since the Census Department started collecting the data in 1956. Unsold properties on the market totaled a record 3.45 million in 2006, according to the Chicago-based National Association of Realtors.
“Unsold properties being turned into rental units are creating a shadow market that’s driving up the vacancy rate and slowing the growth of rents,” Chandan said in an interview. “Areas that saw the most speculative investing, particularly in condos, will see the biggest pressure on rents.”
…
“A bigger supply of units for rent means fewer opportunities for speculative owners to cover their mortgage payments by renting,” Chandan said. “It has the potential of placing further stress on mortgage performance that has already deteriorated because of subprime defaults.”Houses that end up in foreclosure probably will be bought by people who rent them until demand improves, adding to supply on the market, said Martin Cohen, co-chief executive officer of New York-based Cohen & Steers Inc., which oversees almost $34 billion.
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Frustrated sellers who become landlords have created an inventory of for-sale properties that could derail a housing recovery next year, Chandan said. If home sales improve in early 2008, as predicted by Freddie Mac, the No. 2 mortgage buyer, properties now being rented could reappear in 12 months time to flood the spring market.“Those homes that are disappearing off the sales market can just as easily appear again when demand is stronger,” he said.
U.S. real estate prices “continued to weaken” in many districts during March and April, the Federal Reserve said last week in its regional survey known as the Beige Book for the color of its cover. The report cited the San Francisco and Richmond, Virginia, markets as “falling or soft.” Sales declined in the Cleveland, Atlanta, Kansas City, and St. Paul, Minnesota regions, the Federal Reserve said.
“Houses that end up in foreclosure probably will be bought by people who rent them until demand improves,”
Classsic textbook mistake.
“Competition already is forcing the big apartment owners to offer concessions like two months free rent,” McCabe said. ”
I guess the LOD’s rule.
From Forbes.com VIDEO OF Prof. G. Schilling !!!
Recession in ‘07
(255 sec.) One of Wall Street’s biggest bears tells us why investors should look out below
http://www.forbes.com/video/?video=fvn/moneymasters/vj_mm122806&partner=yahootix
Is Wallstreet in Denial right now ?
Again, every market is cratering except NYC. Very discouraging. Fundamentally NYC shouldn’t be immune to the basics of supply and demand. So how is Manhattan escaping this?
“So how is Manhattan escaping this?”
A $4 million pad costs $2 million pounds.
The value of the dollar doesn’t matter?
Good point BC, the same applies to rent.
jb
#4 foreigners are the only one’s buying real estate in manhattan. And even if they are, its the high end luxury apartments. Not the 1br on a 3rd floor walk up in old tenement buildings. Yet those pieces of shit still sell for half a million or more.
“So how is Manhattan escaping this?”
http://njrealestatereport.com/index.php/2007/04/12/subprime-in-the-city/#comments
I don’t know but I have been looking at apts and it is insane that the market around NYC is out of control. When I rented my apt. 2 years ago their was at least some inventory and the prices weren’t insane. Now the same apartments that in 2005 were 1100 are 1500-1600, and the good stuff that was 1500-1600 is now not available and if a unit opens up it is like $2100.
It seems like the people holding off buying are driving demand for apartments. Hudson county is bonkers and any apartment that is halfway decent gets shown and if you don’t jump on it is leased in less than a few days. In hoboken I was looking at one bedrooms in the hoboken ghetto jefferson st. that were not very big or nice for $1600.
Again, every market is cratering except NYC. Very discouraging. Fundamentally NYC shouldn’t be immune to the basics of supply and demand. So how is Manhattan escaping this?
Unlike much of the country, Manhattan is highly dependant on the casino economy of Wall Street. Even though Wall Street may only be responsible for a relatively small percentage of the jobs, Wall Street money filters through much of the NYC economy.
Secondly, real estate bubbles tend to act like…well…bubbles. They expand out from places like NYC into the surrounding suburbs, exurbs and finally into rural areas (i.e. Pennsylvania). They collapse in reverse order, first hitting the rural areas, exurbs, suburbs and finally the city.
DO NOT CALL WALL STREET A CASINO
Well the excuses I hear about why Manhattan isn’t going down is that Wall Street is making a lot of money. But if that were really the reason, we’d also see Westchester, CT, NJ suburban real estate going up too. But the suburbs are declining. Its like people suddenly get pulled into a blissful hypnosis about real estate as soon as they step off the train at grand central. When they’re in the burbs, they’re scared of housing, when their in the city they suddenly forget how overpriced it is. I just don’t get it.