July 25, 2008
June 26, 2008
Gas cost a threat to suburban apartment owners
Nationwide, home prices in neighborhoods with long commutes and no public transportation are falling faster than prices in communities closer to cities, according to a study by Joseph Cortright, an economist at Impresa Consulting. For example, his study found that prices in distant suburbs of Tampa fell 14 percent in the last 12 months, versus a 9 percent drop in areas nearer the city. “The decline in almost every case is worse in the suburbs and exurbs than it is in close-in neighborhoods because transportation costs are so much more of a factor,” says Cortright
In the years ahead, concerns over sprawl, traffic congestion and the likelihood of higher energy prices will accentuate the desirability of both suburban town centers and more convenient urban living environments such as Napa, Santa Rosa, San Rafael, San Francisco and the like. Extended periods of high fuel prices will end fringe suburban growth and kill demand for apartments with outsized commutes…suburban apartment developers beware.
Keep in mind our entire economy reflects the cost of energy: the cars we drive, the homes we occupy, the kinds of factories we have and the equipment in them, expect large changes in all of these things. The national average price of regular gasoline topped $4.00 a gallon for the first time, AAA, the largest U.S. motoring club, reported yesterday. “At $4 per gallon gas, $125 per barrel oil and $10 per million Btu natural gas, a lot of activity becomes uneconomical,” says Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania.
When you factor in high cost transportation, housing far from urban centers becomes much more expensive, and in many cases more expensive than housing in or near a downtown center. Bottom line sell apartment holdings in far flung suburbs and rural locations if it takes 10 minutes or more to reach vital services your apartment asset will decline in value over the next 5 years along with a rise in vacancy and a reduction in gross income.
BAM! BAM! BAM! I am pounding the table, buy apartments in close proximity to downtown or town center areas. There are many offerings on the table at very attractive prices across the bay area.
Looking to buy?
June 12, 2008
Northbay Multifamily Apartment Building Sales Report
Multifamily apartment sales so far in June 2008 for the entire San Francisco North Bay include:
- 6 Unit, 2 West Court Sausalito - $1,200,00
- 11 Unit, 504 Matheson Street Healdsburg - $1,680,000
Word on the street says the 15 Unit 680 Lincoln street listing offered at $1,778,000 is under contract. My guess this property is under contract far below the asking price. The other interesting napa multifamily property to be put under contract is 6778 Yount Street in Yountville this property consists of 8 units offered at an astounding $1,950,000 or $243,750 per unit. I love Yountville the atmosphere, restauarants and quaint inns are something to long for but these ammenities certainly do not justify $243,750 per unit. And with a reported gross income of only $120,000 I believe an appraiser would have a hard time explaining this price to the bank.
Consider my off market property in downtown Napa consisting of 9 units offered for $900,000 with a gross income of $109,000 and naturally downtown Napa has wind on it’s back with appreciation potential far outstripping that of Yountville over the next 5 years.
There are fabulous values in this market. H
June 7, 2008
Napa Multifamily Update
1711 Lincoln Avenue has been placed back on the market. Property was in contract as I pointed out in my previous article. 1711 Lincoln was the 10 family property in Napa offered at 1,099,000. Interestingly the property also showed up on the courthouse notice of default list pending foreclosure. This almost certainly will put downward pressure on multifamily apartment values should this property be sold either in foreclosure or sold below the current asking price.
Currently their are five multifamily apartment buildings in various stages of foreclosure in Napa. Prices are decling, rents are going up, an the drive by media says the worst is yet to come. Actually there has never been higher rents in Napa county for apartments then right now. Now is the time to buy multifamily apartments in Napa county.
If you would like to learn about Napa Valley multifamily apartments offered for sale through foreclosure, pre-foreclosure currently listed or off market properties consult with the most knowledgable team in Napa. A sample of current inventory:
-
9 Units $900,000-Napa
-
6 Units 1/2 acre $1,800,000 - St Helena
-
7 Units zoned OFC/RTL/MF $1,250,000 - Napa
-
38 Units 4,940,000 - Napa
-
2 Units $315,000 - Napa
-
2 Units $299,000 - Napa (New Construction)
June 3, 2008
Napa County May 2008 Multifamily Apartment Sales
The Napa County May 2008 multifamily apartment sales market was dismal. May was the weakest month on record for apartment sales in Napa county for 2008. We witnessed a paltry 2 sales one in downtown Napa of a four family on Brown street and the other deep in the vines of Calistoga with a duplex sale.
May 2008 average unit sale price- $151,250
1206 Hazel - $153,750 per unit
344 Brown- $148,750 per unit
Based on increased buyer calls, more showings, and some interest from my longtime investor clients my outlook for the June 2008 Multifamily apartment market is much better. I think we will see triple the sales activity of May although expect prices to erode further. We are still waiting for the closing of 1711 Lincoln this is the large 10 family offered at 1,099,000 that went into contract May 8th, 2008.
May 22, 2008
Napa County Multifamily 2008 Sales Report
So far in 2008 Napa County has only seen two apartment buildings over 4 units sell, those include:
1333 Jefferson Street- $131,666 per unit
733 Trancas Street- $147,285 per unit
This leaves an average selling price of $139,475 per unit with further declines almost assured as 1711 Lincoln in Napa just went into contract. This property has 10 units and was listed for $1,099,000 even at full asking price which is unlikely the per unit price of $109,900 will put further downward pressure on apartment pricing.
In 2005 and 2006 comp sales approached the $200,000 per unit mark since September 2006 multifamily prices in Napa County have continued to erode. The only bright spot could be downtown Napa where prices have held up but sellers are well advised to sell now into the hype of the new hotel, retail and office development then after the hype. The concept of selling into the trend rather than after the trend is a hallmark of the Warren Buffett style of investment. Otherwise a long term holding horizon of 5 years or better is advised.
Napa duplex, triplex and fourplex sales in 2008 have shaped up like this:
January 2008 average unit sale price- $200,000
1616 Muller - $242,500 per unit
480 Toyon - $157,500 per unit
February 2008 avaerage unit sale price- $247,500
1155 Sylvia - $247,500 per unit
March 2008 average unit sale price- $220,750
1164 Republic - $220,750 per unit
April 2008 average unit sale price- $208,142
1574 Silverado Trail - $188,070 per unit
702 Lawrence - $235,000 per unit
225 Valley Oak - $194,500 per unit
1638 H Street - $215,000 per unit
The small multifamily market qualifies for conforming loans and often small buildings like these appeal to residents not just investors thus keeping prices higher than 5 unit plus buildings which almost always fetch lower per unit prices. We currently have small multifamily offerings in Napa as low as $133,000 per unit.
May 2, 2008
$115 Million Apartment Building Sale
Los Angeles, Calif.-based Urban Housing Group has sold the Edgewater Luxury Apartments in San Francisco for $115 million to UDR, Inc.The Edgewater Luxury Apartments, which sold for $595,855 per unit, are located at 355 Berry St. The complex contains 193 units and was built in 2007. The six-story apartment building is comprised of a 157,203 square foot building with one-bedroom and two-bedroom units.
What a discrepancy between Napa and San Francisco. The last large scale sale in Napa was the
April 27, 2008
Largest Napa Valley Apartment Sale In Two Years
The property was not advertised nor offered on the open market for sale. Emphasizing the value of using a full time commercial broker to assist in your acquisitions. Most of the largest and many properties with large upside potential are sold “off market”.
The Plaza Del Sol Apartments are located near Highway 29 at 713 Trancas St. in the storied Napa Valley wine country. Built in 1970, the apartment complex contains 70 units on 2.94 acres. It was 97 percent occupied at the time of sale and has a unit mix of 30 one-bedroom and 40 two-bedroom apartments. The sale is the largest multifamily deal in Napa since December 2006.
April 18, 2008
Low Income Multifamily Apartments Do Not Hurt Home Values
Despite protestations that mixed-income multifamily developments reduce property values, a new study from the Massachusetts Institute of Technology’s Center for Real Estate shows that there’s no significant difference in home-price appreciation between residences located close to a mixed-income development or elsewhere in the community. Great news for homeowners and rental owners is areas of heavy mixed used development like Napa Valley or San Francisco.
The study, “Effects of Mixed-Income, Multi-Family Rental Housing Developments on Single-Family Housing Values,” looked at seven such developments in the Boston suburbs. The results effectively disarm one commonly used weapon in the fight against higher-density, affordable housing projects. “We were extra-meticulous in our research because this is such a hot-button issue,” says Henry Pollakowski, a housing economist at MIT’s Center for Real Estate and the study’s co-author. “We talked to planners, tax assessors, and neighbors, as well as looking at patterns over time for the price comparison.”
Developers are happy to have proof of what they’ve been claiming all along. “I’m not at all surprised by the findings,” says Mark Huppert, principal with Seattle’s Catapult Community Developers. “The reality is that new multifamily housing–when appropriately designed to accommodate a retail, pedestrian, and neighborhood orientation–can in fact enhance the sense of activity and services. This report will serve as a tool for getting potential opponents to the table and will open up lines of communication before opposition can be formed.”
Feel free to contact me: Mike Bolen 707-254-9999 or email Mike@MikeBolen.com and I can direct you to some of the best multifamily deals in the area both advertised and “off market” pocket listings.
To read the study, visit http://web.mit.edu/cre/research/hai/40b.html.
April 15, 2008
After the Real Estate Gold Rush
The San Francisco bay area and Napa County has some of the nation’s most extreme barriers to new building in terms of land availability and especially development costs. There’s just not enough land available in the Bay area for single-family building to reach especially large volumes, and furthermore, much of the population can’t afford the region’s high single-family home prices.
The region isn’t experiencing the run-up in single-family home construction seen in most other parts of the country. In fact, while building authorizations in the single-family sector dropped 11 percent in the 12 months ending March 2005, multifamily starts jumped 20 percent, with apartments and condominiums now accounting for nearly half of ongoing total housing development.
Meanwhile, San Francisco Bay area apartment occupancy has been inching upward for more than two years. The spring 2005 occupancy rate reached 96.3 percent, up 2.4 points from the bottom performance of just less than 94 percent in 2003. While occupancy reached 98 percent during the late 1990s-early 2001 frenzy, today’s 96.3 percent occupancy rate actually is within a percentage point of full occupancy by long-term historical standards. Napa Valley Occupancy is even stronger with only a 2.2% vacancy rate.
Rents, on the other hand, still have a way to go. The typical apartment community in the Bay area suffered a 35 percent cut in effective rents between 2001 and the end of 2004, before rates began eking up in 2005. Still, the year-over-year increase as of spring 2005 was less than 1 percent. Average rents now stand at $1,341 per month, or $1.624 per square foot.
With Bay area apartment occupancy tightening, the region should be positioned to experience strong rent growth once again, assuming that single-family home values remain astronomical. During the same time as apartment rents faltered by 35 percent, the median price of a single-family home shot up 42 percent and now stands at $656,700, according to the National Association of Realtors. This makes the premium to buy versus rent housing in San Francisco one of the steepest in the country.
The outlook for rent achievement appears promising, too. Though it’s unreasonable to expect rates to return to their early-2001 high anytime soon, the return of rent growth well above the national norm certainly should be within grasp. Even if single-family home prices dipped, there’s still ample room for rents to increase. The Bay area, then, should join places like the Florida markets, Southern California, Austin, Seattle, and Las Vegas among the country’s rental revenue growth leaders in the immediate future.
