Imagine just one tiny little blip in the economy and all these luxury developments start to sit idle with no renters or buyers.....yea it's going to happen. It always does.
These luxury developments are everywhere....in the last decade there have been millions of units up for rent, most of them priced sky high, and that's only because of the 10 year old bull market that's in place and the job market being plentiful....none of these luxury home developers have felt any slow down at all since the great bull market started running, so to hear there is an over supply shouldn't phase anyone. With wages absolutely stagnant and renters paying a third of their income to rent, any inkling of a slowdown could have this entire market seeing red for years. I know of a few people that pay 2000-3000 a month to live in these amenity filled buildings...it's mostly millennials....most of them haven't lived through a recession or an era of extreme high unemployment....and as prices of these high end rentals keep going higher and wages go absolutely no where eventually it will catch up with most of these builders who think it can keep going and going. One inkling of a recession and there goes that entire luxury market of high end rentals....
Major apartment developer: 'There is an acute crisis headed our way'
- The luxury market is largely overbuilt, while there is a shortage of affordable rental housing.
- Lower- and middle-income households are spending proportionally more on their rent, says apartment developer Toby Bozzuto.
- Nearly half of all renter households pay more than 30 percent of their income for housing.
Scan the downtowns of the nation's largest cities, and you are likely to see a staggering array of cranes.
Most of them are helping to build luxury apartment buildings. In fact, multifamily construction is now at a 40-year high; the trouble is, developers are putting up the wrong kinds of buildings. The luxury market is largely overbuilt, while there is a shortage of affordable rental housing, and developers are hamstrung by the now record-high cost of construction.
Apartment completions in the 150 largest U.S. cities jumped to 395,775 units in 2017, beating 2016 production by a staggering 46 percent and more than doubling the long-term average, according to RealPage, an apartment management software and data company. Luxury, upscale buildings accounted for between 75 and 80 percent of the new supply in the current cycle.
