I don’t think there’s anyway of describing 2020 without it being an understatement.

Difficult, unprecedented, germy… there are plenty of adjectives that get us part of the way there.

From a real estate perspective, there was a lot of good, bad, and ugly.

Below are a few interesting news items from the past month, along with a recap of how 2020 looked for our business and what 2021 might have in store.

• Mass Timber construction is gaining a foothold in more markets, including Boston. The cost to build n w housing has skyrocketed, primarily as a function of increased material, labor, and regulatory costs. For example, construction costs for a new single family home were 54.8% of the total sales price in 1998. In 2019, that number rose to 62% of the total sales price. While home prices have gone up over time, the cost of construction has gone up even faster. Innovative and sustainable techniques and materials such as Mass Timber should help ease this over time.
• Multifamily developers are re-thinking the hotel-esque amenities rush and piloting more “self-serve” communities. The bet is that consumers will opt for reduced pricing / increased living space for more automated and centralized services, rather than fully staffed gyms, parking, front desk staff etc.
• As consumers grow squirmish after a long year of travel restrictions, the appeal of owning a vacation home is soaring. Platforms like Airbnb and VRBO are also helping second-home owners subsidize their purchases by facilitating short-term rental options during times of non-use.

Household expansion: Jillian and I are excited to welcome baby Evans to the world this Spring!

Writing more: I’ve really enjoyed sharing my thoughts with you all this year, and am amazingly appreciative of all of the kinds notes, thoughts, and feedback you’ve sent. Next year, I’m hoping to expand my writing to longer format blog posts as well. If there’s anything specific you’d like me to research and write about, please let me know!

Small Business investing: just a teaser here for now, but I’m looking to invest in local home services businesses. We have something in the pipeline, and will hopefully be able to share more on this coming next year.

I hope you have an amazing holiday season and joyful end to 2020!

Here is your monthly “Gladstone Gazette” update – a quick summary of what I’m working on, learning about, and interested by in the world of real estate.

• A Yardi Matrix study of 17 million apartment units concluded that rents came down in expensive cities, and stayed flat / grew in more affordable cities. NYC, San Jose, and SF led the pack with rent declines in August (4-6% down), while Columbus and Sacramento led on growth (2% up). Despite softening rents, Boston Capital had no problem holding a $133M first close of its second multifamily fund.
• According to Redfin, home prices hit a new record, reaching a national median of $320,625. In MA, I wanted to dig in to see how the growth looks in Single Family Homes vs. Condos. Based on year-to-date MLS data, median SFR sales price is up 9.4% vs. Oct. YTD 2019, while condo median sales price is up 6.3%. In Suffolk County (Greater Boston), the median condo sales price is up 2.4%.
• As the MA eviction moratorium expires the week of the 19th, a 171m rental assistance plan will be put to the test. The Federal eviction moratorium is still in affect, so we will see how smoothly the rollout of this program goes and what the impact will be on tenants and landlords.

• We made another sale this month, a duplex we renovated and rented over the past two years. This was a really smooth transaction – not always the case when selling a tenanted building. The buyer wanted to live in the top floor unit and keep the existing tenant in the 1st floor unit. We worked with the upstairs tenant to find a new apartment, and he left with no pushback or hard feelings.
• Spencer ave (Chelsea) with OnPoint is gearing up for our first open-house this weekend!

What I’m..

Listening to:  Why are Cities (Still) so Expensive from Freakonomics, featuring an insightful interview with San Francisco Mayor London Breed (who grew up in public housing).

Following: The Suffolk Downs redevelopment project. After three years of community engagement and over 450 community / stakeholder meetings… HYM development made it through a “marathon” 6 hour meeting to secure BPDA approval. I’ve been to several of the community meetings for this project, and am wildly impressed by how patiently and thoughtfully Tom O’Brien and the HYM team have incorporated community feedback into the project scope.

Thanks for reading and please give me feedback by responding to this e-mail. What do you want more or less of? Let me know!

Cheers,
James

P.S. if someone forwarded this email to you, you can subscribe here to get on our mailing list.

• National rent collection tracked by the NMHC through September 13th came in at 86.2%. This is essentially flat from 86.9% last month (August 2020) and down from 88.7% last year (September 2019).
• While rent collection has maintained steady, concessions are on the rise.  The most common perk is free rent (91% of all concessions), and the median duration is six-weeks. This was happening pre-COVID in expensive markets / luxury buildings.
• Even as state and city imposed eviction bans start to expire, the White House and CDC implemented a national eviction ban for renters earning less than 100k / year.
• Home prices are still soaring, despite a 9% increase in new listings. The increases are most notable in ‘relatively affordable’ cities like San Antonio and Baltimore.

• We made our first sale this year, taking advantage of the hot market for single family homes. This was a single family rental in Revere purchased in Dec. 2018. The real headache was working with the tenant to find a new apartment. We worked closely with her and the RAFT office to help her fund back rent, and with another local organization to help her with move in costs for her next apartment.
• Spencer ave (Chelsea) with OnPoint is coming together. The mechanical connections were more challenging than expected, but the plaster and paint crews are starting soon and the building is coming out great! See some exterior progress shots at the bottom of the email.
• Saratoga St (East Boston) also with OnPoint is weather tight and rough mechanicals are in progress. The framing contractor put together a great highlight video of the progress so far.

What I’m..

Listening to: The Real Estate Addicts podcast featuring Max and Garrett from OnPoint.  I’ve loved working with these guys for the past few years, and was great to hear the RE Addict guys facilitate their story.

Using: Tiller Money. It’s Mint.com but all in spreadsheets and with no ads. This probably isn’t for everyone… but if you want more flexibility and control over how you organize and track your personal finances, there’s nothing else like it.

Up to: A nomadic month. A family acquaintance had a three-week gap in between selling their house and buying a new house in our town and mentioned looking for a house to rent. We met and chatted with them and, on a whim, rented them our house out for the month. We bummed around from camping trips in NH, weekend rentals in VT, and parents houses during the week when not on vacation. What kind of complete lunatics spends a year rehabbing their house only to rent it out as soon as it’s finished? Us.

Thanks for reading and please give me feedback by responding to this e-mail. What do you want more or less of? Let me know!

Cheers,
James

P.S. if someone forwarded this email to you, you can subscribe here to get on our mailing list.

• National rent collection tracked by the NMHC through August 13th came in at 86.9%. This is down slightly from 87.6% last month (July 2020) and down from 88.9% last year (August 2019).
• Refinancing is getting more expensive. Fannie Mae and Freddie Mac came out of nowhere and announced they will impose a new “adverse market fee” of 0.5% on most refinanced mortgages starting 9/1.
• The NHMC argues that extended eviction moratoriums are doing more harm than good, and everyone (renters, owners, bankers) would all be better off if we funded direct rent relief for those affected by COVID.
• Volatile times are a good reminder that vague commentary on “the real estate market” is meaningless. Every market and asset class have wildly different dynamics… for example: apartment vacancies in New York are at an all time high. The Boston for sale market is uber competitive, but Boston renters actually have some leverage. Suburban homes are going through the roof… but so are urban homes.
• The “YIMBY” movement in Minneapolis and ban on single-family zoning will be interesting to follow, but without changes to parking requirements and building size, it’s doubtful we’ll see much of an impact on density.

Gladstone Capital updates

• Spencer ave (Chelsea) is flying along. Mechanical connections are wrapping up by the end of August, and the floodgates will open to potential buyers starting mid-September. Broker open houses went great and we have armies of agents ready to send buyers through as soon as the units are patched and plastered.  
• Saratoga St (East Boston) is flying along. The highlight so far is seeing how nice the rooftop view will be!

What I’m..

Waiting for: The next round of COVID stimulus. I understand the need to balance action and thoroughness… but I’m surprised there wasn’t at least a temporary extension on the bonus unemployment benefit. The loss of the $600/week bonus payments is expected to result in a 44% reduction of spending, according to the NBER. I was concerned about the bonus payments dampening incentives for people to get back to work (when jobs come back), but this WSJ article made me second guess that assumption.

Reading: “Why Real Estate Will Always Be More Desirable Than Stocks.” The Financial Samurai is one of my favorite personal finance blogs, and I’ve noticed a push towards more real estate related blogs over the past year or two. See also his 30/30/3 rule for buying your first (or next) home.

Surprised by: Apparently Blockbuster has a Twitter account? They came out of nowhere and tweeted for the first time since 2014. Why? The last remaining Blockbuster – located in Bend, Oregon –  is offering up three, one-night stays on Airbnb. Bananas. 

Thanks for reading and please give me feedback by responding to this e-mail. What do you want more or less of? Let me know! 

Cheers,
James

P.S. if someone forwarded this email to you, you can subscribe here to get on our mailing list.

• National rent collection tracked by the NMHC through July 13th was at 87.6%, down from 90.1% in July 2019. 
• It’s crunch time for lawmakers to put together a second round of funding and stimulus as the $600/week CARES Act unemployment bonuses fade out at the end of July. 
• Banks are “flying blind” into a potential credit storm. Lenders can’t tell who is creditworthy, so many are pulling back and tightening their lending criteria. I’ve heard this first hand for weeks from the lenders I talk to. Many smaller banks / credit unions are feeling the stress from PPP loans coupled with a waive of  forbearance and deferral requests.   
• In Massachusetts, the introduction of the Housing Stability Act to cancel evictions and freeze rents was met with….err… apprehension from many landlords and lenders. The Mass Real Estate Law blog has an interesting summary of landlord concerns with the bill.

Gladstone Capital updates

• By far the coolest day of construction I’ve ever seen was the set day for the Spencer Flats project with OnPoint Capital. The 60 second highlight video is a must-watch for an orchestra of adult legos.

• Saratoga Street in East Boston is almost completely framed. This is going to be a beautiful building – can’t wait to see it come together over the next few months!

• Unfortunately, the sellers backed out of our 8 unit rental building acquisition in Manchester. While frustrating, I’d much rather lose out on a potentially good project than give up discipline with pricing and terms. On to the next one!

What I’m..

Reading: The Week magazine. As much as I love twitter, there’s something refreshing about getting The Week delivered and reading a physical magazine with succinct recaps of what’s going on.

Finishing: after ten months of living through a gut rehab, our house is finally done (98%)! There’s still a few odds and ends left and we’ll always find new projects to take on, but for now the sounds of saws and drills have gone away. I’ll organize some before/after pictures for next month.

Watching: This webinar on Boston’s co-living climate. I always love hearing Benjie’s industry insights, and the co-living industry will be fascinating to see evolve post-COVID.

Thanks for reading and please give me feedback by responding to this e-mail. What do you want more or less of? Let me know! 

Cheers,
James

P.S.  subscribe here to get on our mailing list.