RXR and partner Chuo-Nittochi Group break ground on The Arden at Garvies Point
Five-story building will feature 101 luxury rental apartments and retail space
Project includes indoor and outdoor amenities, parking, and EV charging
The Arden is scheduled for completion in 2027
RXR is beginning construction on its latest addition to its $1.3 billion Garvies Point development in Glen Cove.
Along with its real estate investment partner Chuo-Nittochi Group, RXR will be constructing a five-story, 101-unit luxury rental building called The Arden.
Rendering of the inside of The Arden apartments in Glen Cove. / Courtesy of RXR
The Arden project, which had a groundbreaking ceremony on Monday, will include 2,400 square feet of retail space with outdoor patio seating, 94 covered garage parking spaces, 72 surface spaces, and 7,750 square feet of indoor amenities, including an attended lobby, resident lounge, and wellness lounge, according to an RXR statement. It will also feature 8,300 square feet of outdoor amenity space with a courtyard, swimming pool, grilling stations, bicycle storage, EV charging stations, and walking trail access to Garvies Point Preserve.
The Arden will join other Garvies Point rental buildings including the 385-unit Harbor Landing, and 55 units of workforce housing in two buildings from Georgica Green Ventures at the 56-acre mixed-use community that began rising in 2016. RXR also developed the 146-unit Village Square apartment complex about a half mile away in downtown Glen Cove.
With 167 residences, The Beacon, completed at the end of 2019, offered 800-square-foot to 2,400-square-foot condos at Garvies Point with prices ranging from $800,000 to about $3 million. Amenities at the condo building feature a movie theater, billiards and game room, library, fitness center, yoga studio, event space, outdoor pool and a 24-hour concierge.
First pitched in 2002, the redevelopment of the once blighted Garvies Point property, a former EPA Superfund site, has gone through changes in developers, a drawn-out environmental cleanup, a housing market crash and a few lawsuits that collectively delayed the massive project along the way.
The City of Glen Cove has had several different mayors since the plan was first presented. The city signed a land development agreement with the project’s original developers in 2003 and initial approvals were granted in 2008, but the start of construction was delayed by the massive clean-up needed to remediate the once-toxic property, changes in the development team and poor market conditions.
Though the name of the project, originally known as Glen Isle, and the plan itself has morphed since it was first proposed, Garvies Point was planned to bring a total of 1,100 residences, split between rentals and for-sale residences. RXR was assisted in the development with economic incentives from Glen Cove Industrial Development Agency and Local Economic Assistance Corp.
The red-hot real estate market of just over a year ago has become a victim of its own success. … [+] Escalating home prices and soaring mortgage rates turned homes unaffordable for many, while builders face growing inventories and plummeting sales. This is not good for the construction industry.
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On June 2021 I wrote a post here titled “3 Reasons Why The Real Estate Boom Is Not A Bubble.” At the time, a lingering deficit of housing units was pushing up housing prices but the combination of low rates, healthy savings and strong income made it still quite affordable to buy a home. The Federal Reserve Bank of Atlanta agrees: According to a recent article, affordability was pretty high when the article came out. But oh my, how times have changed.
The real estate boom was running at full speed in 2021, when homes were affordable despite of rising … [+] prices. They are affordable no more.
Federal Reserve Bank Of Atlanta; Path Financial LLC annotation
The affordability index fell precipitously from those good times to the lowest value since before the Financial Crisis. According to the Atlanta Fed, the decline was (and still is) driven mainly by higher prices and much more expensive mortgages. These factors also affect homeowners who bought or refinanced their homes over the past few years at historically low rates: They are stuck, because moving to a new home will require in many cases much higher mortgage payments. This, in turn, contributes to the shortage of existing homes offered for sale.
Homes have become exceedingly unaffordable due to rising prices and skyrocketing mortgage rates.
Federal Reserve Bank of Atlanta, Path Financial LLC annotation
Both existing and new home sales slumped. National Association of Realtors data shows that existing home sales fell from a peak of 6.5MM annual units in early 2022 to about 4.1MM units, or about the same as during the worst point of the pandemic, and they are heading lower. It is similar to the decline in new home sales, which in July 2022 reached the lowest level since March 2016.
After a post-pandemic boom, home sales have slowed down steadily and reached the lowest levels in … [+] six years.
Federal Reserve Bank of St. Louis, Path Financial LLC
Conditions are unlikely to change much, since mortgage rates will stay high as long as the Fed remains determined to keep interest rates high to fight inflation. This means that sales will slow even further unless there is a price adjustment. This is affecting the construction industry, which had cranked up production in response to higher prices but now finds it more difficult to sell their newly built homes.
Residential construction ramped up quickly after the pandemic, and accelerated even more in late … [+] 2021 and early 2022 in response to higher prices leading to a much larger inventory of homes.
Federal Reserve Bank of St. Louis, Path Financial LLC
What makes it even worse for homebuilders is that, according to the Atlanta Fed data, a lot more is still under construction, adding to the pipeline of new homes coming to market.
New construction activity continues unabated. The proportion of homes that are not yet finished … [+] versus those already available is the largest in the Atlanta Fed study period of almost 20 years.
Federal Reserve Bank of Atlanta
The growing housing glut is confirmed by other measures, such as the number of housing units in the U.S. as a percentage of population. That percentage hit a peak during the construction frenzy driven by the housing bubble of the mid-2000s, which took several years to adjust. But, when prices recovered and sales boomed, new construction kicked in and drove that percentage even higher.
The number of housing units per person is now higher than at the peak leading to the Financial … [+] Crisis of 2008.
Federal Reserve Bank of St. Louis, Path Financial LLC
And this brings me back to the point I made earlier: With a lot of new inventory, even more coming out and affordability at a low point, home prices will have to adjust or sales will continue to fall. This may not necessarily be a serious problem for existing homeowners who can wait, but a big one for builders who, having tied up capital in inventory, will have to offer discounts to move their product. But, because of higher construction costs caused by the supply-chain crisis, their margins have shrunk and their ability to cut prices and still make a profit might be limited.
Either way, this is not entirely unwelcome news for the Fed, intent as it is to lower prices, slow the economy down or, preferably it seems, both. A slowdown in construction activity and lower home prices would go a long way to achieve the outcomes it seeks. The first part is unfolding, as the number of permits for new residential construction is 29% below the recent peak. Notably, permits sank between 30% and 77% off a prior peak in 7 out of the last 8 recessions, which suggests that the slowdown in construction spending may get worse if the recession everyone expects actually materializes.
The number of new residential construction permits has declined considerably and in fact more than … [+] during the pandemic shutdown. The slump is likely to continue.
Federal Reserve Bank of St. Louis, Path Financial LLC
When local factors are considered, national trends matter less
It’s important to keep in mind that there are differences between the aggregate real estate numbers presented above and the realities on the ground, which are influenced by local conditions much more than by nationwide numbers.
Take, for example, three counties in Florida (Manatee, Sarasota and Charlotte) just south of Tampa, on the Gulf of Mexico – which happens to be where I live and work.
According to Realtor MLS data, the number of real estate listings here dropped rather steadily from the 28,000 or so active listings in the months leading to the 2008 Financial Crisis (when monthly sales were a paltry 1,100 units a month) to a low of just 2,000 active listings in March 2022 (shortly after sales had reached a red-hot volume of 4,000 units a month that depleted inventory). In recent months the number of active listings has recovered slightly and is once again larger than monthly sales, but the number of units listed for sale is still far lower than for most of the last 15 years.
This area’s real estate transactions are influenced by tourism, retirement, and a migration into Florida from other states that picked up momentum with the trend towards remote work. In addition, the area tends to attract buyers of luxury homes who are less sensitive to price increases and don’t rely as much on mortgages.
The point is that hyper-local conditions override nationwide numbers, so while the information I presented earlier is important to investors considering real estate investments through instruments such as VNQ VNQ (an ETF that invests in REITs) or REZ (an ETF with higher exposure to residential real estate), it may be of marginal importance for someone evaluating the sale or purchase of a specific piece of real estate. While current conditions seem particularly unfavorable at this time for large homebuilders with a national presence, those thinking about buying or selling a home in any given place will benefit more from consulting real estate agents, who usually have the best understanding of local conditions, rather than aggregate numbers.
WASHINGTON — A measure of inflation that is closely monitored by the Federal Reserve remained painfully high last month, the latest sign that prices for most goods and services in the United States are still rising steadily.
Friday’s report from the Commerce Department showed that prices rose 6.2% in September from 12 months earlier, the same year-over-year rate as in August.
Excluding volatile food and energy costs, so-called core prices rose 5.1% last month from a year earlier. That’s also faster than the 4.9% annual increase in August, though below a four-decade high of 5.4% reached in February.
The report also showed that consumers spent more last month, even after adjusting for inflation, a sign of Americans’ willingness to keep spending in the face of high prices. Consumer spending increased 0.6% from August to September, or 0.3% after accounting for price increases.
The latest figures come just as Americans have begun voting in midterm elections in which Democrats’ control of Congress is at stake and inflation has shot to the top of voters’ concerns. Republicans have heaped blame on President Joe Biden and congressional Democrats for the skyrocketing prices that have buffeted households across the country.
The persistence of high inflation, near the worst in four decades, has intensified pressure on the Federal Reserve to keep aggressively raising its key short-term interest rate to try to wrestle rising prices under control. Last month, the Fed raised its key rate by a substantial three-quarters of a point for a third straight time, and next week it’s expected to do so for a fourth time.
The central bank’s latest rate hikes far exceed the quarter-point increases that it typically used in the past when it sought to tighten credit to fight inflation. But after being caught off guard beginning late last year, when prices accelerated far more than the Fed’s policymakers had anticipated, the officials have been raising their benchmark rate at the fastest pace in four decades. In doing so, they are raising the risk of a recession — something that many economists expect to occur sometime next year as a result.
The Fed’s hikes have led to much higher loan rates for businesses and consumers, particularly for mortgages. The average 30-year fixed mortgage rate surged past 7% this week, according to Freddie Mac, the highest level in two decades and more than twice what it was a year ago.
The rapid run-up in borrowing costs has crushed the housing market. Sales of existing homes have dropped for eight straight months and are down nearly 25% in the past year. New-home sales and construction are also falling.
A weaker housing market has slowed the economy, as fewer home purchases also drag down sales of furniture, appliances, and home improvement gear.
Home prices, which rocketed during the pandemic, have started to fall as a result. The S&P Case-Shiller home price index fell from July to August for a second straight month, according to the latest data available,
But those declines have yet to show up in the government’s measures of housing costs, which include rents, which are still rising for many people as they renew their leases. It could take until late spring or summer before falling home prices work their way into the government’s inflation indexes. That delay could keep official measures of inflation from falling much over the next few months.
WASHINGTON — The problems have hardly gone away. Inflation, still near a 40-year high, is punishing households. Rising interest rates have derailed the housing market and threaten to inflict broader damage. And the outlook for the world economy grows bleaker the longer that Russia’s war against Ukraine drags on.
But for now anyway, the U.S. economy has likely returned to growth after having shrunk in each of the first two quarters of 2022.
At least that’s what economists expect to see Thursday when the Commerce Department issues its first of three estimates of gross domestic product — the broadest measure of economic output — for the July-September period.
Economists surveyed by the data firm FactSet have predicted, on average, that GDP grew at a 2% annual rate in the third quarter. That would reverse annual declines of 1.6% from January through March and 0.6% from April through June.
Consecutive quarters of declining economic output are one informal definition of a recession. But most economists say they believe the economy has so far skirted a recession, noting the still-resilient job market and steady spending by consumers. Most of them have expressed concern, though, that a recession is likely next year as the Federal Reserve continues to steadily ratchet up interest rates to fight inflation.
Preston Caldwell, head of U.S. economics for the financial services firm Morningstar, notes that the economy’s contraction in the first half of the year was caused largely by factors that don’t reflect its underlying health and so “very likely did not constitute a genuine economic slowdown.” He pointed, for example, to a drop in business inventories, a cyclical event that tends to reverse itself and generally doesn’t reflect the state of the economy.
By contrast, consumer spending, fueled by a healthy job market, and stronger U.S. exports likely restored the world’s biggest economy to growth last quarter.
Thursday’s report from the government comes as Americans, worried about high prices and recession risks, are preparing to vote in midterm elections that will determine whether President Joe Biden’s Democratic Party retains control of Congress. Inflation has become a signature issue for Republican attacks on the Democrats’ stewardship of the economy.
The risk of an economic downturn next year remains elevated as the Fed keeps raising rates aggressively to try to tame stubbornly high consumer prices. The central bank has raised its benchmark short-term rate five times this year, and it’s expected to announce further hikes next week and again in December. Chair Jerome Powell has warned bluntly that taming inflation will “bring some pain’’ — namely, higher unemployment and, possibly, a recession.
Higher borrowing costs have already hammered the home market. The average rate on a 30-year fixed-rate mortgage, just 3.09% a year ago, is approaching 7%. Sales of existing homes have fallen for eight straight months. Construction of new homes is down nearly 8% from a year ago.
Still, the economy retains pockets of strength. One is the vitally important job market. Employers have added an average of 420,000 jobs a month this year, putting 2022 on track to be the second-best year for job creation (behind 2021) in Labor Department records going back to 1940. The unemployment rate was 3.5% last month, matching a half-century low.
But hiring has been decelerating. In September, the economy added 263,000 jobs — solid but the lowest total since April 2021.
International events are causing further concerns. Russia’s invasion of Ukraine has disrupted trade and raised prices of energy and food, creating a crisis for poor countries. The International Monetary Fund, citing the war, this month downgraded its outlook for the world economy in 2023.
