I had an interesting visit in Roseville this morning with a pair of Northern California apartment industry specialists, John Gallagher and Dean Bagneschi, partners in the Apartment Advisory Team at TRI Commercial.
Here at The Bee, we do a ton of stories on the housing market, but don't often enough explore the world of apartments that house an estimated 35 percent of the region's population. That's sort of a hidden world to many, a world of big institutional funds and insurance companies and local families with money that buy and sell apartment complexes.
The bottom line right now: the apartment industry is slumping, too. Sales prices are falling, a few have fallen into foreclosure and buyers are waiting on the sidelines to see if prices fall more, the two said. There's still more supply than demand, which has lessened investor interest, too, in apartments.
There's also the issue of credit. Even when brokers like them can put together a buyer and a seller it's hard to get the bank on board. They said Citibank used to be the biggest regional source of loans for apartment deals. Number two was Washington Mutual. Between them, they represented 75 percent of the region's financing.
Now both banking giants are struggling with their loan portfolios and have largely stopped lending in this realm, they said. The deals are there, they said. In some cases a buyer can pick up a complex for half of what it would cost to build the same thing new.
But the financing is the hard part.
Truly, if you ever wanted an example of what it means here on Main Street when the analysts talk about a freeze-up in credit markets, this is it.
Apartment complex buyers who used to make 25 percent down payments are now being asked for 40 percent down if they want to get a loan. So they're reluctant on that front, too.
All in all, it's hardly the express lane in their business sector.
Like everyone else, they're waiting for the state government to stabilize, for job growth to pick up and people to move here. In short, anything but the constant reports of layoffs and threats of layoffs that are keeping many buyers - even of apartment buildings - on the sidelines, waiting, waiting to see how the economy shakes out.
Like to hear it in their own words? Here's a brief video of Gallagher and Bagneschi after coffee Friday morning at The Fountains in Roseville.