Location Strategy Chartbook 02.22.25

While the S&P 500 continues to hit new all-time highs, the US Bond Market (Bloomberg Aggregate Bond Index) remains 8% below its peak from the summer of 2020.

At 54 months and counting, this is by far the longest drawdown in bond market history.

Over 11% of credit card balances in the US are now 90+ days delinquent, the highest since 2011.

Three straight years of six-figure job growth ends in Houston which added 58,000 jobs in 2024

Prelim data released by the BLS, Houston added 57,800 new jobs in 2024, the slowest pace since 2020 and far below the 140,000 annual average between 2021 and 2023. On a year-over-year basis, employment has grown by 1.7%.

Still, when looking at historic trends, last year’s figure is right in line with the 20-year average tally of 56,000 jobs.

Two sectors, education and health services and mining, logging, and construction, drove the bulk of last year’s gains, accounting for nearly 26,000 new jobs combined.

Construction hiring, specifically, has picked up despite high interest rates and a tight lending environment. Roughly 15,200 construction jobs were added in 2024, the highest mark since 2018.

Other strong gains were in the financial activities sector, which added 8,400 jobs, and the leisure and hospitality sector, which added 6,700 jobs.

Last year's total U.S. hotel results showed revenue per available room growth of 1.8%, driven by average daily rate growth of 1.7% — well below the level of inflation. Breaking this national result down by hotel class reveals a similar picture. Two classes, midscale and economy, had ADR declines, while the other four classes had room rate increases below 2%.

Occupancy growth was also mixed, as the lower three classes reported occupancy declines while it increased for the upper three classes. Traditionally, occupancy declines when supply growth outpaces demand growth. However, for midscale and economy hotels, room demand fell in 2024. For economy-type hotels, this was likely a function of fewer available rooms, as supply declined by 1.1% and demand decreased by 2.4%. The demand deceleration is slightly worse than it was for chain-affiliated economy hotels, which was 2.1%. This implies that unbranded economy hotels fared even worse.

The reason for the varied performance outcomes by class can be summed up under the headline “bifurcation,” as properties at the higher end of the market performed better than the lower-end hotels. Economists refer to the “wealth effect,” when consumers spend more when their wealth increases. Corporate travel has increased since corporations are spending more money on face-to-face interactions.

Will the single family renter market grow in demand due to preference for mobility, lack of maintenance and responsibility? Or is this simply a function of being priced out, high mortgage rates?

Builders: can you build a product to capture and entice younger prospective homebuyers? I postulate part of it is the products being built aren’t attractive to younger demographics and its not just in design or size nor function, but also in experience. Specifically the long term experience of home ownership and also location.

ResiClub: The vanishing 20-something homebuyer. Whenever an economic analyst talks about a cyclical change, they’re talking about short-term fluctuations driven by the business cycle. Whenever an economic analyst talks about a secular change, they’re talking about long-term, structural shifts in the economy. Sometimes a trend can be a little of both.

One example: First-time homebuyers keep getting older. 28 years old → The median age of first-time U.S. homebuyers in 1991. 38 years old → The median age of first-time U.S. homebuyers in 2024. In other words, the median first-time U.S. homebuyer in 2024 (age 38) has been out of high school for 20 years but is also only 24 years away from the earliest age at which they could receive Social Security benefits (age 62).

Some of that increase is driven by how strained housing affordability has gotten over the past three years.

And some of that increase is driven by secular changes, which are happening across the developed world, as younger generations are delaying life events compared to previous generations—attending school longer, marrying later, buying homes later, and having children later.

US housing starts slowed in January as builders pulled back on single- and multifamily home construction amid growing worries over mortgage rates and unsold homes.

New residential construction decreased 9.8% to an annualized pace of 1.37 million last month, slipping after a nearly 16% surge in December, according to government data released Wednesday. That trailed the median estimate of economists surveyed by Bloomberg, who expected an annualized 1.39 million pace.

Single-family starts fell 8.4% to an annualized rate of 993,000 in January amid exceptionally cold weather across the country, marking the first drop since October.

Multifamily starts, meantime, fell 13.5% to an annualized 373,000, pulling back after a huge gain in December that some economists said likely resulted from seasonal adjustments.

Economists and publicly-traded home builders expect the new-home market to see only modest growth this year, dragged down by mortgage rates near 7% and median prices that are 30% higher than in December 2019.

Meantime, the prospect of 25% tariffs on goods from Mexico and Canada, a major source of US lumber, and a 10% tariff already in place on Chinese goods have reversed the jolt of confidence builders felt after President Donald Trump’s election in November.

The topic of failing and infrastructure costs to deliver utilities has been coming up in multiple municipalities in Texas and Location Strategy recommends you take a closer look at house these costs impact your financial projections but also the appeal to the end Buyer, Operator or Tenant. In some areas, there are impact fees per lot for water.

When we look at households’ overall utilities payments – covering electricity, gas and also water utilities, it appears they are actually growing faster than the consumer price of energy services might imply.

In January 2025, the YoY increase was 6%, 3.5 percentage points faster than the rise in the price of energy services in the Consumer Price Index (CPI)."

Why are these payments rising faster than prices? One contributory factor appears to be water utility payments. While we can’t easily separate customer payments for electricity and gas with Bank of America data, as they are often supplied by the same firm, we can separate some water utility payments. When we do this, we find the median water payment is showing a YoY rise of around 7.5%, adding upward pressure to overall utility payment growth. However, the absolute dollars spent on water bills are typically significantly less than on energy, so this on its own is not enough to account for why overall utility payments are rising so briskly.

But another significant reason for the increase is that households are consuming more electricity. The EIA estimates that residential electricity consumption rose 2.7% in 2024, while natural gas consumption declined 4.3%. For consumer bills, it’s the rise in electricity consumption that matters more because the average household spends over three times as much on electricity than on gas. The EIA forecasts a further rise in electricity demand in 2025, potentially leading to more upward pressure on bills.