LOCATION STRATEGY CHARTBOOK

Happy Memorial Day from Location Strategy

This week has been a relatively slow one for economic news. The Federal Reserve remains perplexed that inflation has not moderated. About 40% of the CPI is housing costs - yet no action they have taken increases supply, labor or materials available for home construction; nor does it reduce household formation that underlies demand for housing - all trditional supply and demand factors.

The Fed also apparently does not realize the impact Federal policy has on its efforts - the Administration is running a $1.7 Trillion deficit - the highest in the country’s history (outside of 2021’s $2.1 Trilion during the pandemic). This is almost 7% of GDP and is projected to continue for 10 years. Certainly this has some offsetting effect? Or the 8.5 million economic migrants who have pending asylum hearings pressuing rents at the low end of the apartment market? Or its own effect of the households sheltering in higher end apartments after selling their homes waiting for lower mortgage rates?

Somewhat giving up on the Fed, the market does not anticipate either a recession or a rebound in inflation.

Dramatic examples of food inflation since 2019:

Historically, when oil and gold prices have exceeded their median levels, producer price inflation has shown marked increases in the following years.

There has been a widening gap in living standards between higher and lower income groups.

Research from the Kansas City Fed shows that industries and states with the largest increases of immigrants to more deceleration in hourly wages. This should not be a surprise. Here’s the perspective of Jared Bernstein, Chairman of the President’s Council on Economic Advisors. (We most recently saw Chairman Bernstein defending the Administration’s handling of debt on May 5).

“One thing we learned in the 1990s was that a surefire way to reconnect the fortunes of working people at all skill levels, immigrant and native-born alike, to the growing economy is to let the job market tighten up. A tight job market pressures employers to boost wage offers to get and keep the workers they need. One equally surefire way to sort-circuit this useful dynamic is to turn on the immigrant spigot every time some group’s wages go up.”

Housing starts and building permits were above last year’s levels in April, …

The rate lock count climbed above last year’s levels.

Mortgage originations for households with credit scores below 760 reached a multi-year low in the first quarter.

New home sales dipped below last year’s levels in April.

The number of new housing pre-sales, represented in black below, continues to show a downward trend.

Existing home sales climbed above last year’s level in April but were lower than expected.

But existing home inventories are now above last year’s levels.

Here is the seasonally adjusted index of home sales.

For the first time since 2010, rental costs for single-family attached homes have decreased year over year, diverging from the rents of detached units.

Best cities to work in, according to the class of 2024:

Fertility rates in select economies: