Location Strategy Chartbook 080324

The big question going into the Federal Reserve’s meeting comes down to how strongly officials signal their desire to cut rates.

The central bank is widely expected to hold its benchmark short-term interest rate steady—in a range between 5.25% and 5.5%, a two-decade high—while setting the table to begin a series of reductions at the next meeting in mid-September.

Bonds are paying the highest yields in a generation and interest rates are poised to come down. Meanwhile, a record number of retirees are looking to cut risk in their portfolios. That combination has investors pouring money into both indexed and actively managed funds. Wall Street is seeing dollar signs.

Looking back to 2021, many economists agree the Biden administration’s $1.9 trillion aid package helped to stoke demand at a time when supply was constrained, contributing in some measure to the subsequent surge in cost of living. Regardless, Powell has acknowledged that the Fed in hindsight ought to have tightened policy sooner than it did.

Based on that experience, “the Fed may become much more vocal in warning of a policy rate response” the next time that it looks like inflation will pick up steam, Steve Englander at Standard Chartered wrote in a recent note.

US economic strength has, in turn, pulled in foreign capital and elevated the dollar’s value, Yellen said last week. Moves by the Federal Reserve to tamp down inflation have left interest rates higher than in other countries, also contributing upward pressure. “We believe that’s how the system should work,” she said in a Thursday press conference.

Officials want to tame inflation, but they also don’t want to cause undue harm to the labor market by holding rates high for too long. That puts the closely-watched monthly jobs report on Friday even more in the spotlight, along with other readouts due on the labor market.

The number of job openings per unemployed person returning to pre-COVID levels.

Credit card delinquency rates hit a nearly 12-year high

• Consumers are increasingly holding off on applying for new mortgages and credit cards, a Philadelphia Fed report finds.

• The delinquencies come as consumers have leaned heavily on borrowing to pay for everything from groceries to vacations — expenses that have risen sharply during the pandemic recovery — and as higher interest rates to curb inflation have pushed card rates to record highs.

47% of adults under 50 now say they’re unlikely to ever have kids.

• This is up from 37% in 2018.

• Oddly, affordability is the 4th most common reason with “they just don’t want to” as reason #1.

Banks and other lenders are seizing control of distressed commercial properties at the highest rate in nearly a decade

In the office space, Austin is currently trailing the five-year pre-pandemic average sale count by 40%

• The sale of Twin Towers is part of a recent and growing trend in Austin of owner-users buying office buildings.

• Owner-users typically accounted for about 5% of office sales volume (from 2015-2023); but in 2024, their activity has increased substantially, accounting for 20 percent of total sales volume. Sock Club confirmed it would occupy the office building campus it bought from Omninet Capital.

Invitation Homes said revenue rose 8.8% in the second quarter with a 97.5% occupancy rate across its portfolio. It noted weakness in some of its traditionally best-performing markets. Some of its “high-flying” markets softened in the 2nd quarter, especially in Sun Belt states: Arizona and Florida. Executives cited Phoenix as well as Tampa, Orlando and Jacksonville as examples.

• The REIT plans to complete an additional 691 houses for rent in the 2nd half of the year, just a fraction of its 2,700-property pipeline that will be made available for lease over the next few years. The Dallas-based company is also anticipating the completion of the purchase of a stake in single-family rental business Upward America and adding its 4,400 houses to its management portfolio.

• Spending on repairs and maintenance grew 24.3% on a yearly basis and its property taxes grew 10.3% on a yearly basis. At the same time, rental revenue grew just 4.7% compared to the same time the previous year.