Welcome to Location Strategy Chartbook, Texas’ only weekly newsletter dedicated to the homebuilding and land development industries. We will keep you updated on the economic news you need to know. If this is your first issue or someone has forwarded it to you, I’d encourage you to subscribe and to keep reading. We won’t put you on a marketing list, and our newsletter is always free.

For a brief introduction to our readers, Scott Davis is the president of Location Strategy LLC. We provide fast, smart, and affordable Texas-based consulting solutions for real estate clients.

HAPPY CHANUKAH TO OUR READERS

LOCATION STRATEGY CHARTBOOK

Send in the Clowns

Most of the time our irreverent takes are for humor or to help explain a point. This time it’s out of sheer astonishment. The Fed flooded the US economy with cash in an attempt to restart the economy after the poorly conceived lockdowns. This cash grew to represent 50% of available bank capital and banks were forced to invest this in low-yield long term investments which came to represent massive losses once the Fed began to fight the inflation “surprisingly” unleashed by its printing of 40% of every dollar ever printed at that time. But instead of making banks recognize those losses - about $1.3 trillion, the Fed has tried to cover them up with a new lending program allowing banks to borrow against the face value (purchase price, not market value) of these assets to raise cash and further avoid recognizing losses.

I’m too shocked to say anything besides this Rube Goldberg scheme is reason #3 why I think the Fed will start cutting rates soon.

Bank Term Funding Program Balances

Despite Chair Powell’s pushback, the market now sees some 130 bps of rate cuts in 2024.

Treasury yields dropped in response to soft job openings data.

On a year-over-year basis, the widespread between leading and coincident indicators is consistent with previous recessionary environments.

Real GDP growth consensus estimates have been revised higher.

Construction spending is being boosted by residential construction spending

Public construction spending is up 16% from last year.

Business applications remain elevated.

Real household income vs. the pre-COVID trend:

Excess savings are dwindling:

"A homebuyer with the median U.S. income would’ve had to spend a record 41% of earnings on monthly housing costs in 2023, up from 39% in 2022 and 31% in 2021."

Residential mortgage debt as a share of GDP hit the lowest level in over two decades.

The divergence between median new and existing home prices has been widening.

Cash buyers are now a larger component of home purchases than first-time buyers.

Rate lock count rising

US home buyers’ average age:

The US population is now expected to peak in 2080.

The number of times US women have given birth in their lifetime: