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.

I’d like to thank all of our friends and clients who were able to attend our 2024 Forecast Briefing on Wednesday. I hope we were able to give you a good view of what we expect in the coming year. I would also like to thank our panelists and speakers and our sponsors who helped make this event possible:

• Sienna

• Airia Development Company

• Outdoor Lighting Perspectives

• Action Coach

• EHRA

For those of you who did attend, please note: our plan for housing recovery is coming another step closer to fruition this weekend.

Everyone at Location Strategy hopes all of you and your families have a happy and joyous Thanksgiving holiday. You have given us much to be grateful for.

LOCATION STRATEGY CHARTBOOK

The market has now discounted any chance of another Fed rate hike in this cycle.

In fact the market thinks there will be four 25 bps cuts next year.

It appears that core inflation is settling around 3%, which is a concern for the Fed.

CPI was down, but food inflation remains high and is increasing. This is the kind of thing that makes people think the economy is worse than it really is.

We think the Fed will tolerate this higher level of inflation as it comes under an increasingly large amount of pressure to reduce the cost of financing federal debt. An unprecedented $8.2T of US government debt will be maturing in the next 12 months, or 1/3 of the total Treasuries outstanding. That is 3.5x more than what was net issued so far this year."

Interest on government debt could exceed defense spending by 2027 and non-defense discretionary spending by 2030. Rising interests costs will crowd out other spending - which I think will be politically unpalatable.

The employment situation remains strong. Job openings remain well above their 2019 levels in virtually every industry, and both the layoff rate and initial claims remain low.

The pullback in unemployment claims mitigates the likelihood of a recession.

Two years of negative real wage growth crushed many low- and mid-tier households.

Small business optimism indicators are down, but employment indicators are stable at pre-pandemic ranges

Bank lending in the US is now falling for the first time since 2012. This remains the major risk to our industry.

Banks also saw an outflow of $50 billion in deposits last week.

Adjusted for inflation, retail sales are below pre-covid trends

The share of mortgage-free homes is rsising, especially among older generations.

Mortgage applications are trending up.

We're still trading with the rest of Asia, just less so with China

Happy Thanksgiving!