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So many things to talk about this week. I usually start with the magical spreadsheets of the BLS. This week it’s the Owner’s Equivalent Rent. For newcomers, the OER is the Federal Reserve’s primary measure of home price inflation. How is it collected? During the phone calls for the jobs report you hear every Friday, surveyors ask homeowners what they think their homes would rent for on the open market.

The Fed continues to blame housing prices for the stickiness of inflation.

This especially true since the CPI excluding housing is now less than 2%.

Of course coming back to our favorite bête noire, the OER, we find it lags Zillow’s data by TEN MONTHS. So the Federal Reserve isn’t making rate policy decisions in the world of August 2023; they are still stuck in October of last year.

Don’t worry, the Fed is still on the case - and will tell you how much more work they have to do.

Moving on to Job Reports: Magic excel has resurfaced at the BLS. The July job report looked superficially strong 187,000 jobs - one of the reasons we immediately suspected at Location Strategy was the “secret stimulus” we’ve talked about the last few weeks. Upon deeper review, the report’s gains were comprised of an increase of 1 million part-time jobs, a gain of almost 120,000 people with multiple jobs and the loss of 585,000 full time jobs.

280,000 jobs came from the BLS’s own “birth-death” or job creation model. If you remove the adjustment from this model, the data suggest the economy actually lost jobs in July.

Why would you consider removing the birth-death adjustment? Because every month this year it’s been revised downward, and level of additive adjustments from the birth-death model made by the BLS under the Biden administration are larger than at any time in the last two decades.

The volume of mortgage originations has collapsed, but mainly at the upper end of credit scores. These buyers are largely aspirational and can afford to wait, or are willing to rent until rates come down from current levels. Lower credit score buyers may be more motivated by jobs, deaths, divorces - whatever life circumstances have compelled them to move.

This may be why homes are selling faster than they did before the pandemic.

And is most definitely why debt to income ratios have grown so large.

Even with the slowdown in price increases, in most to the US it’s still far cheaper to rent than to buy.

States are increasingly trying to restrict foreign homebuyers. What do foreigners plan to with the houses they are buying? Live in them.

The spread between construction wages and construction spending has narrowed.

I thought I gave up my covid coverage several years ago. I ‘ve heard a lot of media about the new “surge” of some variant. I thought it would be helpful to see the extent of this wave, below:

And sense covid is exiting stage right, we are back to climate change which I try and avoid like the plague. However, it’s worth noting about the day in July that was the “hottest day in recorded history.” Turns out that observation was based on a model - not real data - and one so dubious that NOAA refused to endorse the claim.

Need more evidence? Bloomberg provided this chart where the yellow line are actual temperatures, the green line shows the 30-year average, and the black line shows temperatures in August. Yes it is hot, but they are not at particularly high levels outside average temps.