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 newseltter is always free.

Our readers tell us they value the update every week, and several major developers have told us they base their business plans on the information they read here. We’ll cover more about that in upcoming issues.

BRIEFINGS ARE BACK! NOVEMBER 15, 2023

For decades, we’ve gathered as a homebuilding community to network, connect, and hear the latest on the market from local experts on the market. Location Strategy is proud to restart this tradition with our first forecast briefing presentation on November 15, 2023, from 7:30–10:00 AM. Click here for full details and to reserve your seat.

We have a panel of distinguished builders, developers, and lenders covering affordability across the pricing spectrum and the outlook for project and home lending in 2024. Panelists include:

• Jennifer Keller, Hamilton Thomas Homes

• Becky Ullman, Lennar/Friendswood Development

• Matthew Brodd, AmCap Home Loans

• Lawrence Dean, Veritex Community Bank, moderator

The panel will be followed by the 2024 economic forecast to be given by Scott Davis.

Don’t delay; limited seating is available. Click here to reserve your seat.

LOCATION STRATEGY CHARTBOOK

Impressive performance in retail sales and industrial production boosted the GDPNow Q3 growth forecast (well above 4%, annualized).

The chart below shows the Atlanta Fed GDP Now forecast model. What I wanted you to see is how Residential Investment has gone from a negative contribution to a positive contribution - a sign that even under today’s rate environment, new home construction is expected to contribute to growth.

The NFIB small business optimism index is a combination of consumer and business sentiment. Many NFIB members are very small companies, with responses often reflecting owners’ personal opinions. The business component of this report is the “hard” data such as sales, hiring, credit, etc.

For the first time in over a year, the Wall Street consensus no longer expects a recession over the next 12 months." As an aside, Bloomberg economists’ forecast for a US recession was 100% almost exactly 1 year ago.

We may not be out of the woods yet: key recession indicators are still within the historical range of lags.

The chart below shows the Fed Funds Rate, the 10 year Treasury and the 30-year fixed mortgage rate. We focus on the Fed Funds rate because it gets announced after FOMC meetings. It’s an important rate to be sure, with about 90% coreelation between the Fed Funds Rate and the 30-year Fixed Mortgage rate. But if you really want to know where mortgage rates will go, watch the 10-7ear Treasury rate. It has a 99% correlation with the 30-year fixed rate going back to 1971. Fed Chair Powell suggested as much when he said high long term rates may discourga the Fed from another rate hike.

Of course, why are 10-Year Treasuries skyrocketing? US interest costs are projected to explode because of rising debt that needs to be financed.

US government interest payments per day have doubled from $1bn per day before the pandemic to almost $2bn per day in 2023.

As a result, small businesses are now facing rapidly incfreasing interests costs - another economic headwind.

Homebuilder sentiment is negative for both sales and traffic.

Mortgage applications continue to weaken, confirming the doward sales trend.

Starts are up 9% year over year.

Permtis softened again, however.

How much do new homebuyers need to earn to afford a median-priced home?

Given the NAHB sentiment, it would appear build permits are set to keep falling...

Unlike many other advanced economies, the United States has not seen a commensurate increase in the number of homes to match its population growth.

More space is the top reason for moving.

The duration of Americans residing in their homes has extended.

Reducing spending to cover student loan payments: