BRIEFINGS ARE BACK. NOVEMBER 15, 2023

Location Strategy is proud to announce its 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.

Do you need a market study? Location Strategy, LLC’s promise to you:

• 30-day completion guarantee - or it’s free. We’ll schedule your delivery date when you engage us.

• Flat fee pricing - no mysterious add-on charges for data and subscriptions

• Regular updates so you’ll always know the status of your project.

  If you need help on a project, or under time pressure to get your study done, give us shot. I think you’ll be pleasantly surprised.

Location Strategy Chartbook

The spread between the 2-year and 10-year yield—a classic recession indicator—has been negative for 313 straight trading days, the longest streak since 1980. This is one of the strongest leading indicators of a recession — and part of the reason that we probably haven’t gone into recession yet is the inflationary spending by the Federal government, which we have been covering since July.

The headline CPI accelerated as expected, boosted by gasoline prices.

Morgan Stanley estimates a sharp increase in the headline CPI in August, boosted by energy prices. You can see other areas of the economy are flat or contracting.

Global oil markets face a supply shortfall of more than 3 million barrels a day next quarter—potentially the biggest deficit in more than a decade—as Saudi Arabia extends its production cuts. Meanwhile, the administration has drained the Strategic Petroleum Reserves to about 40% — they now contain about 79 days worth of oil.

Even before inflation began to increase again this year, the median real household income fell by 2.3% to $74,580 in 2022, the largest drop since 2010.

One of the consequences of the resumption of inflation is the divergence of consumer confidence from other economic indicators - consumers believe the economy is much weaker than other indicators suggest.

Part of the reason is that wages have trailed nearly all major spending categories, with the exception of housing, remembering of course that “housing” is the Fed’s questionable Owner’s Equivalent Rent.

Consumer spending is set to take another hit with the resumption of student loan payments will subtract at least 0.5% from quarterly annualized GDP growth (put this first)

Goldman estimates that reduced auto production from the UAW strike would reduce quarterly annualized growth by 0.05–0.10% for each week it lasted

Another threat to GDP is the potential of a government shutdown. Q4 GDP growth will slow from +3.1% in Q3 to +1.3% in Q4 (vs. consensus of +2.9% and +0.6%).

The median U.S. asking rent in August was $2,052, just $2 below (-0.1%) the record high set a year earlier. That’s up just slightly (0.7%) from a month earlier.

Rent inflation based on actual transactions accelerated, but the Fed's preferred OER slowed, as it is a survey instrument based on homeowner opinions.

The rate lock count continues to decline.

We expect CRE prices to be down -27.4% from peak to trough in 18–24 months this cycle (vs. -34.9% during the GFC in 34 months), ranging from -15% for apartments to -40% for offices.