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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.

We hope you had a joyful Thanksgiving holiday this week. In case you were wondering, and we know you were, your Thanksgiving dinner cost less this year, but was still up 30% since 2020.

LOCATION STRATEGY CHARTBOOK

A composite of the average Fed Cycle would cause the following ordering/timing of events: March = First cut (8-month pause), June = Recession starts, October = Market bottom, Feb 2025 = Earnings bottom.

It may be a while before we see the Fed’s first rate cut. The central bank has not previously cut rates with core CPI above 2.7% unless unemployment has also been comfortably above.

It takes 8 months on average from the last rate hike to the first rate cut. So March will likely be the first chance to see rate cuts, although I think they will not come until later in the year.

More [central banks] are now cutting than hiking; this is the first time this has been the case since 2021."

The LEI is down 11.7% from the peak, comparable to previous downturns. Could this provide the Fed with a “recessionary fig leaf” to start cutting rates?

Continuing slowdowns in home sales in pricing will weigh heavily on inflation estimates - the Fed’s regrettably ridiculous Owner Equivalent Rent measure constitutes about 40% of the CPI.

In 2024, both fiscal and monetary policies are expected to be restrictive - this will have the primary effect of suppressing the economy. In fact, we might have already seen the first rate cuts in 2023 were it not for the “secret stimulus” of a 24% increase in federal spending this year.

While some sentiment measures from surveys show pessimism, hard data indicators, such as consumer spending, have been resilient.

We also see this divergence in the NFIB small business data.

Prime-age men with less than a high school diploma have been returning to the labor force.

US businesses are not prepared for a rising Gen Z workforce. Is going to make adjusting to the expectations of millenials look like a cakewalk?

Residential construction held up well last month amid tight inventories.

Building permits are back to last year’s levels. Single-family activity is now well above 2022 levels.

Existing Home Inventories are Slowly Climbing

More homes are mortgage-free.

Home inventories are further impacted by more Americans choosing to remain in their current residences.

Low inventory levels because of low rates are allowing higher rate houses to gradually bleeding into the overall mortgage pool.

Who is buying homes now in America?

The typical recent home buyer or seller is 60 years old

70% of buyers have no children living with them

40% of houses are owned free-and-clear

First-time homebuyers make up 32% of transactions (average is 38%)

Changes in US household wealth by income percentile:

Generative AI is sending shockwaves through the online freelancing world: