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, affordable Texas-based consulting solutions for real estate clients.

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LOCATION STRATEGY CHARTBOOK

Rising Federal interests costs represent the greatest threat to the economy.

Janet Yellen has likely committed the biggest bluder in the history of the Treasury by failing to refinance US national debt at low interest rates. Stanley Druckenmiller explains (click here for the video):

The Atlanta Fed's GDPNow estimate for Q4 GDP growth dropped to 1.2% from 2.3% on Oct 27.

Forecasts indicate a significant economic slowdown following a robust quarter, and with bond yields hovering near multi-year highs, the Fed is likely on hold for the time being.

The rapid rise in US yields to ~5% points to the government’s annual interest-rate bill rising to 4.5-5% of debt outstanding in the next six months. That’s in the region of $1.7 trillion - or the GDP of Australia - each year.

US federal interest payments are going up dramatically.

The US debt-to-GDP ratio continues to diverge from the Eurozone.

The Sahm Rule, which has no false positives, "posits the start of a recession when the three-month moving average of the unemployment rate rises by a half-percentage point or more relative to its low during the previous 12 months." Current reading: 0.33.

Payrolls are still positive, but the actual number of employed Americans collapsed by 348,000 in October - the second negative result this year.

According to the payroll survey, the US has added 1.234 million jobs since April 2023, while the Household Survey shows only 191 people have found new jobs.

How is this possible? Record numbers of people are holding multiple jobs. In October, the (not seasonally adjusted) number of multiple jobholders was a record high 8.5 million, a surge of 396K in one month. Instead of a strong labor market, it merely confirms that a record number of Americans now have to work two or more jobs to make ends meet as a result of the runaway inflation.

The prevailing view is that the Fed is done raising rates, but the FOMC is focused on tight financial conditions. 10-year treasury rates remain a headwind to growth; remember, 30-year mortgage rates correlate 98% with 10 treasuries.

Household excess savings down to $148 billion in Sept 2023 from a peak of $2.1 trillion in 2021.

A higher share of households are struggling to pay expenses

Businesses continue to relocate to Texas.

Home prices continue to outpace wages. This remains the most significant challenge facing the housing market today.

Home prices are up again in August

HPI rose 0.6% MoM (vs 0.5% cons. est and 0.8% in July). That puts YoY at 5.6% (up from 4.6% in July).

Mortgage rates continue to drive purchases down.

Weakening demand for mortgages points to slower new home sales ahead.

Our national rent index fell 0.7% in October, the third straight monthly decline. Year-over-year growth is still negative at -1.2% but appears to be bottoming out.

Surging insurance rates across the country due to extreme weather

Those of you who were our earliest subscribers will remember that I started our newsletter to share research on the best practices for managing how the coronavirus would affect our economy.

What we told you early on was that the emperor had no clothes and lost subscribers overtaking that position. We shifted away from the virus once it was clear what was happening in Texas. I wanted to take a moment, however, to share this article from New York magazine that validated everything we had to say.