Lots of happenings in Residential Real Estate. But be careful not to get caught up focusing on the wrong things -- no, it's not about inflation or NIMBY or PE rentals.
The big issues are technology, ultra-low rates, capital, and changing demographics.
A quick thread
1/
The big issues are technology, ultra-low rates, capital, and changing demographics.
A quick thread
1/
Let's go thru some of the things that matter far less, beginning with prices.
What matters most are not the price paid, but the monthly carrying costs. This is why low rates have a big impact, and tend to send prices higher.
awealthofcommonsense.com/2021/03/what-i…
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What matters most are not the price paid, but the monthly carrying costs. This is why low rates have a big impact, and tend to send prices higher.
awealthofcommonsense.com/2021/03/what-i…
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Next, RRE Inflation.
Try to avoid chart/statistics crimes, like focusing on Year-over-year data from the pandemic lows. Ignorance? Bias? Fraud? I don't, but avoid this kind of garbage.
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Try to avoid chart/statistics crimes, like focusing on Year-over-year data from the pandemic lows. Ignorance? Bias? Fraud? I don't, but avoid this kind of garbage.
https://twitter.com/michael_saylor/status/1407386415760089093
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Do not focus (exclusively) on the ultra-high-end! How many 100 million Coops are there? How many $100 million ranches are in Wyoming?
Those novelty sales are anecdotes, not data. Treat them as such
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Those novelty sales are anecdotes, not data. Treat them as such
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And PUH-LEEZE do not show me the asking price as proof of anything. Any idiot can -- and will -- put an absurd aspirational price on a for-sale ad.
Show me the selling price, and the per square foot price before touting silly asks.
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Show me the selling price, and the per square foot price before touting silly asks.
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Save your bubble claims for when we have a true bubble -- not because there are lots of real estate agents or because lumber prices rose.
ritholtz.com/2021/03/not-a-…
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ritholtz.com/2021/03/not-a-…
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What should be looking at? Start with Technology
I love this commercial real estate technology market map by @nimajw + Thomvest Ventures
blog.thomvest.com/market-map-220…
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I love this commercial real estate technology market map by @nimajw + Thomvest Ventures
blog.thomvest.com/market-map-220…
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It's not just RRE but all manner of FinTech -- the impact of these firms have yet to be felt in the marketplace yet, but it is coming
cbinsights.com/research/us-re…
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cbinsights.com/research/us-re…
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I've discussed the low shortfall of inventory before, but let me show you my favorite chart on this: New Home Sales (aka Construction)
After being too high relative to population in late 1990s/2000s, post-GFC it collapsed, even as population rose.
calculatedriskblog.com/2021/06/new-ho…
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After being too high relative to population in late 1990s/2000s, post-GFC it collapsed, even as population rose.
calculatedriskblog.com/2021/06/new-ho…
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The WSJ wrote about a National Association of Realtors report.
Even assuming that their "5.5 million units shortfall" is wildly exaggerated by 2 or 3X, we are still short a few million new homes.
wsj.com/articles/u-s-h…
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Even assuming that their "5.5 million units shortfall" is wildly exaggerated by 2 or 3X, we are still short a few million new homes.
wsj.com/articles/u-s-h…
10/
Put the past two decades new construction into context (via @nimajw)
From 2000-2007, annual starts averaged 1.73M
From 2008-2019, they fell to 0.948M
And that was pre-Covid...
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From 2000-2007, annual starts averaged 1.73M
From 2008-2019, they fell to 0.948M
And that was pre-Covid...
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After the GFC, too many people were "Hating Homeownership."
It was a lot of "Recency effect" but no doubt that it contributed to the shortfall in new home construction.
ritholtz.com/2014/05/why-do…
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It was a lot of "Recency effect" but no doubt that it contributed to the shortfall in new home construction.
ritholtz.com/2014/05/why-do…
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Even in 2016, homeownership rates were at multi-decade lows
"Still a Lot of Negativity on Housing; Maybe the millennials will fix things."
bloomberg.com/opinion/articl…
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"Still a Lot of Negativity on Housing; Maybe the millennials will fix things."
bloomberg.com/opinion/articl…
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Things began to turn around soon after: There was lots of available capital & investors rotated gains from equity markets to houses
RE/FinTech was also a factor: Zillow, Trulia, RedFin + other apps all worked into the iPhone generation's buying habit: mobile.
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RE/FinTech was also a factor: Zillow, Trulia, RedFin + other apps all worked into the iPhone generation's buying habit: mobile.
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Household formation is the key to the millennial story. It fell off of a cliff post-GFC and just spiked late-pandemic.
Household formation leads (eventually) to new home purchases
yardeni.com/pub/hseholdfor…
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Household formation leads (eventually) to new home purchases
yardeni.com/pub/hseholdfor…
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The most shocking data point in this entire tweetstorm?
This real estate boom comes with HALF of the debt we saw in mid-2000s
via @BobOnMarkets
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This real estate boom comes with HALF of the debt we saw in mid-2000s
via @BobOnMarkets
https://twitter.com/BobOnMarkets/status/1412792670280368129
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Masters in Business next week is with @Mishbia15, United Wholesale Mortgage CEO $UWMC. They arethe #1 wholesale lender + #2 overall mortgage lender in the USA.
Ishbia points how conservative underwriting is today vs what we saw in the 2,000s
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Ishbia points how conservative underwriting is today vs what we saw in the 2,000s
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Low debt, constrained inventory, ultra-low rates, conservative lending practices, high household formation, 332 million vaccination doses given, substantial post-pandemic economic recovery.
That's a recipe for a booming housing market. How far it runs is anyone's guess.
/END
That's a recipe for a booming housing market. How far it runs is anyone's guess.
/END
Post script on Rents:
Check out @jonathanmiller's report on rising rents in response to the economy and return of cities.
Check out @jonathanmiller's report on rising rents in response to the economy and return of cities.
https://twitter.com/jonathanmiller/status/1413212621126447107
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