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Rick Palacios Jr. Profile picture
@RickPalaciosJr
Jul 14, 2021 • 10 tweets • 4 min read • Read on X
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Doing monthly review of our macro housing/econ 350+slide deck. Ten charts grabbing my attention for July:

1/10: Percentage of banks easing credit standards for HELOCs (home equity line of credit) now highest ever post-housing induced 2007-2009 recession.
2/10: Acceleration in residential electric customers (proxy for household formations) has subsided. Ties directionally to some of the normalizing we're seeing in for-sale housing market.
3/10: Home builder labor shortages get a ton of attention lately (rightly so), but more of a structural issue than cyclical/transitory. Builders reporting elevated labor shortages goes all the way back to 2013 coming out of last housing downturn.
4/10: Single-family homes not yet started (green) = 30% of all new home inventory today. Completed homes on the other hand (red) = 11%, a record low. Speaks to tight new home standing inventory we're seeing.
5/10: Builders have 17% fewer communities to sell from compared to this time last year across top housing markets. Thesis is this should start slowly rebounding going forward, namely in 2022.
6/10: Probably need to expand the y-axis on our home value vs. income growth chart. Spread b/w the two has blown out like we've really never seen before.
7/10: Home payment to income ratio (what matters the most) still within realm of healthy. This is all about rates, so can shift quickly. Approaching late-2018 level when mortgage rates hit ~5% and market slowed. Will be interesting to see how it shakes out this time.
8/10: Saving for a down payment is still #1 hurdle for single-family renters who would prefer owning vs. renting. Need to improve credit score = #2 hurdle.
9/10: Gas prices highest since 2014. Wondering if any peak-WFH tertiary market home buyers getting called back to office (even 1-2 days a week) are having buyer's remorse given payment shock at the pump.
10/10: Yield chasing in 1 chart. Spread b/w high-yield & investment grade corporates keeps shrinking. Rereading 'Predator's Ball' currently, so maybe some bias in featuring high-yield chart this month 😉

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More from @RickPalaciosJr

Rick Palacios Jr. Profile picture
Dec 23, 2024
25% of new homes sold for under $300K in November, up from 13% in October. This is the highest % of homebuilder entry-level sales since 2021 (chart below is 3-month moving average).

The jump in sales at lower price tiers supports a few themes playing out in housing today... Image
1. Recent conversations across the single-family rental (SFR) and build-to-rent (BTR) sectors, signaling homebuilders are open to moving entry-level unsold inventory at prices they weren’t willing to consider earlier in the year (Sunbelt in particular). Many production homebuilders have these SFR and BTR groups on speed dial for pockets of volatility like we’re currently seeing.
2.  Homebuilders at entry-level prices leaning on elevated incentives in recent months, often combined with price cuts to drive sales. We’ve been picking this up consistently in our homebuilder survey, and it’s been a growing theme of late with public homebuilder earnings.
Read 5 tweets
Rick Palacios Jr. Profile picture
Dec 22, 2023
Quick primer on US housing, with a focus on single-family rental ownership nationally and locally.

To start, there are 146 million housing units in the US. Follow the charts left to right and you eventually get to 45 million rentals, 14 million of which are single-family. Image
Of those 14 million single-family rental homes across the country, here's how ownership by investor portfolio size looks.

Mom-and-pop investors own the majority of homes (80%), while institutions account for just 3% of single-family rental ownership nationally. Image
There are a handful of housing markets where institutions do own 10%+ of all single-family rental homes. Here's a summary for 20 of the more popular investor markets we monitor. Image
Read 4 tweets
Rick Palacios Jr. Profile picture
Jan 11, 2023
Home builder construction costs finally cooling. Market commentary from our December survey of builders signals relief on the horizon...
#Dallas builder: “Hard costs continue to dip on average $3K-$5K per month. We are pushing back hard to lower our average labor and material costs. They must come down to reflect lower home selling prices.”
#Denver builder: “Almost all the home builders I am talking to are working on cost reductions. They range from -5% to -8% per plan.”
Read 11 tweets
Rick Palacios Jr. Profile picture
Dec 29, 2022
Housing's had a wild up and down ride in 2022. Looking back at our report headlines, here’s how the year played out (I chose one per month to show market shifting)…
January 19th, 2022: “Prepare for Rising Rates”
February 21st, 2022: “Housing Strength Persists Despite 4% Mortgage Rates”
Read 13 tweets
Rick Palacios Jr. Profile picture
Nov 11, 2022
C-suite commentary on yesterday’s Tricon Residential earnings call alluded to single-family rental ‘shadow supply’ thesis...
“Starting to see return to normal seasonality in new lease trade-outs and moderation in overall level of rent growth.”
“One of the factors at play could be a higher supply of rental homes that we’re seeing in our markets, which might be caused by would-be home sellers opting to rent out their homes in light of challenging mortgage environment.”
Read 4 tweets
Rick Palacios Jr. Profile picture
Nov 9, 2022
Home builder commentary from our survey this month was about as negative as I've seen to date. Here's some of the market color that jumped out...
#OklahomaCity builder: "Biggest challenge is your customers who just closed their home and see you drop prices by $30,000."
#Jacksonville builder: "Buying land at the top of the market and having to pull every incentive lever to sell is not a recipe for success. We'll cut starts ~60% to 70% in 2023."
Read 13 tweets

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