Landmark Links May 26th – Flat Broke

Greek BailoutQuote of the Day….. “This money will not be given. “It does not exist.” – Greek Interior Minister Nikos Voutsis referring to how Greece is flat broke and won’t be able to repay the IMF the $1.76 Billion it owes in June.  In other words, expect to hear a lot about the Grexit…again.

Economy     

One thing (maybe the only thing) the media got right about Millennials: There are a lot of generalizations about Millennial that have been making their way through the media since the early days of the Great Recession.  Most of them have little backing when you actually start looking at actual numbers (ie. Millennials don’t ever want to move to the suburbs and will likely never own cars).  One issue that the press has gotten right is the crippling effects of student debt and it’s negative impact on Millennial credit and borrowing capacity.  Look for this to become a larger policy issue in the coming years.  Speaking of credit, despite the ongoing recovery, Americans have far less access to credit than they did in 2005. Credit also has come back stronger in some states/regions than others, further magnifying the difference between the haves and the have nots.

Commercial Real Estate  

Hot Hotel Sector: The hotel space was one of the hardest hit during the Great Recession as people travelled less for both business and pleasure.  It’s also been one of the best performing asset classes.  RevPAR (Revenue Per Available Room) is now up 50% since the bottom in 2009.

Residential

Rising Rate Rumblings: That the Fed will raise rates is now a question of when, not if.  Most economists have peered into their crystal balls and see it happening in September.  Fed Chair Janet Yellen has indicated that it will happen this year but that it will be several years until the benchmark Fed Funds rate gets back to “normal.”  Conventional wisdom is that the eventual rise in rates will hurt the housing market by pushing up borrowing costs.  This is correct but may be an overly simplistic view of what happens when rates rise in a dynamic economy.  First off, the Fed won’t actually raise rates unless the economy is healthy and growing (which includes rising wages).  Second, (slightly) higher rates make lending more profitable for banks which could mean that credit availability, which has been low for a long time could actually rise.  Either way, it will be interesting to see if the economy is strong enough for the housing market to keep expanding when rates finally do rise.  In the meantime, home prices are climbing and new home sales beat estimates.

Markets

Want to buy a new condo in Downtown LA?  Best of luck with that.  First off you are going to have to wait until 2016 since there is literally no new inventory left.  Second, you are going to have to pay up since downtown has been booming and nearly all of the new units planned are targeting the luxury segment of the market.  In other LA news, a developer is trying to sell a 100,000 sf spec home (main residence alone is 75,000sf) in Bel Air for $500MM.  So, if you want to live in something larger than many office buildings with a 5,000sf master bathroom and a tax bill over $5MM, start scratching those lotto tickets.

Drought

The housing industry is beginning to find creative ways to make new units more water efficient in order to deal with the California drought.  An Australian company has figured out a self-contained system to recycle shower, dish, laundry and sink water so that it can be used for irrigation and flushing toilets.  It costs $10,000 per unit and KB Home is making it standard in some new projects.  Expect to see more water saving innovations in the coming months.

Charts of the Day

The Wall Street Journal put together several interactive charts covering the US housing market.  It’s very much worth checking out.

WTF

Saving Space on your Keychain: An Argentinian beer company has come up with a replacement tooth that is also a beer opener.  They’ve even partnered with a rugby league to provide replacement beer-opener teeth to players who have lost a tooth or two.  Something tells me that hockey players will like this one as well…..

Florida Crime of The Week: Is that seat taken?  Who on earth would want to ride a bus naked?

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at Landmarkcapitaladvisors.com

Landmark Links May 26th – Flat Broke

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