Landmark Links May 29th – Creative Destruction

Koolaid Man

Quote of the Day….. “Every act of creation is first an act of destruction.” –Pablo Picasso referring to how tear-downs are spiking in the suburbs.  Small homes are getting bulldozed and mansions are going up in their place.

Economy     

First, the good news:  Americans are feeling better about their finances which is a positive because financial confidence is a critical factor in both investing and consuming habits.  However, large percentages still have little to no emergency funds on hand, let alone savings.  This lack of savings is making it harder for workers to re-locate for better economic opportunities which is a drag on productivity and wage growth.  For workers who can afford to relocate, here are the best and worst cities in which to start a career in 2015.

Commercial Real Estate  

The Search for Yield:  Developers are still confident in the multi-family market.  So much so that they are venturing out of core markets in search of yield.  In classic cyclical fashion, low yields on apartment project in primary markets are forcing investors into secondary and (gasp) tertiary markets in order to make their returns.  All of the sudden, places like Elgin, South Carolina are showing up on the radar of investors who probably couldn’t have found it on a map a couple of years ago.

Residential

No Bubble: Despite rising prices for 35 consecutive months, most economists still say that we are not in a bubble due to limited credit availability as well as a lack of new home production.  Basically, prices are going up because there just isn’t that much for sale.  Don’t look for the scarcity situation to ease muchas builders are still frustrated by lot shortages.  Still it gives me a bit of pause when articles like this start showing up basically vindicating Alan Greenspan for telling Americans to take on adjustable rate mortgages back in 2004 before he started increasing benchmark interest rates by 4.25 percentage points.  The timing is interesting since the Fed is about to start raising rates again.  It also a bit concerning when CNBC (aka Bubblevision) runs a piece called “House Flipping: 5 Tips for Big Returns.”  Time to party like its 2005, apparently.  In other news, rents are still soaring (now even faster than home prices).

Markets

The San Francisco real estate boom is reaching epic heights.  The unemployment rate is now at 3.6% and well-paying jobs abound fueled by hot VC money going into the tech industry.  Prices are up over 10% year-over-year and condo prices are going up even faster.   Good news if you are looking for a place in SF, I found one listed for under $300k.  The bad news?  It looks like this.  If you’re having trouble stomaching the increasing costs of housing in San Francisco or elsewhere, there is a startup in Europe that’s helping people turn their windows into advertisements and pays 150 Euros per month.  You don’t get any control over which ads go up though so you could end up with something like this.  I’m sure that your neighbors will love it.

Drought

On Tuesday we mentioned the one positive aspect of the drought: new technologies to save water.  Here is a negative: when busybody moralists take on water wasters via Droughtshaming (remember that word, you are going to hear it a lot), there are no winners.  Only losers.

The most ironic part of the drought might just be that water prices in CA are still quite affordable.  Here’s why.

Charts of the Day

Low lot supply = low housing starts

Fig1HousingStarts&SupplyofLots

Source: National Association of Homebuilders

WTF

Poor people are crazy, rich people are eccentric: Some idiot with too much money is going to pay over $18,000 for a lock of Mozart’s hair.

Careful what you post online: If you plan on getting your pet chameleon high, you probably shouldn’t post a video of it on Facebook.  It’s probably an even worse idea if your last name is (ironically) Blunt.

Marketing FAIL: a new Chinese hamburger restaurant in Irvine is calling itself Rainbow Bridge.  For those of you who are unaware, the Rainbow Bridge is commonly referred to as a place where pets go when they die.  Yum.

Self-Driving Car FAIL: This is basically the worst thing that could possibly happen in a self-driving car demo.

Must have been studying too hard: They may be smarter than you and make more money but there is a downside: in a survey of graduating seniors, 25% said that they never got laid, apparently Tinder isn’t popular there which might not be a bad thing after all.

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

Visit us at Landmarkcapitaladvisors.com

Landmark Links May 29th – Creative Destruction

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