Landmark Links June 12th – Everybody In!


Lead Story: Quickly rising interest rates have led to a boom in mortgage apps as borrowers push to get their rates locked before they go up further.  If rates do indeed continue to rise, look for home price gains to slow in the coming months.


Case of the Missing Workers: Construction jobs, on average pay quite well.  However, they are also subject to a lot of volatility since development and construction are highly cyclical businesses.  From mid-2006 to early 2011, nearly 2.3 million construction jobs (40% of the industry) were wiped out.  It stands to reason that employees would come back to the construction profession once the industry recovered, hiring began and wages eventually rose (as they are now).  This time around, that hasn’t been the case and construction employment remains 1.3 million workers behind its peak in 2006.  US builders have boosted compensation and stepped up recruitment but are still falling far short of the workers that they need.  In fact, in a study done in 2014, the Associated General Contractors of America found that 83% of builders reported trouble filling craft-worker positions.  One popular theory is that many construction workers went to the oil and gas industry which has experienced a boom in the US due to fracking.  If the labor shortage continues, builders will be forced raise wages further (assuming that the market can handle it) and turn to investing in labor saving technologies like prefabrication.  All of that gloom aside, John Burns – one of the most respected (and typically conservative) names in the home building industry – published a piece this morning predicting a 15-year boom in residential construction. Definitely the sort of thing you want to read at the end of a busy week (unless you are short home builder stocks).

The construction industry isn’t the only one facing a short supply of workers.  Job openings in the healthcare industry hit a record high in April.

Commercial Real Estate  

Office in High Gear:  Now that the economy is back in growth mode, office construction has come back in a big way.  Here are the 8 markets with the largest office development pipelines.  Of particular interest: how is Houston going to support 14.5MM square feet of new office space (almost double the volume in Silicon Valley) if oil prices stay low?

Apartment Hunting: Good luck with that if you live in Manhattan.  Median rents are now just a shade under $4,100 per month and the vacancy rate has dropped to a microscopic 1.07% according to a new report from Citi Habitats.


HELOC Hell: HELOC delinquencies are on the rise.  HELOC’s are typically interest only for the first 10 years after which principal repayments begin.  It’s now over 10 years since the borrowing binge kicked off in 2004 and borrowers are beginning to default on their loans as the sticker shock of paying both interest and principal sets in.  Banks mostly hold HELOCs on their books rather than securitize them so they will likely bear the brunt of this.  Based on the chart below, don’t look for this issue to go away any time soon. Now some good news: The number of loans in foreclosure is now the lowest since 2007, as banks have taken advantage of rising prices and tight inventory to push so-called zombie foreclosures through the legal process and get them back on the market. Seven years after the worst of the downturn, a new study by Hart Research Associates finds that the majority of Americans still believe that the US is in a housing crisis.  The biggest area of concern is now affordability with half of respondents indicating that they are making at least one sacrifice (including not saving for retirement, taking an additional job or going into credit card debt) in the past 3 years in order to pay the mortgage or rent.  Reduction in savings due to higher rents is also cited as a major impediment to upward mobility.  There was a silver lining: 56% surveyed said that buying a home is appealing and offers long-term benefits (57% said that buying a home was less appealing and a poor investment in 2013).

Chart of the Day HELOC Hell for Borrowers as Principal payments are coming due. Source: The Wall Street Journal


Only in Florida: A shark was killed in a highway accident near Orlando.  Seriously.

Video of the Day: A 10 year old and his mom (who is overweight and has a tramp stamp) fighting a woman in a scooter (who is also overweight and has a tramp stamp) in an Indiana Walmart shampoo aisle = white trash at its finest.

Congratulations America, We Are Now THIS Fat: Pizza Hut now has a pizza with hot-dog-stuffed crust for those of us who are indecisive.  In related news, if this is true, FML.

The World’s Largest Thermometer might not be the strangest thing in Baker, CA anymore if a hotel developer has his way.  Luis Ramallo of Alien Fresh Jerky is trying to build a 31 room UFO replica hotel in what is possibly California’s most bizarre highway rest stop town.

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

Landmark Links June 12th – Everybody In!

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