Landmark Links November 17th – Under the Hood

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Lead Story… Predicting the top of the apartment boom has become a favorite pass-time in our industry.  Starts are high, but justified due to low vacancy and ever-rising rent.  However, an notable divergence is happening inside the multi-family space: lower end rents continue to soar even as high end rents begin to stagnate.  This is happening because the vast majority of development is happening on the high end as builders need to deliver high rent units to justify the high cost of land.  Developers are focusing almost exclusively on this segment of the market.  As more and more high end units come online, look for high end rents to continue to soften as increasingly scarce lower-end product continues to get more pricey to rent with few new units on the horizon.  There is another issue at play here as well: renters of higher end units tend to rent by choice, not necessity and can afford to purchase if their life situation changes and tilts their preferences towards the stability of ownership versus the mobility of renting.  Demographic analysis indicates that this is highly likely to happen in the next few years in the Millennial generation.  In summary: developers are building at the high end because they have little choice due to high land values in populated areas while the middle class continues to get squeezed by ever-rising rents in lower and middle tier units where new construction is scarce.  In other words, it may be more productive to look for the peak in a a segment of the multi-family market rather than viewing the market as a whole.

Economics

Early Warning?  A 10% slowdown at US ports during peak shipping season has some economists concerned.

Don’t Pass Go: Bond King Jeff Gundlach of DoubleLine Capital is still calling BS on the Fed Raising rates this year.  Gundlach has been a contrarian for quite some time on yields and has predicted that the Fed wouldn’t hike this year due to economic weakness.  He’s been right so far despite being in the minority. This time? We shall see. 

Like Clockwork: Japan just went into recession.  Again.

Stockpiling: US Businesses are filling warehouses as inventories continue to build.  Good news IF consumer activity picks up, bad news if it doesn’t.  See Also: Macy’s sees trouble brewing this holiday season as a sluggish fall could lead to deep discounting.

Bouncing Back: American families may finally be getting a decent raise as demand for labor rises.

Residential

Detour: Home buyers are increasingly bypassing banks in favor of independent lenders that offer a more streamlined process often with better pricing.

Owner-Occupied: For years, foreign buyers of high end homes US homes conformed to a typical profile: they bought properties (often site-unseen) as high end vacation homes or investments.  However, more and more are buying homes primary residences as financial and societal turmoil persists overseas.

Full Time Landlords: AirBnb has created an entirely new class of real estate investor – the full time short-term landlord.  However, a lot of cities, hotel operators and neighbors are not happy about it.

Profiles

No Laughing Matter: Comedians are increasingly avoiding college campuses out of concern that hyper-sensitive, overly politically correct college students will go ape-shit if something offends them.  In other words, the Participation Trophy generation is now in college.

Higher Education: Business is smoking at Oaksterdam University, the so-called “Harvard Business School of Marijuana” in Oakland. 

Fallout: Oil theft is soaring in former fracking hot-spots as laid-off roughnecks struggle to make a living amidst downsizing.

Chart of the Day

Multi-family starts continue to rise…

but are concentrated heavily in the high end.

Housing Unit Dynamics by Income Quintiles

WTF

Jailbreak: Indonesia is debating using tigers, piranhas and crocodiles as death-row guards.  This is brilliant.

Gluten Free: A new Tumblr site called Gluten Free Museum recreates famous paintings with all wheat products removed.  Looks like someone really, really needs a hobby.

The Struggle is Real: A Massachusetts woman who identifies as a Pastafarian recently won a court case to allow her to wear a colander on her head in her driver’s license photo after citing “religious reasons.”

The Longest Yard: The NFL’s All-Time Degenerate Team is a wonder to behold.

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

Visit us at Landmarkcapitaladvisors.com

Landmark Links November 17th – Under the Hood

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