Lead Story/Chart of the Day… Want to know the rental boom will end? Possibly when homeownership rates stop falling. Some thoughts from the St Louis Fed’s excellent FRED Blog:
For five hundred twenty-five thousand six hundred minutes each year, people have to live somewhere. And it looks like renting is becoming more popular.
The graph clearly shows the U.S. homeownership rate has steadily declined and that the rental vacancy rate has declined right along with it. So the two trends seem closely related, especially recently. But does a decline in homeownership mean homeowners are moving out of houses and into apartments? Not necessarily. So what is going on? At least two things. 1. The financial crisis: The recent economic downturn left many households wary of investing (or reinvesting) in a home. 2. Kids today: The younger generation seem less interested in living in the suburbs. In quite a few cities, St. Louis included, they seem to prefer to live where they work and spend leisure time. Urban commercial buildings are being converted to apartments to accommodate this increased flow of renters. The rental vacancy rate has still been declining, which means the pace of rental property construction hasn’t been fast enough to keep the rental vacancy rate steady. Be sure to check back with the FRED Blog in a few years to see where all this stabilizes.
The homeownership rate has rebounded a bit after hitting a 51-year low so this definitely bears watching.
Economy
Surprise? Lots of bond investors are buying longer duration bonds in search of yield as evidenced by a flattening yield curve. However, some of the largest and most sophisticated investors are shortening the duration of their holdings in the expectation that 10-year rates are about to rise.
Burdened: US corporations are outspending their cash flow, leading to an massive amount of corporate debt issuance. Low interest rates are keeping debt service affordable for the time being but this could become a major economic headwind if interest rates rise and labor costs increase and balance sheets are weak.
Residential
Umpteenth Times the Charm? New data from First American suggests that it’s only a matter of time until Millennials take over the housing market….if a lack of inventory doesn’t kill affordability first. (h/t Doug Jorritsma)
House of Horrors: High-end fixer-uppers have become more of a thing recently. As most of you probably already know, the Playboy mansion recently sold. It was in less than great shape. Today’s quote of the day comes from one of the interior decorators hired to fix the place up. It’s less than surprising (h/t Tom Reimers):
“It’s in horrible disrepair and the whole place smells like a urinal,” interior designer Kenneth Bordewick told TRD.
Profiles
Good Vibes: The origin story of OC’s own Wahoos Fish Tacos is as American as it gets: a trio of surfer immigrant brothers who came to America as kids and built an iconic brand from scratch.
Leaving the Back Door Open: Credit card scammers are taking advantage of lax security of online shopping sites and fraudulent purchases have soared from around $2 billion in 2011 to $4 billion today.
WTF
Cruel: The best way ever to mess with kids that you don’t like on Halloween.
You Want Fries With That? A man in Wyoming was arrested in a prostitution sting after he tried to pay a hooker with a McDonald’s Quarter Pounder and French fries.
Pit Stop: An Arizona man stopped at an In-N-Out drive through as he was getting chased by the police. He was eventually caught but at least he has good taste.
Landmark Links – A candid look at the economy, real estate, and other things sometimes related.
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