What I’m Reading
Flipped: Some of the most affordable rental markets in the US are about on pace to become some of the most expensive thanks to skyrocketing rents. This will eventually become a headwind to economic growth as residents in some of the most productive and quickly-growing cities will be spending more of their incomes on housing costs. While the rate of increase will undoubtedly slow, current conditions do not indicate a reversal. CNBC
Whipsaw: Half of all lumber dealers are now sitting on excess inventory. Bloomberg
Failure to Launch: From PPP to the vaccination effort, most major programs implemented by the US government in the pandemic era have followed a trend – a rocky start with much media scrutiny, followed by dramatic increases in efficiency during the roll out. A notable exception is rent relief where federal, state and local agencies are still not able to get out of their own way, imperiling both tenants and landlords. Nasdaq
Nature is Healing: Cars are depreciating again as transitory inflation pressure appear to be finally easing. Axios
Rise of the Machines: Fast-food chains are working with robotics startups to bring automation to their kitchens as labor shortages persist. Wall Street Journal
Charts of the Day
Consumer sentiment has now breached its COVID low. Investor sentiment, on the other had is sky-high.
Source: @topdowncharts
OER is substantially lagging high frequency indicators like like Zillow and Apartment List. The lag is reflective of the fact that renewing tenants are seeing much lower rent bumps than units that turn over. Zillow and Apartment list measure the former, while OER is a measure of both. As seen below, the historical relationship between the two has evaporated this year. Given that retention is currently running around 55%, the gap will eventually close. My guess: the high frequency indicators will come back to earth – trees don’t grow to the sky, after all – and OER will begin to catch up on an absolute basis. This will put upward pressure on CPI (which relies on OER as a measure of housing cost) while other transitory measures begin to normalize.
Source: Bank of America Global Research
WTF
Oops: A drunk woman who was using the laser pointer on a gun to entertain a cat accidentally shot a man. (h/t Adam Siegel) Yahoo News
Locked Up: A woman was pulled over while driving with a man in a dog cage in the back of her pickup truck because Florida. alt_driver
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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