One Big Thing
Overload: Harvard University’s “The State of the Nation’s Housing 2021” report found, unsurprisingly that the nation’s affordable housing crisis is getting worse. What is perhaps more troubling is that current economic and market conditions indicate that there is no end in sight. Globe Street
That brings us to the $1 trillion bi-partisan infrastructure bill and an aspect of it that I do not being discussed nearly enough: its impact on an already strained housing market. We are living in an era characterized by material and labor shortages that have resulted in soaring rents and home prices. The more that these shortages persist, the harder/more expensive it will be to build, increasing upward pressure on values and rents.
Now, enter $1 trillion of new infrastructure funding into the equation that will create new demand for both labor and construction materials and what do you think will happen? IMO, it will inevitably pull both labor and materials away from the housing sector and towards infrastructure, driving costs up and making rent and home prices even more expensive.
Our infrastructure is generally an outdated mess and both sides of the aisle are correct in wanting it addressed. Over the very long term, it probably helps development – housing and otherwise – by providing better access and transportation. However, the time to inject such a large amount of capital is when there is slack in the labor and materials sectors that will have to actually execute. What we have right now is the opposite. This should at the very least be a topic of discussion and debate.
What I’m Reading
Roar: We have a new moniker for the nine Western cities experiencing the largest housing booms in the US (Boise, Spokane, Austin, Phoenix, Tucson, Colorado Springs, Salt Lake City, Ogden, and Provo): Mountain Lions. Alan Cole of Full Stack Economics wrote a terrific long form blog post about what is driving – and will likely continue to drive – growth in these markets. Spoiler alert: it’s not all about relocating Californians. Full Stack Economics Side Note: Full Stack Economics is a newly launched newsletter focused on economics, technology and public policy. It has quickly gone to the top of my reading list. You can subscribe via the link above if interested.
Dropping the Hammer: California is one step closer to eliminating single family zoning as Senate Bill 9 – which would make it legal to subdivide lots and build duplexes without local approval – advanced in the Legislature. Still no word as to whether or not the governor will sign it and he has plenty to worry about right now so not expecting a statement anytime soon. New York Times
Costly Delay: People are waiting much longer to have children than they previously did. Conventional wisdom is that older parents are in a better financial position to take care of kids. However, there are some interesting economic costs that are often overlooked here with regards to extended family:
As age of first birth rises, generations get spread out and parents get spread thin. The number of people in a family line who are in the workhorse age range declines and so they must carry more of the caregiving load.
Tailspin: Malls are still facing a wave of value reductions despite reopening. Some of the decreases in appraised value are stunning. For example, the Westfield Palm Desert Mall was valued at $212 MM in late 2014. In March, it was lowered to $65.9 million. This month, the value was reduced again – this time to $55.2 million. The borrower is unsurprisingly way underwater and not making payments. Trepp
Chart of the Day
I’m not surprised that the retired population is up substantially in both absolute and percentage terms since 2010. That being said, look how much it has increased since the pandemic. This doesn’t strike me as a backdrop supportive of strong long term inflation. Also, demographics in the rest of the world are substantially worse.
Source: @bobbyeubank
WTF
Monkey Business: A monkey-loving woman has been banned from visiting a male chimpanzee at a zoo in Antwerp, Belgium, after officials declared their relationship unhealthy for the animal’s socialization with other chimps. New York Post
Asleep at the Wheel: A man was arrested after he was found passed out in a Wendy’s drive through due to allegedly consuming three rum and coke’s because Florida. Boca News Now
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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