What I’m Reading
Backlog: During COVID, many US courts stopped functioning for months before adopting new technologies to move cases through, albeit more slowly than before. At the same time, cases including landlord-tenant disputes, foreclosures, contract disputes, tax appeals, partnership settlements have been piling up. Experts fear that once courts are functioning at full capacity again, the backlog could take years to work though. The upside is that it could lead to an environment where more disputes are settled out of court. Bisnow
Falling Behind: The US housing market is now nearly 4 million homes short of buyer demand, according to Freddie Mac. The estimate represents a 52% rise in the nation’s home shortage compared with 2018, the first time Freddie Mac quantified the shortfall. The unexpected twist ending to the housing bubble is that it created an environment where we built so little that it resulted in years of undersupply, pushing home prices past their bubble highs. Wall Street Journal
Off to the Races: Industrial demand is once again outpacing supply and rents at the national level are now at their highest are now at their highest level on record. In addition, absorption is now on track to surpass 600 million square feet for only the second time in history according to a new report from Cushman and Wakefield. Cushman and Wakefield
Handbrake: Refinancing, which makes up roughly 60% of all mortgage activity, has slowed as rates increase. Expect this to continue even if rates plateau as many borrowers have either already refinanced at lower rates or are unwilling or unable to take advantage of current rates. This is why we saw non-bank mortgage originators rush to go public – late 2020 was likely as good as it gets. The Real Deal
Big Shift: A recent survey of Gen Z renters conducted by the National Apartment Association in partnership with Statisfacts/Apartment Ratings found a major generations shift from Millennials when it comes to housing. More than half of Gen Zers surveyed said they’ll stay put after graduating from college, with 44% saying they prefer a vibrant suburb over city life. And 43% say they want to rent single-family detached properties after graduating. Gen Z renters also believe that buying a home makes more financial sense than renting, with 58% saying that renting “feels like throwing their money away.”
The media narrative around housing from 2008-2012 when millennials were coming of age was that it was a terrible investment and that people were better off renting. That turned out to be possibly the best window in modern times to buy a house but most Millennials didn’t yet have the finances to do so. Now the media narrative is that housing is a great investment and everyone who can should buy. I’m writing this not to suggest that the market is on shaky ground – based on current demographics and financing conditions it most certainly is not. That being said, it will be interesting to see how this shift in opinion turns out over the long term. Globe Street
Snap Back: A new paper from researchers at Columbia University and NYU predicts that looked at rental growth versus home prices concluded that we will see a revival in urban rents which will likely outperform the suburbs this year as the economy reopens.
The conclusion is that remote work had a much larger impact on rents than home prices in urban areas. Overall, this makes sense because renting tends to cater to those who value mobility over stability. I would imagine that we see some mean reversion. Market Watch
Chart of the Day
We are truly in uncharted territory.
Source: @SoberLook
WTF
Got Change? Two women were arrested after trying to use an obviously counterfeit “$1 million bill” – which they claimed to have received in the mail from a church – to purchase merchandise at a Dollar General store in Tennessee. I, for one, am stunned that this scam didn’t work. The Smoking Gun
A Sucker Born Every Minute: An Indian lawyer was duped into believing that she was in a relationship with Prince Harry — and then attempted to seek legal action against the for breaking a supposed promise to marry her. Obviously this was thrown out in court and the emails turned out to be coming from a catfisher operating out of an internet cafe. The part about this story that I just can’t get over is that the woman in question is an attorney. NY Post
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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