What I’m Reading
Round Trip: Lumber prices have shot up to near-record levels again, doubling since mid-November. Wall Street Journal When it comes to construction, supply chain issues are not improving but rather getting progressively worse. Its difficult to see how raising the fed funds rate fixes these sort of problems.
Out of the Basement: The amount of negative yielding debt in the world is falling rapidly. After topping out at $17.8 trillion at the end of 2020, it has dropped to $6.1 trillion today. Expect this to continue to fall as central banks hike. Bloomberg One big caveat: this article is referring to nominal yields. Real yields are still negative pretty much across the globe.
Priced Out: Interest rates spikes in recent weeks have pushed us rapidly above the long-term, pre-Great Recession average payment-to-income ratio of 25%, resulting in the worst affordability levels since 2008. Calculated Risk At risk of sounding like a broken record here, the big beneficiary of the dramatic decrease in affordability, coupled with extremely low supply will be landlords.
Falling Behind: Construction employment increased in nearly two-thirds of US metros in 2021. However, job openings in construction increased nearly 30% YoY in December indicating that labor shortages are getting worse. Yardi Matrix IMO, the only way to fix this problem is a substantial increase in immigration.
Rock and a Hard Place: Owners of struggling older office properties in Manhattan are facing a conundrum – spend money on a full gut renovation at a time when office use is shrinking or allow properties to languish with swelling vacancies and declining rents. Bloomberg Neither seems very attractive at the moment, TBH.
Chart of the Day
This is about to get substantially worse.
Source: Black Knight
WTF
Making the Cut: A fight over leaf blowing resulted in a 66 year old woman being arrested for allgedly stabbing two people with a steak knife because Florida. (h/t Steve Sims) Click Orlando
Porch Pirate: Police are searching for a man dressed as ‘Captain Jack Sparrow’ for stealing packages from the front doors of homes because Florida. The Tampa Free Press
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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