What I’m Reading
Air Bag: Americans have something that they usually lack heading into a recession: a lot of cash. Federal Reserve data show that as of the end of the first quarter, U.S. households held $17.9 trillion in cash and cash equivalents, up a bit from the fourth quarter and much higher than the $13.7 trillion they had at the end of the first quarter of 2020 – and its up substantially across the wealth distribution curve. Wall Street Journal
Double Edged Sword: The Fed is raising interest rates aggressively to bring down inflation. However, it will also crush investment, which will likely sew the seeds of future shortages as demand recovers quicker than supply can. This is the double edged sword in the housing market right now: with pricing where it is, we need low rates for builders to build more but those same low rates will cause homes to appreciate at a high rate. The American Prospect
Staying Power: With mortgage rates increasing they way that they have been, its reasonable to expect that homebuilders would see a large increase in cancellation rates. Cancellations have remained historically low but are likely to increase as time goes on. Calculated Risk
The Great Migration: A recent report from Freddie Mac confirms what we have been seeing in homebuilder migration patterns. The pandemic amplified existing urban de-concentration by threefold from large, expensive metro areas to smaller, more affordable destinations. The data also shows that in fast-growing metro areas, the continued shortage of housing and high house-price-to-income ratios eventually lead to increased out-migration as homebuyers seek more affordable destinations. Freddie Mac
Drawing Even: CBD and suburban office vacancies are the same for the first time as the former lags and the latter gains. Globe Street
Charts of the Day
Inflation indicators are starting to roll over. 5-year breakevens are at YTD lows:
Source: Conor Sen
Commodities are falling despite major supply constraints. Here’s copper, which is now down YoY.
Source: Bloomberg
And rate hike expectations for Q1 2023 have fallen off a cliff over the past two weeks.
Source: Bloomberg
WTF
How’d That Get There: A man who was searching a vacant lot for his escaped chicken instead found human remains because Florida. Local 10
Special Delivery: A man called the police after 27 grams of meth were delivered to his home via UPS because Florida. ABC Action News
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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