Landmark Links December 21 – Barrier to Entry


Must Read: This quote from a recent BuildZoom article by Issi Romem sums up the negative feedback loop in construction costs quite nicely:

However, construction wage growth could also be part of a dangerous, self-reinforcing cycle. Rising construction costs tend to reduce the supply of new housing because they shift marginally-worthwhile residential development into the red.8 This helps raise housing costs, which in turn feeds back into construction wage growth for at least three reasons:

  • When housing prices rise, workers require greater compensation to subsist.
  • When housing prices rise and the supply of homes is smaller than it would be otherwise, it is harder for people to find suitable homes for sale (and to afford them). This creates a greater incentive for renovation, which exerts upward pressure on labor costs as suggested earlier.
  • When housing prices rise, the pool of potential home buyers becomes more financially select, which likely corresponds to higher expectations with respect to homes’ level of finish.9 Once again, this means that more renovation is bound to take place (including home-flipping), exerting even more upward pressure on labor costs.

And, higher labor costs reduce the supply of new housing. Repeat ad infinitum.

This is a good reminder that restrictive zoning is a major problem when it comes to the housing affordability crisis but it is definitely not the only one.


Staying the Course: The Fed hiked rates in a predictable fashion.  Could it come back to bite themSee Also: Jerome Powell says that he is following the data, not the marketContra: Treasury inflation forecasts continue to fall after the Fed rate hike.

Long Strange Trip: Ten years ago the Fed moved rates to zero and built up a massive balance sheet in order to counter an economic crisis.  The move changed the way that the central bank operates and now that a zero interest rate policy has been used once, it’s more than likely that it will be utilized again.

Debt Sentence: US student debt outstanding has reached a record $1.465 trillion, doubling since the Great Recession. In addition, a shocking 2.7 million borrowers owe in excess of $100k.


Big Questions: From tech to rising interest rates to the death of traditional retail, here are ten questions that real estate has to answer in 2019.

Sad Santa: Nearly vacant malls mean that a lot of Santa Clauses are not very busy this holiday season.

High Hurdle: Multi-story warehouses will continue to become more common as the demand for last mile distribution in densely populated areas keeps increasing.  However, these properties are expensive to build and operate as well as more operationally intense than traditional single story warehouses.


In the Right Direction: FHA loan limits will increase in most of the US in 2019.

Correction Territory: Single family housing starts fell more than 13% last month from a year earlier, following a sharp drop in homebuilder sentiment to the lowest level in 3 years.  John Burns now says that we are in a housing correction.

Suffocating: Housing affordability issues are already leading to a decline in total economic activity in some regions.


Pushback: Amazon is pushing its partners for changes in product packaging and quantities in an effort to weed out unprofitable items.

Fake it Till You Make It: Rising Instagram “stars” are increasingly posting fake sponsored content to make it appear as if they have more financial backers.  Don’t laugh though as this will be one of the last viable ways to make a living once the robots take over in about five years.

Branching Out: Yuppies have discovered marijuana and they like it.

Chart of the Day

Tis the Season (h/t Doug Jorritsma)

The Drunkest States In America During The December Holidays



The Hero We Deserve: An ex-NASA engineer created a fart-spray laced glitter bomb package that detonates when a porch pirate opens it.  The thing has cameras and the video is hysterical.

Marketing Genius: Fried chicken chain Popeyes is selling meals in a chicken shaped container labeled “Emotional Support Chicken” to stressed out travelers in airports during the holiday season.

Getaway: A man was being taken to a mental health facility when he carjacked an ambulance, leading to a police pursuit.

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