Landmark Links March 18th -The Biggest Loser


Lead Story…. The spring selling season is upon us and traffic from potential home buyers is rising once again.  However, surging interest may not translate to a big jump in sales because one key group is losing out: first time buyers.  Inventory is up over 10.9% in January for homes over $250k.  However, inventory was actually DOWN 8.2% for starter homes.  In addition, entry level homes made of up 27.7% of the market’s inventory through February this year, the lowest since 2012.  There is ultimately only one way to solve this problem: build more entry level homes.


Taking the Plunge: American’s perception of the economy has gotten substantially worse over the past three months despite the fact that the economy isn’t much different than it was in December.  See Also: The Fed just dialed back the pace of future rate hikes.

Subprime Redux: Defaults are beginning to rear their ugly heads in the subprime auto lending space, spurring concerns about underwriting standards that mirror the housing debacle.  But See: Subprime auto loans are NOT like subprime mortgages for a few key reasons.

It’s Not That Complicated: The US Dollar is at it’s lowest level in 8 months as the market digests the Fed’s slower rate increase forecast so it’s no surprise that oil has rebounded recently.  But See: If oil prices have bottomed, the top might not be that far off either as higher prices have shale drillers poised to re-enter the market, increasing supply and keeping a lid on prices.


Size Matters: Rental communities typically thrive in walkable neighborhoods with plenty of amenities nearby and cities are increasingly requiring more ground floor retail as a condition of approval for new multifamily projects in order to create a community feel. Developers often think that having a retail amenity will increase rents but scale is often problematic.  In reality, a few thousand square feet of retail space in a 300 unit building does little to nothing to increase apartment rents and the businesses that lease that space can’t make ends meet if their only patrons are building tenants.   In addition, if the building isn’t in a vibrant commercial district with foot traffic, the spaces can be very difficult to lease often leading to ground floor ghost towns in fully occupied apartment buildings.

Reprieve: The Fed’s decision to dial back future rate increases was a welcome reprieve for CRE borrowers in light an increasingly fickle lending environment.


Solid Report:  Home starts came in above consensus in February and prior months were revised up. Bill McBride at Calculated Risk did his usually terrific job of parsing the data and found that “the key take away from the report is that multi-family growth is slowing, and single family growth is ongoing”  He added that “I think most of the growth in multi-family starts is probably behind us – in fact multi-family starts might have peaked in June 2015 (at 510 thousand SAAR) – although I expect solid multi-family starts for a few more years (based on demographics),” citing my new favorite chart:

I agree with the above with two important caveats: 1) There is still a ton of demand for apartments at the entry level as little has been built in that segment and 2) The demand for rentals in the coming years could very well be driven by downsizing boomers looking for higher end product as opposed to the Millennial demographic bulge (which will likely begin to favor buying) going forward.

Taking Matters into Their Own Hands: Runaway rents have venture capital looking for an answer for affordable housing.  Their latest idea: co-living, which is basically a dorm for adults where Millennials pay by the bed to live in some of America’s most expensive cities.

No Easy Way Out: An aging workforce, declining immigration, an improving economy in Mexico, too few female workers and a failure to attract Millennials have led to a labor shortage that is having a negative impact on the construction and development industries.  Home Advisor’s Insights Forum recently hosted an experts panel that provided four new strategies for the industry to use in order to regain some ground.


Scam: Auditors have discovered that Nigeria’s state owned oil company is missing $16 billion in revenue that was supposed to go to the government in 2014.  Rumors that an elderly state oil company worker with an AOL account wired it to a Nigerian prince via an email solicitation have yet to be confirmed.  (h/t Darren Fancher)

The Nino: The much-anticipated Godzilla El Nino has been a bust in Southern California but has been dropping buckets of much-needed rain and snow from Northern California to Seattle, building up the snow-pack and filling major reservoirs in the process.  So, is the drought finally over?  It’s all a matter of who you ask.  See Also: Beverly Hills’ crackdown on water wasting celebrity “environmentalist” hypocrites is working.

Going to Be Yuge? Despite early failures like Google Glass, Augmented Reality or AR is making headway and attracting large VC investments.  According to Goldman Sachs, it could be the next big thing.

Digging Deep: The commodity rout hasn’t stopped miners from digging over 7,000 feet into the ground outside of Phoenix to build the largest copper mine in the US.  Here’s the fascinating story of how and why they are doing it.

Chart of the Day



See You Later, Alligator: A woman is fighting to keep a 125-pound, 6-foot long alligator that wears clothes and rides on the back of a motorcycle as a house pet.  Because, Florida.

Think You’re Having a Bad Day? At least you’re not former Subway mascot and current convicted child molester Jared Fogle who got pummeled in prison by a 60-year old inmate.

Travel Advisory: What I’m about to write should be blatantly obvious to anyone with an IQ higher than a turnip: the next time you decide to go on a vacation, please for the love of God, DO NOT GO TO NORTH KOREA….unless you like hard labor, then you should go for it.

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