News

Landmark Links September 10th – Disappearing Act

Must Read: According to a new report on affordable housing from the UCLA Siman Center for Real Estate, naturally occurring affordable real estate, defined as class-B and class-C housing with below market rents, is disappearing as a result of value-add investment and a lack of new affordable housing development – thanks to restrictive zoning and soaring costs.

Economy

This is Not Sustainable: The number of babies born in the US last year fell to a 32-year low.  The reason?  It’s nearly impossible to afford having kids due to the wild inflation of child care expenses, which now costs almost twice as much per year as in-state tuition for a 4-year public college.  Having children would be un-affordable for more than 90% of the state’s population, using 7% of a family’s income as the maximum outlay.

The Other Side of the Story: Today’s low interest rates could have a lot to do with technology putting downward pressure on costs.

Not Good: America’s fastest growing job – healthcare aid – pays only about $24,000 annually.

Commercial

Drip, Drip, Drip: The latest from WeWork is that there seems to be no takers at the drastically-reduced valuation of $20 billion, which means that the number is going to have to drop further if (and this is becoming a bigger “if” by the day) the company still comes public. In addition, the co-working giant is now facing an even bigger problem – talent.  Top employees go to startups and often take less salary in exchange for getting equity and a big capital event at the IPO.  WeWork has now raised around $12 billion but isn’t worth that much – therefore no pop.  Look for top employees to head for the exits once this becomes more obvious. CEO Adam Neuman effectively looting the company for $700MM while the SoftBank-fueled valuation was sky high was a major red flag here.

Hoarding: Sam Zell and Equity Group Investments are sitting on a record amount of cash and aren’t seeing anything attractive to invest in at the moment.

Dry Powder: Self storage REITs are circling acquisition opportunities as a glut of new product has caused lease-up rates to slow.

Secular Growth Story: The rise of e-commerce and evolution of the supply chain have industrial real estate owners confident despite talk of an impeding economic downturn and the ongoing trade war.

Residential

Crickets: Home bidding wars have hit an 8-year low as buyers lose confidence in the market.  See Also: Weekly mortgage refinances are falling despite lower interest rates.

Hold Out: Middle men have taken a beating in the past couple of decades as technology allows sellers to go direct to the consumer.  One notable outlier is US realtors when home sellers still pay nearly double what is customary in other developed countries.  However, that could be about to change as several lawsuits are targeting anti-competitive behavior and commission fixing where agents force sellers to agree what they will pay a buyers broker upfront.

Soon to Emerge? The Treasury Department has unveiled a partial plan to bring Fannie Mae and Freddie Mac out of conservatorship but leave a government-backed lifeline in case of another crash.  However, the plan is relatively short on details and the executive branch will probably need to go it alone as Congress is unlikely to act – especially in an election year.

Profiles

Planting the Flag: A decade ago, US banks caused a crisis.  Today, they are dominating international finance like never before thanks to a pullback from European rivals.

Told Ya So: A new study published in the British Medical Journal found that vegan and vegetarian diets may increase the risk of a stroke.

Round Trip: Cord cutting and un-bunding has been all the rage in entertainment over the past few years.  However, enough platforms are creating original content now that re-bundling will be necessary.

Chart of the Day

Older home owners are increasingly opting for the mobility of renting over the stability of owning.

renters by age

Source: John Burns Real Estate Consulting

WTF

Golden Shower: An inmate awaiting sentencing for attempted murder doused a prosecutor with urine because Florida.

Collateral Damage: An activist who goes by the name “Mythical Mia” on social media ‘rescued’ 16 rabbits from a farm but caused the death of nearly 100 more in the process because Vegans.

I Thought That This Was America? A bank accidentally transferred $120k into a couple’s  bank account and the couple is now facing felony charges for spending it.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

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