Economic Update (August 23-28, 2021)
Economic Update
(Monday, August 23, 2021)
According to the 2020 Census, the United States is increasingly multi-racial and urban.?Population growth is being driven by people of color and happening in metro areas, Census Bureau officials report. A whopping 33.8 million people identified as two or more races, up from 9 million in 2010, while people who identify as white fell by 8.6 percent. Undoubtedly, some of these changes are likely due to changes in how the Census asked people about race.?But these changes do reveal that the U.S. population is much more multi-racial, and much more racially and ethnically diverse than what we measured in the past.?The white population, meanwhile, is shrinking and aging.?The under 18 population is increasingly diverse, too.?The Census also reveals an increasingly urban concentration, showing a continued migration from the South and West and population losses in the Mississippi Delta, Appalachia, and smaller rural counties.?Meanwhile metro areas — from big cities to their surrounding suburbs — are growing. Phoenix, Arizona is the fastest-growing U.S. city, with 11.2 percent growth in the last ten years, followed by Houston, with 200,000 more people.?Overall, the U.S. grew by 7.4 percent over the last decade, down from 9.7 percent in the previous census. For more economic and related real estate news, let’s dig deeper…
Retail Sales Declined in July.?Retail sales declined 1.1% in July, nevertheless it was up 15.8% from a year ago.?But don't fret over last month’s drop.?Sales rose well above pre-COVID levels due to massive fiscal stimulus and, as that stimulus gets further in the rear-view mirror, some (continuing) downward normalization in sales should be expected.?Eight of thirteen major categories declined in July, with autos leading the way as supply issues continue to wreak havoc on car sales. Another way to look at it is that sales are up 17.5% versus February 2020 (which was pre-COVID).?"Core" sales (which exclude the most volatile categories of autos, building materials, and gas station sales), fell 0.6% in July, but are up 16.6% versus February 2020.?In other words, due to temporary government support, retail sales are running hotter than they would have in the absence of COVID, even as the level of output (real GDP) is still running lower than it would have been in the absence of COVID.?But it has not been an even recovery for all major categories, to be sure.?For instance, sporting goods stores (36.3%), non-store retailers (30.2%), and auto sales (20.1%) have all grown significantly faster than overall retail sales since February 2020.?The last category of sales to get above February 2020 levels was restaurants & bars, which finally moved into the green in April and are now up 9.1% from 17 months ago.?Nevertheless, in the months ahead, retail sales will be a battle between a number of opposing factors.?For example, rising wages, jobs and inflation will all be pumping up retail sales, while the waning of the temporary and artificial boost from "stimulus" checks along with the end to overly excessive jobless benefits will slow sales.
Housing Starts Declined in July. ?According to the Census Bureau, housing starts declined 7.0% in July (to a 1.534 million annual rate), but was up 2.5% versus a year ago. The drop in July was due to both single-family starts and multi-family starts.?In the past year, single-family starts are up 11.7% while multi-unit starts are down 15.7%.?As I have previously reported, home building has been volatile so far in 2021 due to widespread supply-chain issues and shortages of labor.?But looking at the 12-month moving average (which helps sift through that volatility), residential construction now stands at the fastest pace since 2007.?While the monthly pace of activity will ebb and flow as our recovery continues, you can expect housing starts to remain in an upward trend.?A big reason for my confidence is that builders have a huge number of permitted projects sitting in the pipeline waiting to be started.?In fact, the backlog of projects that have been authorized but not yet started remains at the highest amount since back in 1999.?Despite this, builders increased permits for new construction for the first time in four months in July, signaling an expectation that demand will remain strong in the future.?New building permits increased 2.6% in July to a 1.635 million annual rate.?Compared to a year ago, permits for single-family units are up 5.5% while permits for multi-family homes are up 6.9%.?Meanwhile, keep in mind, the US needs roughly 1.5 million housing starts per year based on population growth and scrappage (voluntary knockdowns, natural disasters, etc.).?However, we haven't built that many new homes in any calendar year since 2006.?But with plenty of future building activity in the pipeline and builders looking to boost their inventory of homes and meet consumer demand (as more Millennials finally enter the housing market), it looks likely construction in 2021 will finally cross the 1.5 million unit benchmark and then move higher in 2022.
July Foreclosure Activity Declines Slightly.?The July 2021 “Foreclosure Market Report” released by ATTOM Data Services shows there were a total of 12,483 U.S. properties with foreclosure filings?(i.e. default notices, scheduled auctions or bank repossessions), down 4 percent from a month ago, but up 40 percent from a year ago. Nationwide one in every 11,009 housing units had a foreclosure filing in July 2021. States with the highest foreclosure rates were Nevada (one in every 3,626 housing units with a foreclosure filing) and Delaware (one in every 4,206 housing units).?Among the 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in July were Atlantic City, NJ (one in every 2,290 housing units with a foreclosure filing), Macon, GA (one in every 2,853 housing units), and Champaign, IL (one in every 3,802 housing units).?Those metropolitan areas with a population greater than 1 million, with the worst foreclosure rates in July 2021 including Las Vegas, NV and Cleveland, OH.??Lenders started the foreclosure process on 6,572 properties in July, down 4 percent from last month but up 45 percent from a year ago.?States that saw the greatest monthly decrease in foreclosure starts included: North Carolina (down 50 percent); California (down 31 percent); Arizona (down 27 percent); Georgia (down 17 percent); and Illinois (down 10 percent).?Lenders repossessed 2,418 U.S. properties through completed foreclosures (REOs) in July 2021, up 5 percent from last month and up 12 percent from last year.
Investing in Farmland. Here’s an investment strategy you probably haven’t considered. According to the United States Department of Agriculture, of the 911 million acres of farmland across the U.S., 80%?is owned by landlords who don’t farm it themselves. These private landowners are making a profit by renting out their land to farmers. Investors often purchase land from farmers who have owned it for decades, but now sell because they are now asset rich and maybe cash poor.?Investments in farmland are growing across the country as people look for new ways to “grow” their money.?For example, in 2020, Bill Gates made headlines for becoming the largest private farmland owner?in the U.S (which would be a great answer to a trivia question). ?He has quietly accumulated more than 269,000?acres of farmland across 18 states in less than a decade. His farmland grows onions, carrots and even the potatoes that are used to make McDonald’s french fries.?“It’s an asset with increasing value,” American Farmland Trust CEO John Piotti says. “It has great intrinsic value and beyond that, land is a limited resource.”?The U.S. Department of Agriculture estimates that?farmland is increasingly owned by landlords who don’t farm it themselves.?Selling farmers are in a unique position.?“The economic realities for them are typically that they’ve spent their life farming,” says Holly Rippon-Butler, land campaign director at the National Young Farmers Coalition. “and now with their retirement, their equity is all in the land and tied up in selling land.” So they sell their land and retire.?“Plus young farmers are just as happy to lease the land because whether you are young or old, it’s a profitable business, right?” said Thomas Petterfy, chairman of Interactive Brokers and owner of 581,000 acres. But you don’t have to be Bill Gates to buy farmland.?Farmland is for sale all over the United States.?“You just go buy a farm and then you put that rental lease in place, you’re going to be looking at about 2.5% return on your capital,” Peoples Company President Steve Bruere says.
Tree Buffs in D.C. Help Rebuild Notre-Dame. Rick Brown and his wife, Laura, are the co-founders of?Handshouse Studio, an educational nonprofit that replicates large historical objects using the precise techniques with which they were originally built.?In April of 2019, the Cathedral of Notre-Dame de Paris, was nearly swallowed up by an inferno. An electrical short probably started the fire.?Within Notre Dame, was La forêt?(“The Forest”), a latticework constructed from over 1,300 oak trees, mostly in the 12th century. By the time it was finally extinguished, the cathedral’s twin towers and flying buttresses survived, but?la forêt?and the spire went up like the?Hindenburg.?Last year, French President Emmanuel Macron decreed that the cathedral be reconstructed just as it had been.?Dieu merci, thought traditionalists.?Brown knew immediately that he wanted to get in on the reconstruction of?la forêt, and knew just whom to call: Fran?ois Calame, the head of a group called?Charpentiers Sans Frontières (or “Carpenters Without Borders”). The group acted as a liaison between Brown and the officials at Notre-Dame. They happily sent Brown blueprints of the wooden trusses that made up the attic. Brown decided his group would focus on rebuilding truss No. 6, which stood above the choir and was one of the oldest and largest.?It will be 35 feet tall and 45 feet across. The white oaks for the truss came from a forest 200 miles southwest of D.C., in Virginia. Brown, who is also a professor emeritus at Massachusetts College of Art and Design, called on the disparate peoples of the “lumberverse” to join him. Members of the Timber Framers Guild; students from the oldest trade school in America, North Bennet Street School; and other tree people (likely to be covered in?Mortise & Tenon?magazine) all heeded his summons.?Today, Brown and his tribe are at Catholic University in Washington, D.C., with hand axes building the trusses.?In a corner of the lawn, a group clustered around a copy of a drawing from the year 1111, are animatedly debating the merits of Swedish versus Norwegian cleaving techniques.?When completed, Brown will send the truss to the French as a gesture of American goodwill. There is just one little problem. When the truss is completed, no one knows for sure whether the French will actually accept it. Why? ?Although the French are impressed that the Americans are intent in doing this, they say that at this stage “everything is so complicated, and so political, and with so many unknowns” that there is just no telling whether they can accept an overseas shipment carrying truss No. 6.?If all this labor seems crazy for a “spec” project, you don’t know tree people. These people love trees the way Hitchcock loved a blonde — they love looking at them, and then they love cutting them down and making things.
Water Supply Alert Issued for Southern California.?While local reservoirs have enough imported water for Southern Californians to weather the drought this year, the severity of water shortages throughout the West prompted the Metropolitan Water District of Southern California to declare a “water supply alert.”?The move triggers a call for a voluntary 15% reduction in water use. That reduction could help forestall further water savings moves, including restricting supplies to the 26 local water agencies served by Metropolitan and issuing fines for excessive use.?Metropolitan distributes water from the Colorado River and northern California. The decision to seek the voluntary cutback, approved by its board Tuesday, comes a day after the federal government declared a water shortage in the Colorado River for the first time in history!?The move mandates an 18% reduction of the river water for Arizona and 7% for Nevada?— as well as reductions for Mexico — beginning Jan. 1.?Other states, including California, were excluded from the federal mandate, but could be added if the water levels at Lake Mead in Nevada continue to drop. The lake is 35% full, its lowest level since the Hoover Dam was completed in 1936! ?Lake Powell, upriver of Lake Mead, is only 32% full, also a record low.?Manmade climate change is considered a key element in drier weather and warming temperatures responsible for the drought. Despite a few years of normal rainfall since 2000, scientists have said the Southwest is experiencing a?20-year mega-drought?that’s the worst in the region since at least the late 1500s.?Metropolitan heavily promoted conservation during the 2007-2009 drought, leading to long-term water savings thanks to initiatives that included drought-proof landscaping and low-flow toilets and showers. Additionally, the district has been aggressively building reservoir and aquifer storage, increasing capacity roughly 13-fold since the 1990s. While the current drought began in 2020, the district didn’t begin tapping its reserves until this year. On Jan. 1, it had a record 3.2 million acre feet in storage and expects to tap about 600,000 acre feet of that to help fulfill an anticipated 2021 demand for imported water of 1.75 million acre feet. An acre foot is enough for about nine people a year.?Metropolitan serves 19 million people in six counties in Southern California.
Gehry’s Futuristic Tower Opens in Arles France. Frank Gehry has done it again! Rising high above an ancient Roman arena in Arles, a tall, twisted tower dramatically shimmers in the sun. Frank Gehry, the 92-year-old brain behind Bilbao's Guggenheim Museum and Los Angeles' Walt Disney Concert Hall, wrapped 11,000 stainless steel panels together to create the “Tower.”?The Tower, covering a total of 49,000 square feet, creates a twisting geometric structure clad with these unique stainless-steel panels.?Reaching at 56-metre height, the Tower has 12 levels featuring several artist commissions throughout. Philippe Parreno created “Danny,” a new permanent immersive artwork using algorithmic technology, a unique ceramic wall mural by Etel Adnan covers the entire back wall of the auditorium, and a new site-specific iteration of?Olafur Eliasson’s “Take your Time,” a circular rotating mirror affixed to the ceiling, is installed above the monumental, double-helix staircase.?The Tower, which opened to the public last Saturday, is the flagship attraction of a new "creative campus" conceived by the Swiss Luma Arts Foundation that wants to offer artists a space to create, collaborate and showcase their work.?The campus is a 27-acre creative hub at the Parc des Ateliers in the city of Arles.?It will house contemporary art exhibitions, a library, and offices, while the Luma Arles campus as a whole will host conferences and live performances.?From a distance, Gehry’s structure reflects the changing lights of this town that inspired Van Gogh, capturing the whiteness of the limestone Alpilles mountain range nearby which glows a fierce orange when the sun sets.?Maja Hoffmann, a Swiss patron of the arts who created the foundation, says the Tower took seven years to build and many more years to conceive.?
Britney Spears’ Beach House Listed for Sale.?While the media has been pre-occupied with the resignation of Jamie Spears and termination of the conservatorship, Britney’s former Malibu beach house as been quietly listed for sale.??The house is famous as the location for Britney’s hit single and video “Sometimes.”?If you remember the video, you’ll remember the house.?Built in 1949, the estate consists of 4,210 square feet mina house, including 4 bedrooms, 5 bathrooms, and two guest houses.?The house featured throughout the video, where the singer surreptitiously observes her love interest (played by model?Chad Cole), can be found about eight miles up the road at 33800 Pacific Coast Highway. (Please remember this is a private home. Do not trespass or bother the residents or the property in any way.)?Situated on a towering bluff overlooking Nicholas Canyon and El Sol County beaches, the stunning “legacy property” is a sight to behold! Last sold in May 1986, the current listing?marks the first time the place has been on the market in 35 years! Owning a piece of pop history doesn’t come cheap, though! The four-bedroom estate, which is repped by Malibu realtor?Chris Cortazzo, sports a hefty $44,500,000 price tag!?But you get what you pay for, as they say. Parked at the end of a 300-foot gated driveway, the extraordinary estate is sequestered on a whopping 1.9-acre lot that boasts an incredible 131 feet of ocean frontage!?The dwelling was originally designed in 1949 by Cliff May, the architect largely considered the father of California’s ubiquitous ranch architecture.?Though “Sometimes” was shot early in Britney’s career, when the then 17-year-old was still on the cusp of superstardom, it is easy to see why 33800 PCH was pegged to play her home in the video. The place is certainly befitting of a pop princess, with or without a conservatorship!?
Graceland (Memphis, Tennessee).?Speaking of large houses, the most visited home in the United States (except for the White House), is Graceland, the house 22-year-old?Elvis Presley?bought in 1957. ?Which is amazing when you consider that Elvis died over 44 years ago (August 16, 1977).?And yet today, Graceland continues to host over 600,000 visitors a year. Angie?Marchese, Graceland’s Vice President of archives and exhibitions, calls it “a time capsule,” complete with 1970s shag carpet, purple velvet drapes and the famous “Jungle Room.” Even Presley’s grave is on the property. “When you walk through that front door, you’re literally walking into Elvis’ world,” Marchese says. The Graceland experience includes the house, a trophy building, a racquetball court, and an 80,000 square-foot exhibition space housing 1.5 million Elvis artifacts (including his gold records, guitars, studded jumpsuits, and of course, his pink Cadillac).?Marchese’s favorite item is less flashy: Presley’s wallet. “It’s got his insurance card and credit cards, a picture of his daughter Lisa, business cards people had given him—there’s even a movie ticket stub. It’s such a personal thing. Your wallet is like a diary of what your life’s about.” ?Graceland has its share of well-known visitors too, such as Bruce Springsteen, who infamously hopped the Graceland wall at 3 a.m. one morning in 1975 to try to meet Elvis. Except for Bruce, everyone else who comes to Graceland is “respectful,” says Marchese, who has worked at the mansion for 32 years. “Everyone visiting here is paying homage to Elvis; they’re here to honor the man and his extraordinary career.”
Vendors Expo Returns!?In an abundance of pandemic caution, we’ve postponed our world-famous "Real Estate Vendors Expo"?until Thursday night,?October 14, 2021. The Vendor Expo will be open from 6:30 to 7:30 pm (before the beginning of our general meeting). We'll have a collection of over 40 of the finest vendors featuring the real estate services you will need to become a successful investor. Please RSVP at www.LAREIC.com.
October General Meeting.?There will be no meeting in September.?In an abundance of caution, we are moving our first “live in-person” meeting from September 9th to?October 14?(6:30 to 9:30 pm).?And we have a very special guest to celebrate.?There aren’t many celebrities in the real estate world, but there is one very special individual who stands out.?When CNN or Bloomberg need a real estate expert, there is only one person they interview.?When CBS or NBC News need analysis of a difficult real estate issue, there is only person they call.?When CNBC or ABC News need a real estate authority on a breaking story, there is only one person they turn to.??When NPR or the Wall Street Journal need a quote from a real estate expert, there is only one person they ask.?Probably no one in the real estate industry has appeared more frequently on TV, radio, online, or in print than this guy!?Who else gets listed on Inman News’ “Top 100 Influential Real Estate Leaders” year after year??There is only one person who receives this kind of respect.?That celebrity is Rick Sharga, the number #1 authority on real estate economics, and we have him exclusively on at our October 14th meeting.?Our meeting will be held in the Grand Ballroom (2nd floor) at the Ackerman Union, UCLA, 308 Westwood Plaza.?Please RSVP at www.LAREIC.com.?
Annual Los Angeles Real Estate Grand Expo.?Our Annual Grand Expo returns on Sunday, October 31 (Halloween day), 9:00 am to 6:00 pm, a the beautiful Skirball Cultural Center.?The theme of this year’s Grand Expo is “How to Invest in a Post-Pandemic World.”?The Grand Expo is presented by the Los Angeles Real Estate Investors Club, Sam’s Real Estate Club, Ventura County Real Estate Investors Association, and Realty 411.?There will be twelve national speakers in breakout sessions, and over 70 vendors in an area the size of a football field!?Best of all, the Grand Expo will be FREE and parking is also FREE. You can RSVP and see a aprtial list of speakers and vendors at www.LAGrandExpo.com.
领英推荐
Weekly “Rubbing Elbows” Podcast.?LAREIC proudly hosts a weekly podcast, “Rubbing Elbows” staring our Director of Acquisitions, Chuck Dorfman, and his co-host, Lior Yehuda.?Every Thursday live at 8:00 pm (and streaming anytime thereafter), Chuck and Lior interview real estate professionals sharing their insights and advice.?Its real estate uncensored and unfiltered.?These guys may be unorthodox, but they know what they’re talking about.?You can enjoy “Rubbing Elbows” wherever you view podcasts (i.e. YouTube, Facebook, Google, Apple) and LAREIC.com/RubbingElbows.
This Week. Looking ahead, investors will be closely watching Covid case counts around the world, and the rapidly spreading Delta variant. They also will look for hints from Fed officials about the timing for changes in monetary policy (i.e. tapering of bond purchases). Beyond that, this will be a busy week for real estate data.?Existing Home Sales will be released today (8/23) and New Home Sales tomorrow (8/24). The core PCE Price Index, the inflation indicator favored by the Fed will come out on Friday (8/27).
?Weekly Changes:
10-year Treasuries:????????????Fell????002 bps
Dow Jones Average:??????????Fell????500 points
NASDAQ:?????????????????????????????Fell????150 points
?
Calendar:
Monday (8/23):????????Existing Home Sales
Tuesday (8/24):???????New Home Sales
Friday (8/27):????????????Core PCE
For further information, comments, and questions:
Lloyd Segal
President
Los Angeles Real Estate Investors Club
310-409-8310