IYKYK 10.7 Recession Edition

"It's a recession, everybody broke

So I just came back to give everybody hope

Just looking out for my folk given the whole nine

Yeah you ain't got it now so you keep the whole nine"

-Jeezy, Young, 2008-

It's been just about 14 years since The Recession (arguably the timeliest named album ever) dropped 10 days before Lehman's Implosion. I had just started grad school at the MIT Center for Real Estate, and boy, those were some wild times. The big question today is whether these are fina be some wild times too. I tend to veer away from predictions but here's what I'm seeing and looking at at:

Mark Zandi of Moody's tells NMHC Fall Meeting "No Recession"

"Too many important key metrics are signaling positively for the US economy and “we’re not even close” to being in a recession right now,” Mark Zandi, chief economist, Moody’s, shared during National Multifamily Housing Council’s 2022 Fall Meeting in Washington. I attended the conference and while Mark may be spot on as it relates to job and income numbers, he admitted the Fed is not telling big banks not to do construction lending...but they're kinda telling the big banks not to do construction lending. Here's a copy of the slides.

Housing will drop. How much and where is the question.

You can't buy the same house with 6.5% debt you could with 3% debt. That's just a fact. While everyone has a different calculator here, the band of price drops through 2023 seems to be in the 7.8-12% range nationally. That means nothing because all housing markets are local. Here's CoreLogic's latest prediction:

Moody's recently downgraded a number of housing markets to higher risk of repricing into the negative 25-30% range . Before you get your grave-dancing shoes on, keep in mind that while there are fewer buyers about to compete with, there's also been a pretty dramatic pullback in listings. According to Realtor.com, New listings–a measure of sellers putting homes up for sale–were again down, dropping 17% from one year ago.?This week marks the thirteenth straight week of year over year declines in the number of new listings coming up for sale. So you have a slowdown in new home starts, record home equity and a relatively healthy homeowner pool with low-interest mortgage debt who can't trade into anything. The real losers here aren't likely to be those homeowners. It's the industries that are transaction based: real estate agents, title companies, construction and renovation. Unless another shoe drops, we may just not see bargain basement prices, especially in supply constrained markets like DC.

Land prices gotta chill

This is pretty much anecdotal because there's not enough closed transaction information to be really rigorous here, but expect development sites and land to drop precipitously. I talked to a buddy at a major development shop in the Mid-Atlantic this week and he told me he's both retrading and has been retraded on pretty much everything in his pipeline. He passed on every deal I had because he doesn't really have good visibility into pricing right now and his debt pool just got way more expensive so for him, tertiary and emerging neighborhoods are out. I'm also seeing a ton of "back on market" and "price improved" emails in urban infill sites. Also seeing a ton of projects looking to sell once they have permits or pre-delivery. Takeway here seems to be the pendulum has swung from the people controlling the dirt having all the power to the people with cash having their choice of options.

Meta rescinds hiring, gives back $110 Million lease to landlord

First:

Second:

The prevailing wisdom heretofore had been that if you had a FAANG company as an anchor tenant in a Class A office space, you were pretty much immune to the rest of the death and destruction in the office market. Welp.

Looking for Venture Funding?

Venture funding for the third quarter of 2022 totaled $81 billion, down by $90 billion (53%) year over year and by $40 billion (33%) quarter over quarter, according to a Crunchbase News analysis . Definitely going to be a ton of top-tier tech talent available in the short-term but the upside is that with a ton of record raises in the past few quarters, there technically is a bunch of capital that needs to be deployed, assuming everyone answers their capital calls.

Speaking of available funding, Amazon has launched a $150 Million fund to invest in Minority owned accelerators and VC firms. Find out more here .

That's all I got. Enjoy the weekend. If you're in DC, don't forget The Halcyon Awards is coming up on October 20. Buy your ticket here. And if you need a last minute date idea to support a great cause, Flock DC's 7th annual Casino Night is tonight. Get your tickets here .