The Dirt Weekly 2.0
I sent an email to subscribers this Monday celebrating the 1-month-aversary of The Dirt. This after spending the weekend reflecting on what I wrote over the last month and what I want The Dirt to be. I love to nerd out on economics, markets, and real estate. But I’ve decided that I want The Dirt Weekly to be a condensed source of current events and trends and how it all relates to Texas real estate and land. I will still write essays and bloviate about economics and real estate but will relegate those to Dirty Deep Dives. Said Dives will be paid content and will be a separate subscription. It will be very wordy, very nerdy, and very Dirty. But here at the The Dirt Weekly, every week (mostly) and for $free.fifty-free, you will get…
The Down and Dirty
As it has been for a while now, the most real estate worthy news is inflation. All eyes this week were on the Consumer Price Index report. It was… not good.
Prices are rising 8.3% year over year. Looking at the breakdown below, we can see that consumers are being strangled by rising prices.
After the report, the stock market subsequently went the way of the Titanic. So did the bond market. The rate on the 10-year Treasury is, at the time of this writing, 3.45%. In January it was 1.63%. The headline average rate for 30-year fixed mortgages rose to 6.33%. In January the average rate was 2.65%. The velocity of these increases over such a short period of time is extraordinary (which makes for easy news but hard times). Which us brings us to Uncle Fed. Just what will he do this time?
The Federal Open Market Committee (FOMC: the people at the Fed who decide what to charge banks to borrow money) meets on September 21. Consensus is that they will hike rates another 0.75%. The rubric which guides their decision is inflation which is measured by the aforementioned Consumer Price Index (CPI). At this point, at least a few more rate hikes appear certain. The questions now are:
How long will current inflation rates persist?
How high will the Fed hike rates to combat it?
Will the Fed settle for inflation rates above 2% if the resulting recession cuts too deep?
My intuition is that this will all linger a lot longer than we care to hope or dare to dream. Real estate, being primarily credit driven, will bear the brunt of rising rates. It already is.
Inflation takes many forms:
Pink Slips
Believe what you will about Government, ahem… Goldman Sachs but they are not stupid. While I take everything and anything they say with a grain of salt, I put a lot of weight in what they do. My thesis remains that massive layoffs would be the catalyst for a housing crash. When I read blurbs like the tweet below, I always wonder what GS knows that I don’t (which is quite a bit). I also believe that they are ahead of the game most of the time.
On Thursday, FedEx followed suit and announced office closures, a hiring freeze, and grounded aircraft.
Which brings me to the strange question of: is there such a thing as a recession with high employment? I think the answer is: sure, why not? A recession is a decrease in economic activity, not necessarily employment. We like to measure (economists are just obsessed with measuring every-damned-thing) recessions by declines in GDP. While I am looking for increased layoffs and unemployment as the traditional symptoms of a recession, I think it is very possible to be dragging as an economy while most people still have jobs. What if employment remains stable but Average Joe still gets gut-punched by stagnant wages in the face of tighter budgets and increasing inflation. What if Average Joe, thus squeezed like a lemon into a Topo Chico, then stops spending money on Chinese knick-knacks on Amazon. Sounds reasonable, right? Full employment recession. It’s 2022 and anything goes.
I hear that train a comin’…
Maybe it’s just my tunnel vision, but I did not see many talking heads, you know, talking about the looming railroad strike until Wednesday. Then it was all over the news for about 5 minutes. Then the White House announced an agreement. Then poof - gone. Folks, this averted train strike (assuming it remains averted) is like the asteroid that passes within 3 feet of earth and no one knows about their brush with oblivion. Average Joe has no clue how much of our nation’s supply chain is run via rail. If we do indeed see a strike, look forward to massive repercussions in our supply chains. Amazon Prime might go from 2-day to 2-month to 2-year delivery. Look for uhhh (checks notes)… yep, empty shelves and higher prices.
This week in Dirty Deep Dives
I went down a rabbit hole with Google Trends and discovered some very interesting and very consistent annual patterns from Google users searching for the phrase ‘Texas Land for Sale’. I also found that searches for that term are near all-time lows. Read more below. In the Deep Dive chute is a look at real estate affordability in terms of historic mortgage rates, prices, and incomes. In the works is a state-wide price study that is tentatively titled: Where all the cheap land at (sic)?
Strong Dollars and Foreign Buyers
I consider myself an epic economics nerd (say that 3 times fast) with strong opinions on the nature of money and exchange. But the exchange of foreign currencies (Fx) is a subject that still twists my brain from time to time. The bottom line is that the US dollar has increased in strength relative to other currencies. For those not in tune with Fx nerdery, you might be shocked that the dollar is doing so well in light of our current economic plight. The best way to explain why is the analogy of a bunch of boats sinking: the USS Economy might be a sinking ship, but it is sinking slower than the other boats so, relatively speaking, the dollar is the place to be.
Strong dollars mean that foreign buyers who must exchange their own currencies for ours can’t get as much bang for their buck. And since Texas land has been historically so popular with foreign buyers (see Tweets below for links), I’ve been wondering if the foreign buyer pool has been shrinking. I don’t have the answer for this yet but am looking for one. If I can find an answer it will be the subject of a future Deep Dive. For now, it’s just food for thought.
A word from our sponsor…
This publication is sponsored and heavily supported by the phenomenal land professionals at the Grand Land Company. I am proud to be included in their ranks as a Realtor and land specialist.
Texas Land This Week.
The following information comes from LandWatch.com1. As of September 15, 2022 there were…
13,623 acreage properties listed as Available
1,128 acreage properties Under Contract
Five counties with the most listings:
Grayson County - Texoma Region (271 listings)
Hunt County - Dallas Prairie Region (258 listings)
Edwards County - Edwards Plateau West Region (229 listings)
Van Zandt County - Dallas Prairie Region (219 listings)
Smith County - Piney Woods North Region (219 listings)
Price per acre trends for these five counties:
For the last 7 days there were…
718 properties listed or changed
10 properties marked as under contract
1 property identified as Sold
Five counties with the most listing activity in the last 7 days:
Gillespie County - Highland Lakes Region (21 listings added or changed)
Van Zandt County - Dallas Prairie Region (18 listings added or changed)
Henderson County - Piney Woods North Region (14 listings added or changed)
Edwards County - Edwards Plateau West Region (14 listings added or changed)
Fannin County - Texoma Region (13 listings added or changed)
Price Trends for these five counties:
Important News from the Twitt-a-verse.
Interest Rates (Compliments of the Mortgage News Daily app for iOS and my iPhone).
I pay a lot of attention to interest rates. You should too. Love it or hate it, agree or disagree, the cold hard fact is that we exist in an economy moved by credit. Wholesale, retail, national, personal: almost every single financial decision is informed by credit and rates in some way.
Financial Markets (compliments of the MarketWatch app for iOS and my iPhone).
Stuff about Texas.
Do yourself a favor and follow the link below. The story of Enrique Esparza is awesome.
The Dirt Recommends.
I highly recommend the song Cover Me Up by Jason Isbell. KOKE-FM in Austin played him one fine day as I drove into the driveway. It was so good that I sat and listened until the song was over. He’s a very talented singer, and I am still getting to know him.
Where I get my information:
An analyst’s analysis is only as good as the information they possess. As the old programming saying goes: garbage in-garbage out. The following is a list of my sources…
I follow a bunch of smart people on Twitter. A sample is represented above. You may also follow me on Twitter:
The Amazing Realtors with the Grand Land Company
LandWatch.com and LandsofTexas.com
MarketWatch App (market quotes and data)
FRED: Federal Reserve Economic Data, Federal Reserve Bank of St. Louis
North Texas Real Estate Information System and Heartland Realtors
Houston Association of Realtors
The information is based on properties that are greater than 10 acres and which I refer to as ‘acreage properties’. This information is single source. Which means that this is NOT an exhaustive list of all properties available and sold everywhere in the Great State of Texas. Texas is a non-disclosure state and is therefore a Dark Market. This means that there are a great deal of data that are hidden, dispersed, not allowed to be shared publicly, or just plain unavailable. The following information is for reference and entertainment purposes only.
Very informative. I like how you gave a big picture view of the economy and how that can impact real estate.
I am not seeing much movement in land / home prices here in Wise County. Tons of homes under construction, though! Should be interesting.
I am not a professional. Would I benefit from your paid subscription?
Thank you for The Dirt!