theDirt Weekly: October 15, 2022
Everything gettin’ broke: broke tape measures, broke markets, broke records, broke people
Down and Dirty this week
Happy Late Tax Day · CPI song playing on repeat · Dirty Larry strikes back · Fannie Mae stabs housing in the heart · Train strikes (again) · Mississippi’s getting low · On an icy road to Detroit · Texas A&M RE Center Land Report · Bob Loblaw’s Law Blog
National Procrastinator’s Tax Day
To start, I wish all of my fellow procrastinators out there a very happy Tax Day. My favorite minute is the last minute, and if I can rationalize a way to put something off then I will. I am very good at this. Perhaps the world champion. But the tax returns are now off and gone and so, for a short while anyway, blessed peace can return to my soul.
Inflation’s a broken record set on repeat
The Consumer Price Index printed at 8.2% this month. I am sure that all of you are just *shocked* that inflation is still a thing. I know that I was… not. Because I go to the grocery store. Because I buy fuel. Because I work in real estate and the market is getting more broker (sic) every day due to prices getting just silly a few months ago. But somehow the professors in their ivory towers consulted the oracle and hoped that CPI would decrease more than it did. Us peasants with our boots in the Dirt chuckle at their noble ignorance.
The Dirty people know that CPI will continue to be persistently high for a while because that measurement is very backwards looking. Rent, for example, is measured every six months. From the BLS website:
Because rents for existing tenants change in line with the terms of leases and rental agreements, and many leases are for 12 months, existing tenants typically do not face price change within the 12-month period of the lease. This is called a “sticky” price. Because of this, the process used to calculate the indexes for rent and owners’ equivalent rent differs from the process used to calculate the rest of the CPI. Most prices are collected either monthly or every 2 months, but rent prices are collected every 6 months. In effect, this means price increases for shelter can sometimes take longer to appear in the CPI than in some other data sources.
And while my memory isn’t the best, I do recall real estate (and rents) skyrocketing through the last half of last year into the first half of this year. So 2+2=5 and our current inflation is 8.2%. Which actually isn’t current at all. So maybe, just maybe, our tape measures are skewed and our levels are bent. Maybe, just maybe, the Fed ought to go down to Home Depot and buy some new measuring devices. But nobles are not wont to listen to Dirty people with callouses on their hands.
Which of course means that more interest rate hikes are inbound. Which is really going to kick real estate in the groin. This should be fun.
Dirty Larry strikes back
After the CPI number was released, there was much wailing and gnashing of teeth. Markets tanked. Interest rates spiked. And then… And then!!! everything immediately flipped and shot up by 5% from its daily low (on Thursday). Holy-flippin-moly. That was quite the u-turn. Explanations and reasons-why abound. But dear reader, the real reason is because of Dirty Larry. He is driving the car and is really in charge of all markets everywhere. I wrote about him last week in Dirty Thoughts: fast cars and pretty stories. I am convinced that Larry was so pleased with my article that he got a wild hair just to prove my point. Thanks Larry.
As of this writing, markets are poised for another gain and rates set to fall, but don’t bet the farm because Larry’s been awfully squirrelly late.
*Friday afternoon update: Hah! Larry you crazy person. You fooled me again.
Et tu, Fannie?
Dear reader, even Fannie Mae, housing’s nearest and dearest friend, is turning on the housing market. She is getting ready to stab housing in the heart whilst screaming sic semper tyrannis. Beware the Ides of March, noble housing market. Beware the Ides!
Folks, friends don’t let friends make decisions based on government (or large quasi-kinda-sorta-but-not-really-governmental institutional) forecasts. Such are frequently late to the game. They are like a kid who walked into the horror movie in the middle of the murder scene: completely shocked that things turned out this way. The rest of us who’ve been watching the movie from the beginning saw it coming. Fannie (and Fed) bashing aside, when the biggest players in the housing game cave to Dirty reality, well you know things are getting really real.
I hear that train a comin’ (again)
Alright folks. Russia, Elon, and presidential flubs make great news but sometimes the important stuff gets shunted off to the side. Do you recall a few weeks back when the great railroad strike almost punched us all in the face but was averted at the last minute? Yes, well. While that can was kicked gloriously (and to much celebratory fanfare) down the road, we might be happening upon said can again. And much sooner than we’d hoped. Which is what happens when you make headlines but don’t solve underlying problems.
And so, one railroad union has already rejected the tentative agreement. And it ain’t looking good for the other unions either. From Politico:
…railroads could again be weeks away from a work stoppage that would halt 40 percent of the nation’s freight traffic, imperiling Americans’ food, drinking water and electricity supplies as well as the holiday shopping season.
Of course Politico was very astute to mention that aside from little things like food and water, the holiday shopping season would suffer. To hell with eating, give me cheap chatchkes from China!
And of course all of this will happen after midterm elections so there is no point worrying about it now because polls show that we have bigger fish to fry. But if you think the price of ground chuck is high now, just wait until the railroads stop running. You ain’t seen nothing yet.
What’s this have to do with real estate? Well, clogged supply lines are going to do us all dirty by just increasing prices even more. And anything, I mean any-damned-thing that moves prices one iota north just kicks the consumer in the pants and exacerbates what is already a problem: inflation. Folks, I think I am developing a weird inflation tick. My brain is broke.
“If this becomes a big deal, it will be a really big deal.” (Will Rogers probably said this but if not he should have).
Humor as dry as the Mississippi River
While most people are focused on the dearth of Adderall and judgements of Alex Jones, some might have forgotten about the incredible drought affecting the western parts of the US. I religiously track rainfall amounts for the ranch and in my little part of Texas we are on track for one of the worst years in over a decade (2011 being an especially bad year in our recent history). In keeping with last week’s theme of a heaping pile of a little more bad news, the drought continues and looks to continue through the winter. The climate nerds at the NOAA who study Pacific water temperatures cheerily predict yet another dry, La Niña winter:
Call it what you like—triple-dip, three-peat, three-bean salad—we are facing the third La Niña winter in a row. This is the third time in our historical record of ENSO (El Niño-Southern Oscillation, the whole El Niño and La Niña system), which dates back to 1950, that we have had three La Niña winters in a row. That’s a lot of threes! The other stretches were 1973–1976 and 1998–2001.
Now behold, reader! A drought map for good measure:
Now compare that to this map
And now, for the coup de grâce: folks, the Mississippi River is getting so low that barge traffic is having a tough time passing. Like trains, it is a little known fact and a really big deal that a large portion of US product, especially agricultural product, floats down the Mighty Mississippi. From MSN:
Repeatedly over the past week, water levels have become too low for barges to float, requiring the corps to halt maritime traffic on the river and dredge channels deep enough even for barges carrying lighter-than-normal loads. Days after a queue of stalled river traffic grew to more than 1,700 barges during emergency dredging near Vicksburg, Miss., a separate 24-hour dredging closure began Tuesday near Memphis. More dredging, which routinely costs billions of dollars a year, could be needed if barges continue to run aground.
Rail strikes, stalled barge traffic, wacky financial markets driven by a maniac, and a determined Fed with its astigmatic eye on a bent level all contribute to what could be a very interesting end to an already interesting 2022.
What does this all mean for real estate?
At the risk of sounding like a broken record: conditions continue to worsen with no relief in sight. Inflation as measured by CPI will probably continue. Actual inflation which affects everyday people the most (e.g. food, fuel) will continue. And the part of CPI that is just starting to edge down (housing, rent) is not measured well and will take a long while to shine through. So more of the same. And so then interest rate increases will follow. All of this will make things tighter for the consumer and decision-making harder for everybody. We are a credit based economy and credit has its nasty tentacles wrapped around all of our necks. The beatings will continue until morale improves.
That is, of course, unless that trickster Dirty Larry comes out of nowhere and takes a hard left turn toward Vegas. And it is always possible. One just never knows with Larry. But as of now we are all on a broken and icy road headed toward Detroit. Hope you packed a jacket.
Oh, and I found this little gem on the Twitterverse. Which is an encouraging sign on my farmland journey.
Sharing is caring
Hey y’all. Do you have someone who you really care about that desperately needs to read about Dirty Nerdy real estate stuff? How about an enemy that you truly despise with the hate of a thousand suns who absolutely needs my input every week? Love ‘em or hate ‘em, they all deserve to dish theDirt. Please do me a big ol’ Texas-sized favor and share.
Texas A&M Land Market Report
On Friday, the Real Estate Center at Texas A&M University released its quarterly report on the Texas Land Market. You can read it here. Here is one, big take-away from the report:
Prices increased by more than 21 percent statewide except in Far West Texas, where they fell substantially. However, total acres transferred declined in several regions, and total sales dropped everywhere but Far West Texas. This trend toward rising prices and declining activity suggests demand is dropping. If so, brokers may begin to find ebbing enthusiasm among potential buyers.
Keep in mind that this is data from the second quarter of this year. The Texas A&M Real Estate Center does a great job, but, like all big institutions, moves very slowly. Their information is academic and very backward-looking. I post it here for entertainment purposes only. Friends don’t let friends…
One of the reasons that I started this little newsletter was due to the complete lack of up-to-date analysis on Texas land markets. I wanted to see how prices and volumes and different markets moved across the state and in as real-time as possible. And ever since the end of the second quarter, life and the Fed came at us pretty fast. Much has changed. And Jack better be nimble and quick if he’s gonna jump over these markets without the candle lighting his pants afire. Jack would be wise to buy a paid subscription to theDirt to get Dirty Deep Dives with up-to-date info and avoid this smoldering embarrassment.
Ag Law Blog
I end this week with a hearty recommendation to subscribe and read the Texas Agriculture Law Blog put together by lawyer Tiffany Lashmet. I’ve found this blog and her companion podcast to be enormously educational and beneficial. Tiffany covers areas of agriculture and land law that you probably won’t see on any big news outlet. But as a fellow real estate nerd her info probably affects you more than any story about Euro climate activists throwing tomato soup at old paintings (as entertaining as that is). An example would be the Supreme Court hearing about the Waters of the United States and how the EPA should be able to define them (or not). I would never have known about it were it not for the Ag Law Blog’s weekly round up.
What? What did I miss?
It’s a big ol’ world out there folks and my vision is narrow. If I missed anything that you think might be important and pertain to real estate in Texas, please let me know in the comments.
Texas Land This Week.
The following information comes from LandWatch.com. (Read Data Disclaimer1)
As of October 14, 2022 there were…
13,936 acreage properties listed as Available
0.35% increase from last week
1,075 acreage properties Under Contract
Five counties with the most listings:
Grayson County - Texoma Region (275 listings)
Edwards County - Edwards Plateau West Region (255 listings)
Hunt County - Dallas Prairie Region (237 listings)
Smith County - Piney Woods North Region (221 listings)
Gillespie County - Highland Lakes Region (221 listings)
For the last 7 days there were…
591 properties newly listed and/or changed
10 properties marked as under contract
3 properties identified as Sold
Five counties with the most listing activity in the last 7 days:
Edwards County - Edwards Plateau West Region (24 listings)
Henderson County - Piney Woods North Region (16 listings)
Coryell County - Blacklands North Region (14 listings)
Hudspeth County - Trans Pecos Region (13 listings)
Montague County - Texoma Region (12 listings)
Interest Rates (Compliments of the Mortgage News Daily app for iOS and my iPhone).
Financial Markets (compliments of the MarketWatch app for iOS and my iPhone).
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. I hope you will also follow me on Twitter:
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.