Morning Report: Inflation-adjusted land prices still below bubble levels

Posted on September 5, 2018 by Brent Nyitray

Vital Statistics:

Last Change
S&P futures 2889 -9
Eurostoxx index 376.86 -2.5
Oil (WTI) 68.97 -0.89
10 year government bond yield 2.88%
30 year fixed rate mortgage 4.56%

Stocks are lower this morning on overseas weakness. Bonds and MBS are up.

Yesterday was a bit of a milestone as the 1 month T-bill briefly cracked the 2% level. Farewell, zero bound.

Tropical Storm Gordon is hitting the Gulf Coast. Oil prices have softened as the storm looks to be weaker than expected. We can still expect to see flooding issues and servicers should be prepared for an uptick in delinquencies. Things to know about your insurance if you are in the storm’s path.

Not much in the way of data today, but we have a lot of Fed-speak.

Emerging markets are getting slammed as a combination of central bank tightening, trade woes, and currency issues are pushing the asset class down. The flight to quality trade should support bond prices and help push yields lower.

Like Freddie Kreuger, government shutdown threats just keep returning. Congressional Republicans are looking to wrap up funding by October 1. Controversial issues like funding the wall would likely get pushed until after the election. As far as shutdowns go, the markets generally do not care, but originators need to remember that things like tax transcripts were unavailable the last time we shut down.

Mortgage applications fell 0.1% last week as purchases increased 1% and refis fell 1%. Rates increased about 2 basis points.

Same store sales rose 6.5%, yet another indication that the back-to-school shopping season was strong. As goes BTS, so goes the holiday season, meaning growth in Q4 should be strong. Note the Atlanta Fed raised their Q3 GDP estimate to 4.7%. Consumption is 70% of GDP.

Wells is out with a call for a 3.2% 10-year yield by the end of the year. A combination of higher deficits, lower trade deficits, and the expiration of a tax provision will lower demand in the face of rising supply. With strong spending bolstering the economy and a tight labor market, the Fed may try and squeeze in an extra rate hike to provide more breathing room in case the economy rolls over.

The September Fed Funds futures are at 99% chance of a rate hike, and the Dec futures are at a 70% chance of another.

Single-family lot prices reached a record level last year, however if you adjust for inflation, they are below the peak. Note however that lot sizes have been falling, and I don’t think this analysis corrects for that. For example, the typical lot size in the Northeast is 0.4 acres, and the typical price is $128k, which amounts to $320k an acre. On the Left Coast, the average lot size is .15 acres and the average price is $84k, which works out to be $560k an acre. Even if you correct for the declining lot size, we still aren’t back to peak levels in inflation-adjusted land prices. Builders constantly mention that land availability is a constraint on building, but this analysis shows that things were worse during the bubble years.

Filed under: Economy, Morning Report |

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71 Responses

  1. Brent Nyitray, on September 5, 2018 at 11:29 am said:

    Alex Jones vs. Rubio

    https://www.pscp.tv/w/1LyxBQyRWopJN

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  2. Let the mutherfuker burn!, on September 5, 2018 at 12:59 pm said:

    lol

    https://twitter.com/ArthurSchwartz/status/1037133170624397312

    I think the Weiner saga would have been the only upside to a Hillary Clinton administration.

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    • Brent Nyitray, on September 5, 2018 at 1:29 pm said:

      I wonder if it bothers Nike that everyone is doing memes from their ad campaign. I guess viral-ness has been achieved albeit for the wrong reasons.

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      • Kevin S. Willis, on September 5, 2018 at 2:00 pm said:

        It might bother them.

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      • jnc4p, on September 5, 2018 at 6:11 pm said:

        “I wonder if it bothers Nike that everyone is doing memes from their ad campaign.”

        No, that means it worked.

        The Nike campaign is exactly the sort of thing that Don Draper would have come up with after one of his sabbaticals.

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        • ScottC, on September 5, 2018 at 7:02 pm said:

          jnc:

          The Nike campaign is exactly the sort of thing that Don Draper would have come up with after one of his sabbaticals.

          You could be right. It almost has the sense of deliberate trolling, just to stir controversy and get headlines. And they probably think that the demographics of their customers are in favor of supporting the Kneeler. I would love it if they were wrong and sales plummeted. I can’t stand corporate SJW virtue signaliing.

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        • jnc4p, on September 5, 2018 at 8:40 pm said:

          They know that for one side “the personal is political” and the other side buys shoes based on economics and performance. So it’s a win/win.

          I see it as an incredibly cynical act, akin to turning Che T-shirts into a fashion statement.

          The real Socialists/Marxists will hate Nike for this because yet again, capitalism demonstrates that there’s nothing that it can’t co-opt to make profit.

          They’ve just hijacked Black Lives Matter to sell shoes right in front of everyone’s eyes, and Colin Kaepernick sold out to corporate America and is getting applauded for it.

          It’s genius.

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  8. Kevin S. Willis, on September 5, 2018 at 2:09 pm said:

    I could go on all day. Terrible campaign for so many reasons, but the meme-worthiness of it in a negative way is certainly one of them.

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  9. Kevin S. Willis, on September 5, 2018 at 2:11 pm said:

    Also the people setting fire to their shoes come across like idiots. That has to be mostly trolling and a handful of nuts.

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  10. Brent Nyitray, on September 5, 2018 at 2:18 pm said:

    This is hilarious

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  11. Brent Nyitray, on September 5, 2018 at 2:32 pm said:

    How can the left possibly lose?

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  12. Brent Nyitray, on September 5, 2018 at 3:13 pm said:

    The Resistance is in the WH

    I read this article and nodded my head – DJT sounds totally like someone I used to work for…

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    • ScottC, on September 5, 2018 at 3:34 pm said:

      So we will do what we can to steer the administration in the right direction until — one way or another — it’s over.

      That “one way or another” sounds like a rather ominous invitation.

      Liked by 1 person

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    • Kevin S. Willis, on September 6, 2018 at 3:01 pm said:

      and make people on the left look like conspiracy freaks

      If it looks like a duck, and quacks like a duck, and walks like a duck then . . . well, Occam’s razor would suggest the simplest answer is that it is, in fact, a duck.

      Those people are conspiracy freaks. They are falling for gags not dreamed up by the GOP or Trump but by mega-trolls on 4chan. Same with the milk gag. It’s all BS, being fomented not by white-power acolytes but alt-right trolls that want to make lefties look stupid and who have no goal in life but to drink sweet, sweet liberal tears (like McWing!), and a large portion of them blithely cooperate.

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      • Michigoose, on September 6, 2018 at 9:16 pm said:

        My theory is that she did it to troll Lefties.

        Having said that, the juvenile mindset of a person who is sitting behind a person appearing at a SCOTUS nomination hearing before the Senate Judicial Committee who would be so childish to do that tells me everything that I need to know about her.

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  15. ScottC, on September 6, 2018 at 7:08 am said:

    Mark:

    Thought you might be interested. I haven’t listened to it myself yet, but Jonathon Haidt was interviewed yesterday on The Federalist Radio Hour.

    http://thefederalist.com/2018/09/05/cultural-trends-created-coddling-american-mind/

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    • markinaustin, on September 6, 2018 at 9:14 am said:

      Scott – thanks for the link.

      Now for something completely different:
      =================================
      Regardless of my disdain for DJT, I don’t think a soft coup by subordinates is something to be encouraged.

      When subordinates disagree with the boss on a matter of principal they should make their case to the boss. They should move on from that or quit, if the boss pays no attention.

      When subordinates think the boss is crazy dangerous they should go to his superiors, if any. Here that would mean either going public to the American people or to Congress or by engaging the VP, SecState, SecDef, TreasurySec, and AG to call a 25th A. meeting. Surely anonymity is not a good point in favor of the complainant who tries to do the right thing.

      We had a soft coup with Mrs. Wilson 98 years ago but the 25thA is supposed to remove that from the playing field.

      There is nothing truly new in the anonymous op-ed unless it is the report that early on some insiders were talking about the 25thA.

      I have mixed emotions – if someone kept us out of war or martial law by removing a bill from the POTUS’s desk, great – but as a lawyer I can’t condone it even as I may think it was useful. DJT was elected. The nation elected a con-artist. His aides may try to keep him on the rails by persuasion and even by selective reporting [which must always occur for time constraints alone and always depends on the good faith of the subordinates], but not by removing bills from his desk. There has to be a line and there is no excuse for crossing it since the 25thA was adopted.

      Or so I think.
      ==============================================
      As I understand it, the Brit model of permanent job protected government workers goes all the way up to the most senior unelected officials. Thus their civil service performs jobs the US puts into the hands of appointees. For another example, regional prosecutors in the UK are chosen by rotation out of the bar, and not by each incoming PM. Maybe we could discuss that system for the future, but it is not OUR system.

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      • ScottC, on September 6, 2018 at 9:22 am said:

        Interesting take on the NYT letter:

        https://pjmedia.com/michaelledeen/anonymous-speaks/

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        • markinaustin, on September 6, 2018 at 9:36 am said:

          Scott, do you think the PJMedia article assumes that Anonymous is not a DJT appointee but a protected civil service one? I assume she is a DJT appointee [and I am using “she” because I think that Anonymous is Kelly Ann Conaway].

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        • ScottC, on September 6, 2018 at 9:58 am said:

          Mark:

          do you think the PJMedia article assumes that Anonymous is not a DJT appointee but a protected civil service one?

          Not necessarily. The author describes Trump personnel policy as “a disaster” where many administration jobs have either been given to anti-Trump critics or left to Obama holdovers. That suggests to me that he is talking about positions other than protected civil service positions.

          I am using “she” because I think that Anonymous is Kelly Ann Conaway

          That would really surprise me, as she has always struck me as pretty serious Trump loyalist. But it could be.

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      • markinaustin, on September 6, 2018 at 9:27 am said:

        Outside the WH, where senior officials have sworn their allegiance to the Constitution, there has always been more leeway. If you told me that the JCoS, or the AG, or the SecDef, or the SecState or the Security chiefs were not on the same page as DJT I would not count that as an insurrection b/c their loyalty is to the Constitution.

        Nowhere is this idea more clear than in the UCMJ where failure to follow a lawful order is an offense – but failure to follow an unlawful one is not. That applies as a defense at a CM even to enlistees who DON’T swear allegiance to the Constitution, unlike their officers, who do.

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      • Kevin S. Willis, on September 6, 2018 at 2:54 pm said:

        @markinaustin: I have mixed emotions – if someone kept us out of war or martial law by removing a bill from the POTUS’s desk, great

        Ultimately, that would have be a more overt betrayal, but I get it. However, I think in most hierarchies there’s some level of trying-to-fix-what-the-boss-got-wrong. This particular guy is just wanting to pat himself on the back for it in the NYT.

        Not to be too cynical, but this is likely a move to benefit him more than anything else.

        Otherwise, I would expect staff to work at angles to their boss’s wishes, and sometimes against them (especially if they don’t replace everybody). I expect this has happened in every administration, just with fewer New York Times editorials.

        Not sure if it’s good or bad but it seems to go with the Jeffersonian president as “first citizen” notion. Ultimately, everybody is working toward what they think is right, and paying lipservice to the boss. In some cases that means they always do what the boss says, but in others . . .

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  16. markinaustin, on September 6, 2018 at 11:33 am said:

    I am disappointed in Kavanaugh’s performance. He is ducking virtually ALL questions, including ones that Scalia, Roberts, RBG, and Kagan all would have answered fully if not definitively.

    For example, the question on self-pardon surely would have been answered with a scholarly recitation on original intent, George III, a nod to no precedent and a look at the Federalist Papers and the discussion of the pardon power and a look at the pardon power in state constitutions and state cases and the guidelines for pardon at the Justice Department and their derivation and a look at correspondence of all the founders after the Declaration of Independence. It is a rich area of undecided law that Federalist Society members have discussed.

    The other four would have let us know they were seriously able to enter that conversation when the time came without tying their own hands.

    Kavanaugh actually tried to sound like he knew nothing.

    Too coy.

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    • ScottC, on September 6, 2018 at 11:55 am said:

      Mark:

      He is ducking virtually ALL questions

      Why shouldn’t he? The whole thing is one big put-on. These hearings are not genuine attempts to understand his thinking or expertise on legal issues. They are nothing but political theater. I see no reason why Kavanaugh should pretend otherwise.

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      • markinaustin, on September 6, 2018 at 2:08 pm said:

        The other four I named all soared way above the political fray which left the viewing public and perhaps even the Committee in awe. They all made it plain that they knew more law than the Senators and it wasn’t close. I expected Kavanaugh to flash that from time to time.

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        • Let the mutherfuker burn!, on September 6, 2018 at 2:56 pm said:

          Is his job to get confirmed or to humiliate Senators?

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        • Kevin S. Willis, on September 6, 2018 at 2:57 pm said:

          Is his job to get confirmed or to humiliate Senators?

          Ideally, he would do both.

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        • ScottC, on September 6, 2018 at 3:37 pm said:

          Mark:

          The other four I named all soared way above the political fray….

          There was no political fray for either Scalia or RBG. And a significantly less of one for Roberts and Kagan, neither of whose appointment threatened the political balance of the court.

          They all made it plain that they knew more law than the Senators and it wasn’t close.

          I don't doubt that the same is true of Kavanaugh, but proving it provides literally no advantage to him in any way whatsoever, and trying to has at least some potential to be a disadvantage. He doesn't have to impress anyone. He just has to avoid saying anything that can be twisted and hyped up into a charge of scandalous thought.

          I get your disappointment as an intellectual exercise, but long ago I gave up on the notion that hearings on judicial nominations could be such an intellectual exercise. And unless and until the left stops corrupting the judicial process by trying to advance its project through the Courts, it will remain the politicized process that they have made it.

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        • Kevin S. Willis, on September 7, 2018 at 10:56 am said:

          There was less of a fray for Roberts but I recall a lot questions of him, as well, not made in good faith, IMO. I’m sure Kagan got some as well as Sotamayor. I just don’t presently recall.

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        • markinaustin, on September 7, 2018 at 7:25 pm said:

          I picked the four I did because they were OUTSTANDING. Sotomayor was not. There was a time when I was practicing regularly when I think I could have done better than Sotomayor or Thomas or Gorsuch, not as well as Alito or Breyer, but not in the same league with those four. Not anywhere near it. Scott is right, I professionally wanted to see a display of legal chops. Eye openers.

          BTW, the Breyer nomination was a real hot potato. Some liberals in the Senate HATED him because he was the legal mind in the Justice Department who invented modern deregulation, beginning with the airlines. And he forcefully defended deregulation. Metzenbaum of Ohio crossed swords with him and lost [IMHO].

          What I recall about it is that Metzenbaum shifted from the deregulation stuff he opposed to attack Breyer for going lenient on pollution cases as a Circuit Judge supposedly because of some small number of shares he owned in maybe Lloyds of London? It was bizarre. And Orrin Hatch than got into a big fight with Metzenbaum.

          Fun times.

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        • ScottC, on September 8, 2018 at 8:41 am said:

          You can watch Breyer’s hearing here:

          https://www.c-span.org/video/?58601-2/breyer-confirmation-hearings

          Go to the 15 minute mark to see Metzenbaum’s questions. Go to the 25 minute mark if you want to skip ahead to actual questions and past his tedious lecturing.

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        • markinaustin, on September 8, 2018 at 11:07 am said:

          Before I watch it is it how I remember it?

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        • ScottC, on September 8, 2018 at 12:46 pm said:

          Mark:

          Before I watch it is it how I remember it?

          Pretty much. The issue which Metzenbaum went after him on was primarily anti-trust law, and his impression that Breyer tended to side against the “little guy”.

          I will say that the quality of questions and answers was infinitely better than what it has become, but that is because it really was an intellectual rather than political exercise. Even Metzenbaum began his questioning by acknowledging that Breyer would certainly be confirmed, and do so with Metzenbaum’s vote, but that he wanted to challenge him on a few of his decisions, so it was a good faith discussion about a legitimate issue. There are no good faith discussions now, because half of the senate isn’t interested in the law or the constitution per se, they are only interested in policy results, and whether or not a particular nominee is likely to aide them in that effort.

          Liked by 1 person

        • markinaustin, on September 8, 2018 at 1:05 pm said:

          Thanks. This confirmation hearing would have been elevated by my questions about the Sea World case, then.

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      • Kevin S. Willis, on September 6, 2018 at 2:56 pm said:

        It is a big put-on. I put an honest, straight-forward legal appraisal that still somehow defangs the critics as the ideal, but I understand the ducking in this situation. If it was a serious, non-televised review being made by people judging his legal chops alone, it would be inexcusable. In this situation, I personally find it easy to excuse.

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    • Michigoose, on September 6, 2018 at 9:20 pm said:

      Senator Harris is mopping the floor with him. Repeatedly.

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      • ScottC, on September 7, 2018 at 6:35 am said:

        Mich:

        Senator Harris is mopping the floor with him.

        That is certainly worrying, if true, because even I know more about Constitutional law than Harris. Somehow, though, I suspect her "mopping" has very little to do with the actual law.

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        • Michigoose, on September 7, 2018 at 6:58 am said:

          She asked him whether or not he had a conversation. He couldn’t answer it. She made him look like a fool.

          It was almost like he’d never been in a courtroom.

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        • ScottC, on September 7, 2018 at 8:25 am said:

          Mich:

          She asked him whether or not he had a conversation. He couldn’t answer it.

          Well, that is certainly the framing that progressives would like to place on it. A more full and honest accounting would be that she asked him if he had had an (insinuated incriminating) conversation with anyone employed by a particular law firm, and he replied that, since he is not aware of all the people employed by the law firm, he couldn’t possibly provide a definitive answer, but that if she had a particular person in mind, she should just provide the name and he would respond. She refused to provide the name.

          And, of course, anyone with any understanding of DC knows that her “question” was not posed in good faith so as to obtain any relevant information about Kavanaugh himself, but rather was posed simply as political theater to raise Harris’s own public profile in preparation for a 2020 run for President.

          She made him look like a fool.

          Foolishness is in the eye of the beholder, I suppose.

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        • Kevin S. Willis, on September 7, 2018 at 10:55 am said:

          It was almost like he’d never been in a courtroom.

          I don’t think so. I think it’s just a strategy, and not an unreasonable one.

          Because this isn’t a courtroom, unless it’s the kind of courtroom where the prosecutor is also the judge and the jury is entirely made up of the prosector/s family.

          Nothing done by the opposition side in these confirmation hearings is done in good faith. Since they couldn’t replicate the Republicans process of denying Garland a hearing with Kavanaugh, they are doing what is available to them. If they could have done that, they obviously would have (they tried to, after all, and made the same type of argument about the midterms).

          Understanding that the hearings would not be done in good faith but as part of a process of posturing, preening, campaigning and attempting to torpedo the nominee by any means necessary, Kavanaugh decided on a “say pretty much nothing about anything” process.

          He was unwilling to answer an ambiguous question that was a set up to be spun to be a “gotcha”, if at all possible. Otherwise, why ask it? Otherwise, why not name a specific person or group of people or a context for the conversation? How could the answer to such a general question matter?

          This is the theater that is the modern confirmation process. Another approach might be more palatable, but I expect he’s going for the safest approach, given the nature of the proceedings.

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        • ScottC, on September 7, 2018 at 11:13 am said:

          KW:

          Because this isn’t a courtroom, unless it’s the kind of courtroom where the prosecutor is also the judge and the jury is entirely made up of the prosector/s family.

          LOL. That’s good.

          Liked by 1 person

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