THE LOCATION STRATEGY TOP 10

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MARK YOUR CALENDAR

Scott Davis will be speaking at the North Houston Counties Builder Association meeting on December 7.  We’ll post the link as soon as it available.   This will be your only chance this fall to hear Scott’s public presentation on the state of the market.

LET'S TALK TURKEY

We were going to run the traditional story about how Thanksgiving dinner cost 20% more this year. Then we ran across this story that claimed that was inflated because grocers cut prices on turkeys the week of Thanksgiving, and we should be comforted by the more modest price increase of 7.7% over last year.

So instead we've included this chart which shows the average size turkey has increased 77% in weight since 1970. At the same time the number of people per household has decreased 20%, and children per household by 50%. Even people per family household (down 13%) and children per family household (down 35%) have declined. So my question is, who exactly is eating this bigger bird?

WE'VE REALLY HIT THE BRAKES

The chart below shows the slowing of used home sales during rate hike cycles dating back to 1983. We are truly in a unique cycle with this slowdown.

INVENTORIES ARE RISING

Inventories on used homes are still running tight, but are rapidly rising as sales slow.

PREVIOUS PRICE INCREASES ARE HIDING CURRENT DECLINES

The median price trends from Case-Shiller and NAR still under the influence of rapid price increases from last year, and earlier this year. But they are hiding what are likely price declines in real dollar terms.

80% OF HOMEBUILDERS NATIONALLY REPORT CUTTING PRICES

Homebuilders have been rapidly cutting prices.

78% INCREASE IN INCOME REQUIRED FOR MEDIAN PRICED HOME

A year ago buyers could afford the median-priced home with about $60,000 income. Today it's $107,000. This should come down somewhat as prices decline, but still is a stark change.

NOT SURE IF THIS IS POSITIVE OR NOT

Home purchases by investors declined 30% YOY last quarter. Generally I think high shares of investor purchases is a bad thing, but I also think we could use the sales.

MORE RENTALS AHEAD

It is probably a good thing on balance to see investors pull out of the market - because more homeowners plan on renting rather than selling their houses as homebuyer demand crashes.

Households are expected to keep drawing on excess savings next year.

WHY WE ARE NOT SEEING MORE OIL JOBS

The chart below shows the ratio of oil and gas company financing to "green energy" project financing. In 2015, oil and gas projects received 20X the financing - in part because of the shale boom. By 2022, this ratio is almost zero. Again in part because many shale plays ended up being unprofitable, but also because of ESG and other requirements directed funding away from oil. Until this financing returns, oil and gas job growth on new projects and in Houston will continue to be slow.

One thing that may help is the stealthy approval of projects like the Sea Port Oil Terminal, an export terminal 30 miles off the coast of Freeport that will handle 2 million barrels per day. Seaport will be the largest such facility in the US. The Biden Administration quietly released news of its approval on Nov. 22nd. While the project will only add about 60 permanent jobs, it is a sign of longer-term commitment to oil as an energy source that should encourage investment in drilling and hopefully refining capacity.

SOME WISDOM FROM ELON MUSK

OK, unless you want to be a new home sales agent or a construction supervisor, there aren't a lot of new jobs this week. I'm happy to run Lennar's forward planner, Adams' division manager, and Caldwell's development manager positions again next week. Somebody please help them out and apply.

Elon Musk recently shared an email to his staff at Twitter about meetings and productivity that I thought we could all benefit from. The leaked email image was unreadable, but Musk's main points:

1. Avoid large meetings
2. Leave a meeting if you’re not contributing
3. Forget the chain of command
4. Be clear, not clever
5. Ditch frequent meetings
6. Use common sense

He also reminds us that we can resolve most issues without a meeting. You can see a full unroll of Musk's views on productive meetings on this Twitter thread. The guy's worth $200 billion - it's worth the read. Happy Thanksgiving.