Ghost Pepper Hot

 Is the housing market TOO hot?

Lumber up 90%, steel up 67%, labor costs within 3% of pre-pandemic levels.

So here we are, median price of a new single-family residence up 20.3% to a record $381,000 (past 12 mos ending in April).

How’s all that for overdosing on inflation?

Used home shoppers are no better off – a 2.2 month supply as of April 2021?  If you can say when inventory was last this close to zero, we’d like to hear from you.

Good for sellers, not for buyers.

I personally know of one used house in Austin a family member bid $5,000 over asking.

Lost the bid.

Last weekend she bid $52,000 over asking on new construction.

Lost that one, too.

$52,000.

Over.

Not a typo.

It would seem now is the worst time ever to be buying a house, used or new, but the weird is, many experts argue that okay, housing is ghost-pepper-hot, but it’s not a bubble.

We’ll see, but with Wall Street and banks nearing the end of their soiree, don’t be so sure.

Some of this pressure in housing is leaking in on commercial too, and not in a way you’d want: escalated building cost, disrupted supply chains and tightened labor markets are testing the limits of what developers can pay for land.

Just two weeks ago as we were finalizing terms on 12 acres of commercial in San Antonio, the buyer slams the brakes over – you got it – skyrocketing lumber costs.

No panic, replacement signed in 72 hours and, at far better numbers – Cresta Bella is a much sought-after destination.

What to watch: canceled projects. . . over build costs not penciling in as expected (came close to that on 32 acres in Forney, knocked us off the ladder on 12 acres in San Antonio). Downward pressure. . . on land costs – swollen lumber, steel, labor -- all are resetting the price points developers can afford. Gradually rising mortgage rates. . . along with a topping out for demand for the remainder of 2021 will begin cooling the market.  Inflation, too. . . will begin to take its bite of what consumers can spend for housing.

In rural areas, just the opposite: prices escalate as the masses flee rising crime, supply shortages, power outages, massive police force resignations (was it you, San Francisco, Austin, that were all in on opening borders, defunding police, wokeness, cancel culture, critical race theory?  Yes, it was. So noble of you.)

Rural is King.

And Texas owns Rural.

Here’s the deal for Texas real estate: It’s Dr. Jekyll and Mr. Hyde – for every good op, there’s  a not-so-good next to it.  Choose carefully, you may end up neighbors with a cancel culture escapee from San Francisco.

The whole thing about real estate is, where are
all the people going and, what is it they buy when
they get there?

Go ahead, Google it.

The Great Atlantic Migration.

A doozy, that one.

And. . . there’s one big thing about it that may surprise you (it did me): it holds the top spot as. . .

The Most Massive
Of All Migrations
in History!

Period.

First major wave was the mass movements from Ireland and Germany to North America starting in the 1840s. Not that long ago, really.

The greatest migration since then is, well, you’re looking at it. . . right now.

Right here in America.

And, in its crosshairs is…Texas.

And, in several layers, starting with Millennials, the largest generation of the U.S. now, if you’ve been keeping up with current events.

So, Layer #1:  Millennial piglets swept the field on new mortgages – 53% of the pie, compared to Gen Xers at 32%, Baby Boomers at 12%.  Here’s a visual of Realtor.com’s findings for Spring 2020:

Their favorite food group?  Not Austin, not Dallas, not Houston or San Antonio.  (Yes, Austin is hot, but its growing pains – defunding the police is just one -- are forcing buyers elsewhere.)

More like an hour’s drive from those: Kyle, Pflugerville, Leander, Kerens,Tool, Mabank, Corsicana, --- all rural Texas villages (we’ve looked in all of them) on the outskirts of those overpriced real estate and escalating violence locales.

You’re remoting in now, no commute, live where you want.

Layer #2:  Urbanites fleeing the same evils.  Had enough of Covid 19 & watching the likes of NYC morph into Gotham City nationwide.  Wave after wave they exit, skyrocketing rural land sales up 17.63 percent to a record $1.69 billion. Thus, Texas numbers like this:

Layer #3:  Can’t leave out the Generation Xers and Baby Boomers, the tall dogs at the Trough of Disposable Income. Their favorite group is a two-hour-drive-away second home.  My personal fave is Hochatown, Beaver Bend Reservoir, Oklahoma.  (Yes, we’re looking there too.)

Look: with lumber prices at all-time highs, home sales at levels last seen in 2006 and stocks on a tear -- who’s to say we’re not in a bubble?  We’ll see.  In the meantime, that Marcus & Millichap webinar I tuned into a few weeks back says dig in, hang tight and ride this one until its knees turn to dust. We’re in for a return on the magnitude of The Roaring 20s before this migration pig makes it all the way through the python, and big prices are coming with it.

First, get over it.  It won't be 2021.

2022 maybe, if we get lucky on testing and vaccine, says Bill Gates.

That long?  It's not because of the virus.  Or lack of a vaccine.  It's human behavior.

The U.S. has proven incapable of forming a unified front to stop the spread.  We hold top spot in the world for mismanagement of the pandemic. So, our own citizens are doing us in. More scary, they're allowed to vote. Taiwan figured it out: 7 deaths, and now they’re back in full swing. Their citizens, however, pulled together, gung ho.  We didn’t.

Even more scary, leadership.  Florida's governor just lifted all Covid-19 mandates, opening bars and restaurants to full capacity, no mask required.  One bar owner even denied entry to anyone wearing a mask. This, in the second hardest hit states from Covid-19 casualties?

Insane, but true.

Not a good play.

Way too many mask yokels.

Fauci: "America's not in a good spot to be right now."

He's been wrong before, but we both know he's right on that one.

Moody’s Analytics says these will be the first to make their way out of the box, listed alphabetically.

• Boise, ID
• Denver, CO
• Durham, NC
• Madison, WI
• Provo, UT
• Raleigh, NC
• Salt Lake City, UT
• San Jose, CA
• Tucson, AZ
• Washington D.C.

Low population density and educational attainment are why.  So big cities hemorrhage as suburbs swell.

Get the full story here.

Last week we asked power brokers across the Metroplex:

“What's working for you?”  One of the answers surprised us. 

Covid-19 turned every investor's shopping list upside down.  The first casualties were retail, office and hospitality. So we began the hunt for the best places to be for the long slog thru the pandemic. Here's what we're hearing.

Single Family Lots

As the pandemic empties out big cities, residential lots are a huge beneficiary -- in the right spots. For D/FW that's Haslet, Argyle and anything along the northern tollway corridor from Celina to Sherman.  Looking northeast, Princeton, east of McKinney, is a hot spot. We see no end to the suburb trend.

Mobile Home Lots

Record unemployment levels pushed home buying out of reach for millions of Americans.  And mobile homes have come a long way in recent years on image -- looking more residential and less mobile. The trick is getting water to the site.  It's not readily available in rural areas. We're looking at two right now.

New Construction
Single Family Rentals.

This was a surprise. When the city of Forney snuffed out the multifamily component of the Tom Thumb site, the developer substituted this product to mollify. Now we find out it's the rage all over.  Ten units to the acre.  We never knew such existed.

MOBs

Covid-19 plunged a dagger into new office construction.  One niche survived: medical office buildings (MOBs).  Usually single tenant, owner occupied, and a tiny footprint -- under 6,000 square feet.

I’ve been fingered by those close to me lately for ingesting too much news.

Guilty as charged, lock me up and garnish my wages.

Not that I watch that much TV.

TV news channels have gotten so aggravating, my channel choices have shrunk to The Science Channel, NASA Channel, Discovery Channel and an occasional dose of 60 Minutes.  After all, most of what you get from TV news is irrelevant to you, your family, your business, things you control.

My online news foraging, however, was veering off the charts.

Online news, according to those who’ve actually mapped its effects, is way worse than TV: it’s disruptive, weakens comprehension and triggers the limbic system to release cascades of glucocorticoid (cortisol), which deregulates the immune system and inhibits the release of growth hormones. The body soon crumbles into a pile of chronic stress.

Like we don’t have enough already.

So stop doing it, news consumption is toxic.

Anyway, a close family member offered me release from such addiction, a delightful find:

Morning Brew

A single page newsletter, to your inbox six times a week. Fast, brief, refreshing, positive, clean, crisp, entertaining– and free. A ten-minute read (unless you take the bait on one of the links).

Give it a try and get back to me.  In times like these, who can afford the luxury of a negative thought?

The debate rages over the vulnerability of vote-by-mail to fraud.

But not in my mind, and here’s why:  though plausible, for the moment let’s set aside this notion of fraud.

Three weeks ago, my trusty assistant mailed a check to a bank in Fort Worth for a mortgage payment.   The check never showed.  She ended up hand delivering a new check to the bank some 30 miles away, to satisfy timely payment.

This is one of dozens of such USPS fails over the course of HCC’s history.

Then, will those mail-ins be counted?  For a contentious election year like this one, don’t be so sure.  Nobody knows what the rules are.

For my ballot it’s mask up, head to early voting.

At least I’ll feel like my vote had a chance of counting.

Global pandemic.  Yesterday’s news.

Economic chaos.  Months of it in our rearview mirror.

Amid a combative political year where insane sums are paid out to those who exacerbate our fears of existential threats.  Oh, well, 2020.

Some parts of the world still work, thankfully.

Suburbs.

The bidding wars are insane.  One home in New Jersey went for 21% more than its asking.  That insane.  Dozens of towns on the outskirts of The Big Apple are inundated by this mass exodus from big cities, a flight capable of turning NYC into a ghost town. Of course it can, look at the buffoons charged with running things, and look for this to replicate in all similarly maligned cities across the country.

RV Parks.

No shocker.  We’re on the road now, not in planes. HCC is looking at a just-built one in Springtown, TX, a mixed-use facility of RV pads, self-storage, propane sales, a pool.  Price $5M.  Travis is running the numbers.

Boutique Retail.

A surprise against the backdrop of mainstream bankruptcies like J.C. Penney, Brooks Brothers, et al.  Boutique, however, is another critter. We’ve an LOI from a group whose niche is spa/salons. Tis would swallow 9,000 SF of our retail strip about to go up on FM 548 in Forney, TX.

Grocery Stores.

Well, we’re all cooking at home now and grocers are killing it.  Tom Thumb has reconfigured its site plan to the city’s liking.  Our 32-acre corner in Forney, TX will soon become a Tom Thumb center.  2^nd quarter, 2021.

Medical Office Buildings
(Tiny Ones)

We’ve two working in this product line.  One is a letter of intent from an urgent care doctor in San Antonio.  His three locations in San Antonio could soon become four if we get this. His eyes are on a 2.17-acre lot in Cresta Bella; this makes his second run at this lot.  The other is a 5,000 SF spec MOB on FM 548 in Forney, TX, on our land wrapping 7-11.  1^st quarter, 2021.

As Hurricane C-19 continues its assault, don’t forget that the storm doesn’t matter until the storm begins to get you down – be kind to yourself.

In a giving moment I ended up donating it to charity, but the T-shirt read: “the beatings will continue until morale improves.”  Such is the outlook for the remainder of 2020 should the "new phase" Covid-19 numbers persist.

No better than we did in our response to Covid-19, I'm not too proud of being a Texan right now. Texas is shaped like a T-bone and, with its willful ignorance of science, looking just as dumb.  With Covid-19 more widespread than ever in the U.S, (even its islands now), it's time we talked etiquette and common sense. That "turn-this-plane-around-and-head-back-to-the-gate-I’m-NOT-wearing-that-mask" mob is on the rise.

Delta obliged, BTW, returning to the gate to off load the two anti-maskers. Happened July 27th on an Atlanta to Detroit flight.  Increasing numbers of Karens are among us, some now armed and dangerous.

Just one state got it right on flattening the curve: Connecticut.  Now they’re besieged with anti-mask protests.

The pandemic doesn't care that you're tired of it, that you're in a rush to bring back normal. I warned about this in March, that America's impatience with shelter-in-place would cost dearly. Now the numbers have been running worse than the April spike. Never mind that what Texas did in April was more of a let up than a lockdown.

We Didn't Obey

Now We Pay

Note to anti-mask Karens:  though unbearably selfish, true, you have your rights.  But the rest of us?  We’ve  the right. . . not. . . to be included in your pathogen party because you refuse to wear a mask, spreading your virus all over. Keep your pathogens to yourself.

And one more thing:

Wash Up

Mask up

Goggle Up

Grow up

(And Stop Killing Us)

Not to inconvenience you but, we like living as much as you.

It's been one booger of a year 2020 handed us. On June 8, it was officially announced a recession to end all recessions started February 2020.  Untold numbers of businesses folded to the lockdown, and adding salt to the wound, the turmoil of a "summer of love" -- it's been one haymaker after another.

So what'll it be for real estate?  Exactly this:  if you buy the "out-of-chaos-comes-opportunity" bit, we could be in for the biggest gold rush era since the 1886 Witwatersrand Gold Rush in South Africa, which claimed the top spot in history.

Looking at what happened with Manhattan apartment leases (dropped 62% in May, worst in a decade), one major pivot in real estate will be away from big cities, thus a gold rush for small towns.  Employees no longer have to drop top dollar on pricey digs in the CBD now that they can remote in.  With no foreseeable sports, entertainment, etc. let alone no police, a slice of the Big Apple's not so yum anymore.  Gotham, keep your germs (and your buffoon city government) to yourself, thank you.

Other pivots will be away from office, hospitality, retail, restaurants, bars and the like -- sure, there are bargains on the horizon, but how long a hold before you see money?

Maybe somewhere between too long. . . and forever.

In their place will be a stampede to RV parks, tiny-home lots, single family rentals, multifamily units, townhomes, industrial and medical.  Texas A&M just landed a $1.6 billion windfall to mass produce a C-19 vaccine at the FujiFilm Diosyn facility early 2021.  Ancillary businesses to partner with them will pop up like mushrooms after a spring rain.  Our scouts are laboriously combing the landscape for opps.

1986, Y2K and 2007 crashes, HCC has emerged from them all, and if there's one thing we learned, it's this: there...  is... the other side of this, and the actions taken at the height of uncertainty will determine what the other side looks like for each of us.

Right now, HCC has four partnerships with properties weaving their way through the title company and two more soon to follow.  Tons of cash are sitting it out on the stock market right now; real estate may very well be one of this gold rush's biggest beneficiaries.