John Reilly, MBA

July CPI 2024 Inflation Commentary: July's #CPI #inflation shows that inflation is still headed on a sustainable basis towards 2%, despite the uptick in the monthly increase in the core CPI to 0.2% (0.1% in July). Prices broadly fell or increased at a slower pace for most items except for shelter and transportation services. The annual inflation rate fell to 2.9%. The last time inflation fell below 3% was in March 2021 (2.6%). Interestingly, the 0.2% monthly rate of increase in the core CPI in July 2024 is the same as the monthly rate of increase in July 2023 which then accelerated to as high as 0.4% in March 2024. Could inflation accelerate to 0.4% this time? Not highly likely. The economy is at a much different state now. The #unemployment rate has sharply increased since March 2024 to 4.3% as of July 2024. Back in July 2023, the unemployment rate was even trending down! Shelter was the main source of increase in the July 2024 inflation rate, up 0.4% (and rent of primary residence at 0.5%). While asking #rents are starting to tick up in part because #affordability conditions in the for sale market, the uptick in rental vacancy rate will tend to keep rent growth modest. Nationally, the U.S. Census Bureau rental vacancy rate held steady at 6.6% as of 2024 Q2 (6.3% one year ago). In the case of #transportation services, the main increase was motor vehicle insurance and state vehicle registration/license fees, which are one-time increases for the year. Yesterday's release on the July #Producer Price Index #PPI showed PPI rising at a slower pace of 0.1%. Bottomline, the overall state of the economy suggests that inflationary pressures are weak and inflation is still sustainably heading towards 2%. The #Fed should now put more weight on its other mandate of maintaining full #employment. Miami Association of Realtors

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November 6-7 #FOMC Rate Cut Commentary As expected by most analysts and financial players, the Fed cut the federal #fundsrate by another 25 basis points to a range of 4.5% to 4.75%, a follow-up to the September rate cut of 50 basis points. However, this rate cut won't likely make a significant dent on mortgage rates, as this rate cut has already been baked in. Mortgage rates are likely to continue to hover at over 6% through the end of the year. I expected 6% in the September 2024 Update Outlook, but inflation expectations and the effect of policy uncertainty can push rates higher. Chair Powell stating "there is no preset course, and decisions will be made meeting-by-meeting". Mortgage rates will likely hold at over 6% as the 10-year note will continue to hover at over 4%. As of 5 PM today, the 10-year note yield did tick down to 4.31% as of around 5PM November 7 from 4.39% on November 6, so we might see a small downtick in mortgage rates, but less than 100 basis points. Why is the 10-year note going back up again? For one, this could be due to a recalibration of expectations, due to stronger economic data after the Sept 16-17 FOMC. The 2024 Q3 #GDP released on October 30 showed a strong annualized quarterly growth of 2.8%, about the same as the 3% final estimate for 2023. The #unemployment rate also ticked down to 4.1% in September/Oct after rising to 4.3% in July. Meanwhile, Core #PCE held steady at an annual rate of 2.7% for over 3 months (July-Sept) even if overall PCE fell to 2.1% in September. Money is also flowing to the #stockmarket. In between the two FOMC meetings, the S&P 500 index ticked up from 5,524 on Sept 17 to 5,981 as of late afternoon of November 7. So bond holders need to be incentivized with a higher return to hold bonds. #Inflation expectations are still well anchored at 2%. However, inflation expectations will evolve as incoming President Trump lays out his economic policies. It's very likely that the 10-year Note will hover at over 4% through the end of the year and mortgage rates to slightly tread at over 6%. What does this mean for #homebuyers and #homesellers? Don't time your purchase on when interest rates will fall. The #housing market is still very tight, with 5 months' supply of single-family homes in Southeast #Florida, and about 2-3 month's supply for homes below $600,000. If you can afford a home that best suits your lifestyle, then go ahead and "marry the house and date the rate." Miami Association of Realtors

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On this episode of RealPage Economy Express, we delve into the latest economic data, shedding light on the robust job growth witnessed in March, persistent inflationary pressures, the mixed housing market picture, and the Federal Reserve's cautious stance on monetary policy. #EconomicTrends #RealPage #MarketAnalysis

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BIG PICTURE: 𝟑 𝐑𝐀𝐓𝐄 𝐂𝐔𝐓𝐒 𝐅𝐑𝐎𝐌 𝐅𝐄𝐃 𝐈𝐍 𝟐𝟎𝟐𝟒 𝐍𝐎𝐓 𝟏. By 善萨伊德Shan Saeed The Wall Street Journal: 𝗠𝗶𝗱-𝗬𝗲𝗮𝗿 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗥𝗮𝘁𝗲 𝗖𝘂𝘁 𝗙𝗼𝗿𝗲𝗰𝗮𝘀𝘁𝘀 𝗳𝗼𝗿 𝟮𝟬𝟮𝟰 Today, many institutions are trimming back their rate cut expectations given strong #labor market data and slow progress on #inflation. At the beginning of 2024, several banks forecasted five or more interest rate cuts over the year, while the median projection for Federal Reserve policymakers was three quarter-point cuts by fiscal year-end in March. Now, it has pared this back to one rate cut this year. This graphic shows mid-year interest rate forecasts, based on institution reports via Nick Timiraos of the The Wall Street Journal. Overall, more than half of the institutions seen in the table below anticipate the first rate cut to take place in September. Citigroup, for example, is forecasting quarter-point rate cuts in September, November, and December. In June, the bank scaled back their projections, which were previously calling for four cuts beginning in July. A key indicator that the bank is watching is the #unemployment rate, which slowly increased to 4% in May, up from 3.9% a month earlier. It also expects inflation to continue cooling over the coming months. Like Citigroup USA Inc. , Goldman Sachs and Nomura see the first rate cut taking place in September. In more of a hawkish camp, J.P. Morgan anticipates the first cut to be in November due to continued momentum in the labor market. This year, the bank has shifted from three interest rate cuts to one, citing that job weakness may take several months to play out. Today, many banks are aware that while inflation has moderated, the Fed is keeping a close watch on future inflation risks. As of May, inflation stands at 3.3%, falling for two consecutive months after trending upward in early 2024. U.S. #interestrates have remained at 5.25-5.50% since July 2023, sitting at their highest level in 23 years. Yet, despite higher borrowing costs, it is taking longer than anticipated to beat inflation or dampen consumer spending. Part of the reason is that many people and corporations locked in low interest rates seen during the pandemic, and the impact of higher interest rates hasn’t fully begun to bite...UNQUOTE Facts are in vogue. Stay on top of the markets with 善萨伊德Shan Saeed Thanks for sharing James W. #economy #investing #markets #Iqiglobal #Monetarypolicy #Inflation #CNN #CNBC #WSJ #NYT #Chicagotribune #Realestate #Equities #Bonds #Commodities #interestrates #Financialmarkets #Stagflation #Deflation #Assetclasses #SCMP #CGTN #NBC #CBS #Europe #UK #USA https://lnkd.in/ge2XQYSP

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The case for a second #fedfunds rate cut is building up with this week's economic data. - Core #PCE index rose at a slower monthly increase of 0.1% of in August (0.2% in June/July) - Personal #consumer spending also rose at a slower monthly pace of 0.1% (0.3% in July), the slowest pace since February. - Personal #savings rate to disposable income nudged down to 4.8% (4.9% in July) and sharply down from 5.5% in January. Low savings rate means households are maxing out on spending their income. -The 2024 Q2 #PCE annualized quarterly growth released yesterday was revised downwards to 2.8% from 2.9% -On the other hand, #consumer expectations are positive as inflation wanes and with interest rates on the decline. The Michigan Consumer Sentiment rose to 67.9, the second consecutive month of increase. There's another month of data before the Nov 6-7 meeting (after Nov 5 election). I expect a smaller cut of 0.25% as the effects of the 0.5% September cut are still working their way through. Election-induced spending could also cause a transitory uptick in inflation in the last quarter of the year. Miami Association of Realtors

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💥IRR-Underwriting terms💥👇🏽 Unlevered IRR and project IRR (often just referred to as "IRR") are closely related concepts, but they serve different purposes and include different assumptions in their calculations. Understanding the distinctions between the two can help investors evaluate investment opportunities more accurately. Project IRR (Levered IRR) - Inclusion of Debt: Project IRR, or levered IRR, includes the effects of financing in its calculation. This means it accounts for all cash flows related to the investment, including those from debt such as loan payments, interest expenses, and the principal repayment. - Higher Sensitivity: Because it includes debt, the levered IRR typically shows higher variability and sensitivity to changes in financing terms and costs. Debt can amplify the returns due to the leverage effect but also increases risk. - Actual Return: It provides a measure of the overall actual return on the investment, reflecting the total cost and benefits, including how the investment is financed. Unlevered IRR - Exclusion of Debt: As mentioned earlier, unlevered IRR calculates returns based solely on the operational cash flows of the investment, excluding any financing impacts. It reflects the return from the assets themselves. - Comparative Analysis: It allows for straightforward comparison between different investment opportunities regardless of how they are financed. This makes it particularly useful for investors who want to evaluate the pure performance potential of the assets. - Lower Risk Perception: By excluding debt, unlevered IRR tends to show a lower risk profile since it does not incorporate the risk associated with leverage. Practical Comparison for Investors For a real estate investor, here's how the two metrics might be used: - Project IRR might be more relevant if you're considering the total return of a project where you are actively managing both the operational aspects and the financing. It tells you what your total return will be, considering how you've structured the deal financially. - Unlevered IRR would be particularly useful if you're evaluating the core profitability of the property independent of financing. This is helpful when comparing properties that might be financed in different ways or if you're looking at potential returns without considering how much debt you might want to take on. In essence, while project IRR gives an investor insight into the effectiveness of the financing strategy combined with the investment’s operational efficiency, unlevered IRR strips away the financing layer to focus solely on the investment's intrinsic operational value. Understanding both helps an investor gauge both the raw potential and the actualized returns of an investment under specific financing conditions. #hsquaredcapital #mfree

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Ponder varied homebuying patterns in SoCal in April: Existing home sales up 9% in a year and prices up 11%. But more “affordable” niches: Sales of new homes up 18%; prices down 8%. Existing condo sales up 14%; median up 9%.

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Are we witnessing the rise of a new paradigm in real estate? The most valuable real estate companies today aren't just collections of assets—they're operating platforms. Think Invitation Homes, Lineage, or Digital Realty -- they have cost-of-capital advantages, true intellectual property, and economies of scale that look and feel and operate just like any other operating company. Two challenges: 1. What do we call this new companies? 2. What are other examples of these types of businesses that I might not be thinking of...in frontier spaces like edge data centers, EV charging, and vertical farming, and historical ones like parking, farming, or timber? Been struggling with this, we've been doing a lot of thinking about it at Fifth Wall, so I thought I'd crowdsource LinkedIn’s collective intelligence: What are the businesses that define this shift? And why are they valuable as platforms, not just assets?

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In contrast to the doomsday scenario reported in some papers, data shows that #condominium/townhome prices are not crashing in #MiamiDade County. In the first half of 2024, the median sales price of condominium/townhome sales rose from one year ago in 84% of 31 areas (with at least 5 sales per month), with 39% posting double-digit price growth. Yes, home sales have fallen in most markets, but prices have remained relatively firm. Supply is building up, especially in luxury coastal areas, but that has not translated to steep price prices on a broad level. #Cash buyers make up at least over 70% of buyers in million-dollar markets like Surfside (site of the Champlain Towers collapse), Sunny Isles, Bay Harbor, Key Biscayne, and Bal Harbour. The condo law passed in 2022 (SB 4-D) is meant to make condos safe for residents, and buyers need take the future costs of ensuring structural integrity into account. But the new condo rules have not led to a collapse in asset prices. Condo owners may even be incentivized to purchase condos knowing that these are safer than before under the new law. https://lnkd.in/e7eJsKXd Miami Association of Realtors

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May 2024 Recap: Transaction volume on the rise, prices on the decline?   Nationwide, there remains a shortage of inventory compared to pre-pandemic; despite the recently realized price cuts and surge of new listings coming to market. So, while the scales are tipping further towards the favor of buyers, they’re still technically in seller’s territory for most regions.    As always, however, real estate is local and there are parts of the national and international landscape that are trending with more fervor than others.    Would-be buyers who witnessed intense competition in Florida markets over the past few years aren’t seeing such a frenzy now, as strong construction in many of these markets has helped restore inventory levels.    LUXURY MARKET Transaction volume in the luxury space has picked up; with major sales like 10 Tarpon Isle in Palm Beach ($152,000,000), and the mass market is likely to follow suit.   Luxury prices have increased at 2x the pace of non-luxury over the last twelve months. Much of this could be attributed to the stock market, as luxury home buyers tend to be well-diversified and have seen equity investments grow, thus creating the opportunity to leverage their portfolios or cash out and purchase hard assets like real estate. The DOW closed above 40,000 for the first time ever in mid-May while the S&P 500, and tech-heavy Nasdaq Composite also closed at new record highs after positive inflation news.    INTEREST RATES The latest Consumer Price Index read showed that prices were up 3.4% for the 12 months ended in April, easing from 3.5% the month before. Taken together with retail sales and the election cycle, this supports a Fed rate cut in the fall.   Rising gasoline and shelter costs accounted for more than 70% of the monthly increase in overall inflation, and grocery prices fell for the first time in a year, dropping 0.2% from March. The housing component of the CPI has proved frustrating because the government’s measurement of shelter costs come with a considerable lag, though private sources of real estate data have shown a cooling rental market.   A separate report mid-month showed that US retail sales were flat in April, which could be an indication of consumers getting tapped out. Retail softening is an indicator that could have a continuing moderating effect on inflation, and thus also support a rate cut in the coming months.    NEW CONSTRUCTION The new single-family home market has thrived given the lack of resale supply, the narrowing price spread between new and existing homes, and offer of builder incentives. Importantly, though, two different housing markets have emerged; that of larger, mostly public builders, and that of smaller and mid-sized builders. In the immediate market, larger builders have been able to be more aggressive with incentives, including buying down the mortgage interest rates well below what a smaller builder is willing and able to do.

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Reasons You Should Build an ADU NOW #3 Demand for Rental Units at the ADU Price Point Remains High There are 17 jobs created for every housing unit built in San Mateo County and the numbers are similar all over the Bay Area. Many of these jobs are right at the moderate income level filled by workers that have one-hour commutes, each way. These workers are great candidates for renting out an ADU. In other words, you will likely never have a problem getting renters and generating passive income from your ADU. The "problem" is getting the 'right' renter for your new unit, and before another landlord sweeps them up. Call NOW 1-888-360-3604 FOR A FREE SITE VISIT & STRATEGY SESSION CONSULTATION CalBRE#01795093, CSLB#1114186 www.adunow.house #adu #adunow https://lnkd.in/gySz_HNw

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