Ken Wimberly
I always enjoy the opportunity to get insight on the economy from those who study trends for a living. Yesterday I got to sit in a room with about a hundred other commercial real estate professionals and hear from the always entertaining John Baen, Ph.D..
For Starters…
Anything bad for one person is good for someone else
>Bad (for California, New York) = Good for Texas
>>185k Silicon Valley employees have been laid off
>>>Could be very good for Texas
>>>Might be a meltdown in economy
50% of world’s wealth is stored in real estate
BAEN: Texas Mortgage
>1% Insurance
>3% taxes
>In essence, a 4% mortgage
Timber was $1,250 / now $450
US Dollar is strong (at the moment)
>CD rates are now 4.25% for 11 months
>Strong US dollar attracts liquidity and capital
>Attracts new buyers immigrants (180k per month coming across Rio Grande)
>Kills exports
Inflation and costs will continue to go up
Average stock price is down BIG TIME
Six G’s
>Gold (down)
>Guns (good; doing well)
>Ground (RE)
>Grub (commodities)
>Gas (oil and gas)
>God
Larry Summers (smartest person in finance according to Baen) says more pain is ahead
Texas has remained S-T-R-O-N-G
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Frisco is on fire; so is Alliance
97% employment in oilfield
Yet since Covid, still plenty of people that don’t want to work
>Bosses want people in the office
>Transparency in wages is a new push
Cannabis is now legal in OK
>More lazy people
>Land prices increasing
Stock market heading South; Real Estate heading North
>When the Nasdaq hits 10,000, Real Estate with thrive
>Hint: BUY REAL ESTATE
If you are worth $11M, you are in Top 1%
Top 5% is $344k per year in income
IRS is broke and trying to hire 87k new agents
>Keep your receipts!
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Credit card debt WAS shrinking, now growing Fast!
Energy prices are skyrocketing
Saudi Fund selling 100 year bonds
Fed can’t print more workers!
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BAEN belief: Politicians don’t really want to stop the influx of illegal immigration; but the UNIONS do
Crypto: don’t invest in what you don’t understand
BAEN: minimum wage going to $15 across the country
Texas Land Market is on fire!
>Avg land price in TX is now $7k per acre
>Land within 1.5 hours of DFW is $15k per acre
>Land went up 34% last year
>Yellowstone craze is hitting the nation; everyone wants some land
>Don’t lease your land for a solar farm! It is a benefit for the sponsors and you lose your AG exemption
>Fed Land Bank rate is now 9% on ranches; causing a slow down
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Residential Market
>Home sales down 18% on previous years (biggest slow down is high end homes)
>People are satisfied for where they are living (bad for banks)
>Wells Fargo closed their mortgage department
>70% of home loans in past 2 years were refinances
>Builders were making 25% per home (now they are gushing with infinitives)
>Any house of $450k or less will be GOLD (affordability!!)
>In last 90 days, 97k homes have sold in Texas
>Latinos will be 30% of first time homebuyers in next 10 years
55% of all parents are helping their adult children with finances
Self Storage is on fire
>People storing junk
>SHIT – Special Heirlooms and Individual Treasures
Industrial/Warehouse
>Lots of deals falling out due to construction costs
>Inside of Fulfillment Centers is very depressing
>Rumor is Amazon is only signing long-term leases WITH 90-Day OUT clauses (that they are exercising)
>West Coast had dock workers and ship workers striking
>>Folks coming to Texas to do business
>Shipping containers raided by ring of thieves
Grocery Wars are coming (more vacant space with big boxes)
>Walmart
>HEB
>Whole Foods
>Albertsons
Move to remote work
>Bosses are losing control of their employees
>In DFW, 70% of folks are IN office
>CBRE moved HQ to Dallas
>>And is building a “Virtual Office”
>Potential train wreck in office sector
Artificial Intelligence (AI) is going to make a BIG impact
>Example just passed the Texas Bar exam
>It doesn’t need time off
Conclusions
>Will be some big vacant warehouses
>>People’s buying patterns are not what was anticipated
>>Party City BK
>>Bed Bath Beyond issues
>Inflation will continue
>Hard Assets will thrive
>Rental house communities will thrive
>House prices will go down when people HAVE to sell
>>Death
>>Divorce
>>Disease
>>Dementia
>If California files for BK, the US government will bail them out
>>Maybe good for Texas
>>Except for the Californians bringing their ways to TX
>Many Realtors will be exiting the market (listings are way down)
>The dollar will drop like a rock; hard assets will win
>>The Govt can’t save us
>Feds will cough on high interest rate
>Oil will stay high
>Hoping natural gas will increase
>Exxon just announced a $2B refinery between Houston and Baytown
>METAVERSE INVESTING: Don’t do it!
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