Afleveringen
-
This segment first appeared in the 12/30/22 episode of the Atlanta Real Estate ReportâŠ
Taking a sip from the Wall Street âfire hydrantâ
* Earnings announcements
* Impact
* Announcements impacts stock prices in the short term
* EPS growth rate (predictablity and sustainability) impacts price in the longer term
* Investors focus onâŠ
* Reported vs Expected (Concensus) â by âThe Streetâ
* Guidance â provided to Wall St analysts by company management
* Financial Statements
* Quarterly
* Annual
* Investor Relations
* Earnings Calls (live + recorded)
* Investor Presentations
* Research Reports
* Wall Street Analysts
* Company and industry / sector specific
* Strategy (asset allocation, market outlooks, etc.)
* Economic forecasts (consumer spending, etc.)
* Thematic (innovation, etc.)
* Company-sponsored content
* Third-party (Market Watch, Seeking Alpha, etc.)
* Financial journalism
* Barronâs, Bloomberg, CNBC, Financial Times, Forbes, Fortune, Wall Street Journal, etc.
* Free vs. subscription-based
* Bloggers, vloggers & podcasters
* Social media
* Twitter â preferred platform for journalists
* YouTube â long-form content; interviews
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This segment first appeared in my November 2022 podcast entitled, Imperfect Storm: Cat 5 Housing Market Cools to a Cat 3âŠ
Monetary Policy
Refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth.
âWe have both the tools we need and the resolve to bring back price stability,â Jerome Powell, Chairman of the Federal Reserve
A decline in rent prices is 'well out' from where we are now, says Fed Chair PowellâŠ
Fiscal Policy
Refers to the tax and spending policies of the federal government. Fiscal policy decisions are determined by the Congress and the Administration; the Fed plays no role in determining fiscal policy.
The Fed
The U.S. Congress established maximum employment and price stability as the macroeconomic objectives for the Federal Reserve (aka, The Fed); they are sometimes referred to as the Federal Reserve's dual mandate.
The monetary policymaking body within the Federal Reserve System is the Federal Open Market Committee (FOMC). The FOMC currently has eight scheduled meetings per year, during which it reviews economic and financial developments and determines the appropriate stance of monetary policy. In reviewing the economic outlook, the FOMC considers how the current and projected paths for fiscal policy might affect key macroeconomic variables such as gross domestic product growth, employment, and inflation. In this way, fiscal policy has an indirect effect on the conduct of monetary policy through its influence on the aggregate economy and the economic outlook. For example, if federal tax and spending programs are projected to boost economic growth, the Federal Reserve would assess how those programs would affect its key macroeconomic objectives--maximum employment and price stability--and make appropriate adjustments to its monetary policy tools.
Source: Board of Governors of The Federal Reserve System
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Zijn er afleveringen die ontbreken?
-
This segment first appeared in the 12/30/22 episode of the Atlanta Real Estate ReportâŠ
How do these Wall Street companies impact Main Street?
* Access to capital
* M&A activity
* Economic impact
* Wealth effect
Access to Capital
* By tapping equity & debt markets
* Use for expansion, R&D (innovation)
Going public in a bear marketâŠ
Timing is everythingâŠ
Mergers & Acquisitions
* Public + private combos create a liquidity event at the local level (e.g., Green Brick + Providence Group, 2011)
* Public + public combos seek to create diversification, scale and/or synergy (e.g., Home Depot + HD Supply, 2020) â MRO (Maintenance, Repair, and Operations)
* Especially significant in CRE market (size)
* Primarily REITs and public companies like Blackstone and Blackrock
* Private equity, pension funds and foreign investors
Economic Impact
* Huge multiplier effect
* Residential Housing: 15-18% of GDP ($3.9 - 4.7 trillion) + 33% of consumer spending (Source: NAHP + Hoya Capital)
* Commercial Real Estate: $1.2 trillion in GDP + $418.7 billion in salaries and wages (Source: NAIOP)
* Commercial Real Estate: 8.5 million jobs
* Construction employment = 7.6 million jobs (3.1M residential)
* Construction jobs: ~300,000 to 400,000 per month
NOTE: Economic impact and employment data are for the entire real estate industry, which includes both public and private companies
Wealth Effect
* Equities = ownership = wealth creation
* Bear markets lead to wealth destruction which, in turn, can lead to demand destruction (including real estate and related sub-sectors)
* Stock prices affect consumer confidence which, in turn, impacts consumer spending
* Most 401(k) plans invest in stocks
Atlanta Real Estate Report by ATLsherpa is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com -
This segment first appeared in the 12/30/22 episode of the Atlanta Real Estate ReportâŠ
Letâs look at some publicly-traded companies in the housing sectorâŠ
Publicly-traded companies are the âfulcrumâ between Wall Street and Main Street. They allow us to participate in the long-term growth of the real estate industry with a much lower investment than owning real property directly â and, in the case of rental property, with less headaches. They also allow us to focus our investment capital on very specific sectors and segments of the industry.
> > > Click on the company names below to access their investor relations pagesâŠ
* Home Builders â DR Horton + Century Communities + Lennar + Pulte Group + Meritage + Taylor Morrison + Green Brick Partners + Toll Brothers + Beazer + LGI
* Banks â Truist + Bank of America + Wells Fargo + Synovus + Ameris + United Community + JP Morgan Chase + Regions + South State + OZK
* Mortgage â Rocket + United Wholesale + Loan Depot
* Residential Brokerage â Anywhere + Berkshire Hathaway + Compass + + RE/MAX
* iBuyers & Hybrids â eXp + Offerpad + Opendoor + Redfin + Zillow
* Single-Family Home Rental â American Homes 4 Rent + Invitation Homes
* Commercial â CBRE + Cushman & Wakefield + JLL + Colliers
* Building Supplies â A.O. Smith + Carrier + Owens Corning + Home Depot + Mohawk Industries + Sherwin Williams
* Home Furnishings â RH + Sonos + Lazy Boy + Sealy + Wayfair + Williams-Sonoma
* Exchange Traded Funds (ETFs) â SPDRÂź S&PÂź Homebuilders ETF + iShares U.S. Home Construction ETF + Invesco Dynamic Building & Construction ETF + Hoya Capital Housing ETF
* Real Estate Investment Trusts (REITs) â Separate topic / future episode
* Public REITs own 535,000 properties across the U.S. as of year-end 2020.
* Equity and mortgage REITs combined own roughly $3 trillion in gross real estate assets.
* Private REITs own an additional $1.5 trillion in gross assets bringing the total REIT ownership value to $4.5 trillion in the U.S. as of year-end 2021.
* U.S. REITs contributed the equivalent of an estimated 3.2 million full-time jobs to the economy in 2021 generating $229 billion of labor income.
* REIT activities resulted in the distribution of $92.3 billion of dividend income in 2021.
* Source: Nareit
NOTES:
Keep in mind that this a small sample of the PUBLIC companies that operate in the real estate industry. As such, they are some of the largest in their respective categories. These are HUGE companies. There are also thousands of PRIVATE companies (typically much smaller) that also contribute greatly to the real estate economy, especially in the way of builders, brokerage companies and mortgage companies.
Clicking on the company names will take you to their investor relations pages. Look for press releases, investor presentations, conference calls and webcasts.
The names listed under âHome Buildersâ and âBanksâ are the Top 10 publicly traded companies operating in the Atlanta region for their respective categories. Note that these rankings may change from year to year.
The real estate âecosystemâ is dynamic and really interestingâŠ
> > > Click on the images below to enlarge the chartsâŠ
Atlanta Real Estate Report by ATLsherpa is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
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This segment first appeared in the 12/30/22 episode of the Atlanta Real Estate ReportâŠ
Letâs look at a few charts to gain some perspectiveâŠ
The sheer size of the equity markets makes them a powerful force when it comes to their economic impact on Main StreetâŠ
> > > Click on the images below to enlarge the chartsâŠ
In the chart above, note the move from the GFC low in 2009 to the pandemic high of late 2021. Equity market cap rose from about 50% to almost 200% of GDP. That is one heck of a run!
Stock prices and the business cycleâŠ
Stock prices and building permits are leading indicatorsâŠ
Atlanta Real Estate Report by ATLsherpa is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com -
This segment first appeared in the 12/30/22 episode of the Atlanta Real Estate ReportâŠ
Discussion Outline
* What defines a âpublicâ company?
* They go from private to public via an Initial Public Offering (IPO)
* Securities trade in the public markets (NYSE, NASDAQ)
* Business and financial information disclosed to the public on a regular basis
* Ways to invest in publicly traded companies
* Stocks = Equity = Owner = Wealth Creation
* Bonds = Debt = Creditor = Income Generation
* Derivatives (options & futures) â hedging, speculation and income generation
* Investing vs. Trading (own vs rent; local vs tourist)
* Many people own public companies directly in the form of individual stocks and/or participate indirectly via ETFs, mutual funds and 401k plans
* Typically, larger than private companies
* Regional, national or international footprint
* Private companies tend to be local, especially in the residential RE space
* Continuous and real time âprice discoveryâ while the markets are open
* Subtle but important point
* Makes them highly liquid
* Contrast this to direct ownership of real property
* Highly efficient vs highly inefficient pricing (objective vs subjective)
* This is the key difference between stocks and real property!
* Stock prices are a leading indicator ofâŠ
* Economic activity at the index level (DJIA, S&P 500, etc.)
* Industry trends at the industry level (banks, home builders, etc.)
* A companyâs outlook at the stock-specific level
Atlanta Real Estate Report by ATLsherpa is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com -
This segment first appeared in the January 14 episode of the Atlanta Real Estate Report â ATL Housing Market: What can we expect in 2023 and beyond?
Secular View: BUY ATL!
* BUY ATL for the long-term (3+ years)
* Perfect Storm (pandemic created a âCat 5â)
* RE market is hyper local
* City of ATL is a city of neighborhoods
* Metro ATL is a region of cities / communities / subdivisions (suburbs & exurbs)
* Population of 21-county region = 6.1 million
* Population of City of Atlanta = 500,000
* SFHs offer the best appreciation potential
See alsoâŠ
* Perfect Storm â June 2018
* Game-Changers: 10 Projects that are Transforming ATL Right Now â 2019
* How long will the ATL housing boom continue? â Dec 2020
* Things are heating up along ATL's "Ring of Fire" â Jan 2021
* Microsoft: Generational Game-Changer for ATL â May 2021
* Imperfect Storm: Cat 5 Housing Market Cools to a Cat 3 â Nov 2022
* Wall Street Meets Main Street â Dec 2022
Atlanta Real Estate Report by ATLsherpa is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com -
This segment first appeared in the January 14 episode of the Atlanta Real Estate Report â ATL Housing Market: What can we expect in 2023 and beyond?
âFor every action, there is an opposite and equal reaction.â
â Sir Isaac Netwon (1666)
Cyclical View: Bubblicious
Demand Pull Forward in the Local Housing Market
* The House Price Index in the ATL MSA bottomed in Q2/2012 at 132.14. At the end of Q3/2022, the index stood at 344.83 (~16% per year)
* The S&P/Case-Shiller U.S. National Home Price Index rose ~13% per year during that same time (ATL: +3% vs USA)
* From Q2/2012 to Q2/2020 (start of pandemic) the ATL index increased 9.5% per year (132.14 to 232.25)
* From Q2/2020 (start of pandemic) to Q3/2022 the ATL index increased 24.5% per year (232.25 to 344.83)
* What does ânormalizationâ mean?
* Reversion to the mean
The Fed Factor (still weighing on the markets)
While speaking at a Brookings Institute event on Tuesday, Fed Chair Jerome Powell said the run-up in home prices during the Pandemic Housing Boom qualifies a "housing bubble."
âComing out of the pandemic, [mortgage] rates were very low, people wanted to buy houses, they wanted to get out of the cities and buy houses in the suburbs because of COVID. So you really had a housing bubble, you had housing prices going up [at] very unsustainable levels and overheating and that kind of thing," Powell said. "So, now the housing market will go through the other side of that and hopefully come out in a better place between supply and demand."
The Pandemic Housing Boom did indeed see housing fundamentals get out-of-whack. According to Moody's Analytics, the average U.S. housing market was "overvalued" by 1% in the second quarter of 2019. Through the second quarter of 2022, the average U.S. housing market was "overvalued" around 25%.
@LanceLambert â Fortune Magazine, December 3, 2023
Wealth Effect
Over the past two years, Americans who own their homes have gained more than $6 trillion in housing wealth. To be clear, that doesnât mean home builders have transferred to buyers $6 trillion worth of new housing, or that existing homeowners have made $6 trillion in kitchen and bathroom upgrades. Rather, most of this money has been created by the simple fact that housing, in short supply and high demand across America, has appreciated at record pace during the pandemic. Millions of people â broadly spread among the 65 percent of American households who own their home â have gained a share of this windfall.
Source: New York Times (May 2022)
Home Prices Roll Over
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The news sends shockwaves throughout ATL and especially the real estate communityâŠ
âCall it what you want, but this is a bubble; a bubble of epic proportions. Nowhere this more apparent than in Grove Park and the surrounding areas.â
ATLsherpa
(*) The Atlanta Business Chronicle is the best resource for local business and real estate news. If youâre not a subscriber, you are missing out on one of the best resources when it comes to business intel.
More from ATLsherpaâŠ
Thanks for reading Atlanta Real Estate Report by ATLsherpa! Subscribe for free to receive new posts and support my work.
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Some thoughts Microsoftâs decision to âpauseâ Quarry Yards developmentâŠ
THIS PODCAST WAS UPDATED AND RERECORDED ON 02.10.23
* Previous presentations & podcasts
* Microsoft is an extraordinary company
* Financial powerhouse
* Trajectory-changer for ATL
* We donât know what we donât know
* My comments at 12:42 in the âGame-Changerâ video below
* My âTip of the Icebergâ podcast on ATLsherpa
* Especially important when it comes to making long-term investment decisions
* Economic headwinds
* 10,000 employees laid off at Microsoft (see quote and CNBC article below)
* Demand Pull Forward: Newtonâs Third Law of Motion
* Spoke at length about this in Segment #2 of my Jan 14 podcast
* Hiring binge (esp by tech companies)
* Residential real estate
* Vivid (poignant) example of how âWall Streetâ can impact âMain Streetâ
* My Dec. 30 Podcast: Segment #4: How do these Wall Street companies impact Main Street?
* Consider the impact on real estate (esp in the Bankhead area) after the Microsoft announcements (then and now)
* Caught âoff guardâ
* What we STILL donât knowâŠ
* Pause or pivot?
* Revised level of commitment to ATL?
* Did Microsoft have a change of heart about ATL?
* If so, what precipitated that change in sentiment?
* How do local Microsoft employees feel about ATL?
* New to ATL
* Move from Avalon to Atlantic Station
What impact will this have on the real estate market?
* Greed-driven market (feeding frenzy)
* Deep end of the pool
* Residential â watch pricing, especially on newly built town houses
* Commercial â watch pace of current / future development activity
* Expect investors to freeze until more clarity is available
* This might provide a temporary floor on prices
* Smart money will probably start selling first (they were buying long before the MSFT announcement)
* Investment and development decisions are likely to be put on hold, awaiting more clarity
* The longer the radio silence, the more selling pressure
* Bottom line: Proceed with extreme caution!
* Which other projects (in other parts of ATL) might pause or cancel development plans? High likelihood that there will be others.
* How might this decision my Microsoft impact current / future plans by other companies (esp in the tech ecosystem) about moving to or expanding their presence in ATL?
âAs we saw customers accelerate their digital spend during the pandemic, weâre now seeing them optimize their digital spend to do more with less,â he wrote. âWeâre also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one.â
âI think for us as a global company, weâre not going to be immune from whatâs happening in the macro,â he said in an interview with CNBC-TV18. âWe will have to also get our own sort of operational focus on making sure our expenses are in line with our revenue growth.â
â Microsoft CEO Satya Nadella
Presentation & Google Earth Tour
Previous Podcasts
Timely & Relevant Articles
* Microsoft Stops Work On 90-Acre Atlanta Campus â BisNow (02.02.23)
* Mayor 'caught by surprise' as development paused on planned Microsoft Atlanta campus â 11Alive (02.03.23)
* Microsoft is laying off 10,000 employees â CNBC (01.18.23)
* A 12-year-old was killed and 5 teenagers injured in a shooting at shopping district near downtown Atlanta â CNN
* Microsoft's stalled plans already impacting Grove Park's housing market â ABC (02.09.23)
* Grove Park residents say itâs been weeks of uncertainty after Microsoft paused 90-acre project â 11Alive (02.20.23)
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com -
The Atlanta Real Estate Report by ATLsherpa is a podcast & companion website for those interested in the Atlanta real estate market. This includes individual buyers, sellers and investors. It also includes architects, builders, developers, lenders, realtors and urban planners; anyone involved with the local real estate ecosystem.
In addition to the Substack app, this podcast is available on Spotify and Apple Podcast.
In this episodeâŠ
NOTE: This podcast consists of four separate segments and each has its own audio recording. The audio players appear under their respective segment headings. The length of the audio recording appears in brackets below. This post serves as an outline for the entire podcast and is integral to discussion.
* Secular View: BUY ATL! [18:59]
* Atlanta Gentrification Map
* Single-Family Homes: The âcrown jewelâ of residential real estate in the ATL [29:32]
* Cautionary Notes
* Demand Pull Forward: Newtonâs Third Law of Motion
* Cyclical View: Bubblicious [22:25]
* Demand Pull Forward in the local housing market
* The Fed Factor (still weighing on the markets)
* Wealth Effect
* Home Prices Roll Over
* What can we expect in 2023? [17:37]
* Lance Lambert â Fortune (interactive map)
* John Burns â John Burns Real Estate (real estate cycle)
* Ali Wolf â Zonda Home (deep dive into RRE industry)
* Sheryl Palmer â Taylor Morrison (housing recession)
* Jeff Blau â Related Companies (Office of the Future, zombie buildings, etc.)
* Jonathan Gray â Blackstone (Univ of Cal $4B investment in BREIT)
Secular View: BUY ATL!
* BUY ATL for the long-term (3+ years)
* Perfect Storm (pandemic created a âCat 5â)
* RE market is hyper local
* City of ATL is a city of neighborhoods
* Metro ATL is a region of cities / communities / subdivisions (suburbs & exurbs)
* Population of 21-county region = 6.1 million
* Population of City of Atlanta = 500,000
* SFHs offer the best appreciation potential
See alsoâŠ
* Perfect Storm â June 2018
* Game-Changers: 10 Projects that are Transforming ATL Right Now â 2019
* How long will the ATL housing boom continue? â Dec 2020
* Things are heating up along ATL's "Ring of Fire" â Jan 2021
* Microsoft: Generational Game-Changer for ATL â May 2021
* Imperfect Storm: Cat 5 Housing Market Cools to a Cat 3 â Nov 2022
* Wall Street Meets Main Street â Dec 2022
Single-Family Homes: The âcrown jewelâ of residential real estate in the ATLâŠ
Cautionary NotesâŠ
* Demand Drivers are secular and powerful, albeit variable*
* Extreme volatility and uncertainty* (makes forecasting more difficult than usual)
* Pandemic Effect: Years of demand âpulled forwardâ (wealth effect)
* Economic headwinds (recession, layoffs, etc.)
* Black swan events (aka, What could go wrong?)
(*) I discussed these at length in my last podcast
Demand Pull Forward: Newtonâs Third Law of Motion
âFor every action in nature, there is an equal and opposite reaction.â
Sir Isaac Newtonâs Third Law of Motion â 1686 @ 23 years old
Cyclical View: Bubblicious
Demand Pull Forward in the Local Housing Market
* The House Price Index in the ATL MSA bottomed in Q2/2012 at 132.14. At the end of Q3/2022, the index stood at 344.83 (~16% per year)
* The S&P/Case-Shiller U.S. National Home Price Index rose ~13% per year during that same time (ATL: +3% vs USA)
* From Q2/2012 to Q2/2020 (start of pandemic) the ATL index increased 9.5% per year (132.14 to 232.25)
* From Q2/2020 (start of pandemic) to Q3/2022 the ATL index increased 24.5% per year (232.25 to 344.83)
* What does ânormalizationâ mean?
* Reversion to the mean
The Fed Factor (still weighing on the markets)
While speaking at a Brookings Institute event on Tuesday, Fed Chair Jerome Powell said the run-up in home prices during the Pandemic Housing Boom qualifies a "housing bubble."
âComing out of the pandemic, [mortgage] rates were very low, people wanted to buy houses, they wanted to get out of the cities and buy houses in the suburbs because of COVID. So you really had a housing bubble, you had housing prices going up [at] very unsustainable levels and overheating and that kind of thing," Powell said. "So, now the housing market will go through the other side of that and hopefully come out in a better place between supply and demand."
The Pandemic Housing Boom did indeed see housing fundamentals get out-of-whack. According to Moody's Analytics, the average U.S. housing market was "overvalued" by 1% in the second quarter of 2019. Through the second quarter of 2022, the average U.S. housing market was "overvalued" around 25%.
@LanceLambert â Fortune Magazine, December 3, 2023
Wealth Effect
Over the past two years, Americans who own their homes have gained more than $6 trillion in housing wealth. To be clear, that doesnât mean home builders have transferred to buyers $6 trillion worth of new housing, or that existing homeowners have made $6 trillion in kitchen and bathroom upgrades. Rather, most of this money has been created by the simple fact that housing, in short supply and high demand across America, has appreciated at record pace during the pandemic. Millions of people â broadly spread among the 65 percent of American households who own their home â have gained a share of this windfall.
Source: New York Times (May 2022)
Home Prices Roll Over
What can we expect in 2023?
Back in May, Moody's Analytics chief economist Mark Zandi told Fortune that the Federal Reserve's inflation fight would see the U.S. housing market slip into a "housing correction." At the time, he expected home prices to flat line nationally and fall between 5% to 10% in "significantly overvalued" markets. Zandi, of course, was right about the housing correction. That correction has actually been so sharp that Moody's Analytics in October once again lowered its national home price outlook. Peak-to-trough, Zandi expects U.S. home prices to fall 10%. If a recession does manifest, that outlook shifts down to a 20% peak-to-trough decline.
Atlanta, Charlotte, Indianapolis, Orlando, and Tampa experienced significant home price appreciation, in-migration, and job growth during the pandemic (prompted by buyers searching for affordability). Conversely, higher mortgage rates and slower economic growth have caused buyers to drop out of the qualified buyer pool or pause their home search until there is less uncertainty around the economy.
Markets in the âPlateauingâ phase have seen significant capital investment over the past 12â24 months and are now faced with limited volume growth and decelerating home price appreciation, leading to shrinking capital returns, or underwriting becoming extremely aggressive in order for deals to pencil.
Zonda Home Chief Economist Ali Wolf gives a State of the Union with an update on housing activity and current economic trends. Market experts provide a closer look at Atlanta, Raleigh, and Charlotte's opportunities and challengesâŠ
A housing recession has been underway for months, says Sheryl Palmer CEO Taylor MorrisonâŠ
Jeff Blau, CEO of Related Companies, on what companies are looking for in office buildings moving forward, what's selling, what's leasing, and what's not. He discusses the office sector at 1:48 in the videoâŠ
Blackstone Group Inc. President Jonathan Gray discusses the University of California's investment in his firm's Blackstone Real Estate Income Trust, investment strategy, and Federal Reserve policyâŠ
On December 1, 2022, Blackstone Inc.âs $69 billion real estate fund for wealthy individuals (BREIT) said it will limit redemption requests, one of the most dramatic signs of a pullback at a top profit driver for the firm and a chilling indicator for the property industry. Source: Bloomberg
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com -
The Atlanta Real Estate Report is a podcast & companion website for those interested in the Atlanta real estate market. This includes individual buyers, sellers and investors. It also includes architects, builders, developers, lenders, realtors and urban planners; anyone working in or supporting the local real estate ecosystem.
NEW » In addition to the Substack app, this podcast is available on Spotify and Apple Podcast.
PRO TIP » The text portion of this podcast contains dozens of hyperlinks, charts and graphs that are integral to the discussion. If you can have that open (preferrably on a desktop computer) while listening to the audio portion, you will get A LOT more out of it.
In this episode, we willâŠ
* Consider how and where Wall Street and Main Street meet
* Discuss the benefits of understanding this dynamic intersection
* Look at some publicly-traded companies in the housing sector
* Explore how these Wall Street companies impact Main Street
* Learn what we can glean from stock charts and earnings announcements
* Take a sip from the Wall Street âfire hydrantâ
Future EpisodesâŠ
* Looking Ahead to 2023âŠ
* Institutional Investors: Who are they, and how do they impact the housing market?
* Real Estate Investment Trusts (REITs)
* Resources: Newsletters + Podcasts + YouTube channels
Letâs start with some definitionsâŠ
For the purposes of this discussion, the term âWall Streetâ refers to the capital markets, in general, but especially equities. Our primary focus will be on publicly-traded companies in the real estate sector. The term, âMain Streetâ refers to economic activity, both at the local and national level. It also refers to us, as contributors to and beneficiaries of that econmic activity.
âWhen it comes to real estate, there are two ways we can benefit by understanding the relationship that exists between Wall Street and Main Street. The first lies in our ability to build equity by becoming owners in some of the most dynamic companies in the world. That is, to participate in the growth of this industry in ways that go beyond owning property directly. The second relates to the insights we can gain from the regular (required) reporting of the financial performance of these companies.â
Publicly Traded Companies: A Primer
* What defines a âpublicâ company?
* They go from private to public via an Initial Public Offering (IPO)
* Securities trade in the public markets (NYSE, NASDAQ)
* Business and financial information disclosed to the public on a regular basis
* Ways to invest in publicly traded companies
* Stocks = Equity = Owner = Wealth Creation
* Bonds = Debt = Creditor = Income Generation
* Derivitives (options & futures) â hedging, speculation and income generation
* Investing vs. Trading (own vs rent; local vs tourist)
* Many people own public companies directly in the form of individual stocks and/or participate indirectly via ETFs, mutual funds and 401k plans
* Typically, larger than private companies
* Regional, national or international footprint
* Private companies tend to be local, especially in the residential RE space
* Continuous and real time âprice discoveryâ while the markets are open
* Subtle but important point
* Makes them highly liquid
* Contrast this to direct ownership of real property
* Highly efficient vs highly inefficient pricing (objective vs subjective)
* This is the key difference between stocks and real property!
* Stock prices are a leading indicator ofâŠ
* Economic activity at the index level (DJIA, S&P 500, etc.)
* Industry trends at the industry level (banks, home builders, etc.)
* A companyâs outlook at the stock-specific level
Letâs look at a few charts to gain some perspectiveâŠ
The sheer size of the equity markets makes them a powerful force when it comes to their economic impact on Main StreetâŠ
> > > Click on the images below to enlarge the chartsâŠ
In the chart above, note the move from the GFC low in 2009 to the pandemic high of late 2021. Equity market cap rose from about 50% to almost 200% of GDP. That is one heck of a run!
Stock prices and the business cycleâŠ
Stock prices and building permits are leading indicatorsâŠ
Letâs look at some publicly-traded companies* in the housing sectorâŠ
Disclaimer: All of the information below has been provided for educational purposes only. I am not a financial advisor and nothing in this podcast / newsletter should be construed as investment advice. If you decide to invest based on anything you hear or read here, you MUST do your own research and seek the advice of a financial professional BEFORE doing so. Thank you.
Publicly-traded companies are the âfulcrumâ between Wall Street and Main Street. They allow us to participate in the long-term growth of the real estate industry with a much lower investment than owning real property directly â and, in the case of rental property, with less headaches. They also allow us to focus our investment capital on very specific sectors and segments of the industry.
> > > Click on the company names below to access their investor relations pagesâŠ
* Home Builders â DR Horton + Century Communities + Lennar + Pulte Group + Meritage + Taylor Morrison + Green Brick Partners + Toll Brothers + Beazer + LGI
* Banks â Truist + Bank of America + Wells Fargo + Synovus + Ameris + United Community + JP Morgan Chase + Regions + South State + OZK
* Mortgage â Rocket + United Wholesale + Loan Depot
* Residential Brokerage â Anywhere + Berkshire Hathaway + Compass + + RE/MAX
* iBuyers & Hybrids â eXp + Offerpad + Opendoor + Redfin + Zillow
* Single-Family Home Rental â American Homes 4 Rent + Invitation Homes
* Commercial â CBRE + Cushman & Wakefield + JLL + Colliers
* Building Supplies â A.O. Smith + Carrier + Owens Corning + Home Depot + Mohawk Industries + Sherwin Williams
* Home Furnishings â RH + Sonos + Lazy Boy + Sealy + Wayfair + Williams-Sonoma
* Exchange Traded Funds (ETFs) â SPDRÂź S&PÂź Homebuilders ETF + iShares U.S. Home Construction ETF + Invesco Dynamic Building & Construction ETF + Hoya Capital Housing ETF
* Real Estate Investment Trusts (REITs) â Separate topic / future episode
* Public REITs own 535,000 properties across the U.S. as of year-end 2020.
* Equity and mortgage REITs combined own roughly $3 trillion in gross real estate assets.
* Private REITs own an additional $1.5 trillion in gross assets bringing the total REIT ownership value to $4.5 trillion in the U.S. as of year-end 2021.
* U.S. REITs contributed the equivalent of an estimated 3.2 million full-time jobs to the economy in 2021 generating $229 billion of labor income.
* REIT activities resulted in the distribution of $92.3 billion of dividend income in 2021.
* Source: Nareit
NOTES:
Keep in mind that this a small sample of the PUBLIC companies that operate in the real estate industry. As such, they are some of the largest in their respective categories. These are HUGE companies. There are also thousands of PRIVATE companies (typically much smaller) that also contribute greatly to the real estate economy, especially in the way of builders, brokerage companies and mortgage companies.
Clicking on the company names will take you to their investor relations pages. Look for press releases, investor presentations, conference calls and webcasts.
The names listed under âHome Buildersâ and âBanksâ are the Top 10 publicly traded companies operating in the Atlanta region for their respective categories. Note that these rankings may change from year to year.
The real estate âecosystemâ is dynamic and really interestingâŠ
> > > Click on the images below to enlarge the chartsâŠ
What can we glean from stock price charts?
Disclaimer: All of the information below has been provided for educational purposes only. I am not a financial advisor and nothing in this podcast / newsletter should be construed as investment advice. If you decide to invest based on anything you hear or read here, you MUST do your own research and seek the advice of a financial professional BEFORE doing so. Thank you.
Within a given sub-sector, stock returns can vary significantlyâŠ
> > > Click on the images below to enlarge the chartsâŠ
âStock price charts provide us with a portal into the past, present and future of a company, an industry or the entire economy. They are especially useful when evaluating price action over various time periods and in relation to other companies or benchmarks (i.e., relative performance). Charts enable us to understand the impact external events (shocks) such as a pandemic, recession, etc. Technical analysis of charts allows us to make informed decisions about future price action.â
Speaking of home buildersâŠ
How do these Wall Street companies impact Main Street?
* Access to capital
* M&A activity
* Economic impact
* Wealth effect
Access to Capital
* By tapping equity & debt markets
* Use for expansion, R&D (innovation)
Going public in a bear marketâŠ
Timing is everythingâŠ
Mergers & Acquisitions
* Public + private combos create a liquidity event at the local level (e.g., Green Brick + Providence Group, 2011)
* Public + public combos seek to create diversification, scale and/or synergy (e.g., Home Depot + HD Supply, 2020) â MRO (Maintenance, Repair, and Operations)
* Especially significant in CRE market (size)
* Primarily REITs and public companies like Blackstone and Blackrock
* Private equity, pension funds and foreign investors
Economic Impact
* Huge multiplier effect
* Residential Housing: 15-18% of GDP ($3.9 - 4.7 trillion) + 33% of consumer spending (Source: NAHP + Hoya Capital)
* Commercial Real Estate: $1.2 trillion in GDP + $418.7 billion in salaries and wages (Source: NAIOP)
* Commercial Real Estate: 8.5 million jobs
* Construction employment = 7.6 million jobs (3.1M residential)
* Construction jobs: ~300,000 to 400,000 per month
NOTE: Economic impact and employment data are for the entire real estate industry, which includes both public and private companies
Wealth Effect
* Equities = ownership = wealth creation
* Bear markets lead to wealth destruction which, in turn, can lead to demand destruction (including real estate and related sub-sectors)
* Stock prices affect consumer confidence which, in turn, impacts consumer spending
* Most 401(k) plans invest in stocks
Taking a sip from the Wall Street âfire hydrantâ
* Earnings announcements
* Impact
* Announcements impacts stock prices in the short term
* EPS growth rate (predictablity and sustainability) impacts price in the longer term
* Investors focus onâŠ
* Reported vs Expected (Concensus) â by âThe Streetâ
* Guidance â provided to Wall St analysts by company management
* Financial Statements
* Quarterly
* Annual
* Investor Relations
* Earnings Calls (live + recorded)
* Investor Presentations
* Research Reports
* Wall Street Analysts
* Company and industry / sector specific
* Strategy (asset allocation, market outlooks, etc.)
* Economic forecasts (consumer spending, etc.)
* Thematic (innovation, etc.)
* Company-sponsored content
* Third-party (Market Watch, Seeking Alpha, etc.)
* Financial journalism
* Barronâs, Bloomberg, CNBC, Financial Times, Forbes, Fortune, Wall Street Journal, etc.
* Free vs. subscription-based
* Bloggers, vloggers & podcasters
* Social media
* Twitter â preferred platform for journalists
* YouTube â long-form content; interviews
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com -
Welcome to the Atlanta Real Estate Report
The Atlanta Real Estate Report by ATLsherpa is a podcast & companion website for those interested in the Atlanta real estate market. This includes individual buyers, sellers and investors. It also includes architects, builders, developers, lenders, realtors and urban planners; anyone involved with the local real estate ecosystem. In addition to the Substack app, this podcast is available on Spotify and Apple Podcast.
In this episodeâŠ
Timestamps appear below in case you want to jump to specific topicsâŠ
* Perfect Storm 3.0: Update on the ten demand drivers [03:40]
* Weather Forecast: Perfect storm weakens to Cat 3 [30:20]
* Supply & Demand: More here than meets the proverbial thinking [44:45]
* Monetary & Fiscal Policy: Topic de jour by Chef Jerome [58:26]
Perfect Storm 3.0: Update on the ten demand drivers [audio: 03:40]
* Perfect Storm: Why the Atlanta Real Estate Market is Booming â June 2018
* How long will the ATL housing boom continue? â December 2020
* Imperfect Storm: Cat 5 Housing Market Cools to a Cat 3 â November 2022
âAtlanta has been a pretty popular place to live since 1837, when a fledgling railroad town called Terminus was formed. However, nothing compares to what is happening in Atlanta today when it comes to real estate. A confluence of events has created a "perfect storm" in the Atlanta real estate market. The result can be described as a huge gap between the supply of homes and the demand for them. This explains why we have seen an unprecedented increase in real estate prices since the economic downturn of 2008 - 2012. Here are some of the drivers that have created this rare economic event...â
"Perfect Storm: Why the Atlanta Real Estate Market is Booming" â June 2018
Demand Drivers
* Location
* Population (ES)
* Lifestyle (ES)
* Demographics
* Diversity
* Atlanta BeltLine (ES)
* Quality of Life
* Transportation (ES)
* Higher Education
* Jobs (ES)
Recent Notes & Observations
* All ten drivers are structural in nature. Strong, long-term trends.
* Some drivers are more economically sensitive (ES) than others, which leads to variable demand.
* The pandemic accelerated the impact of most of these drivers, leading to a temporary demand surge.
* Self-fulfilling prophecy and flywheel effects are at play here.
* Volatility has become extreme, which makes forecasting more challenging. It also increases the probability of overshoots and undershoots.
âIn summary, the ten drivers described above have created a unique and powerful economic event. Remember that these are structural trends; not cyclical ones. The supply and demand imbalance for housing should last for decades. Will there be corrections along the way? No question about it; but the long-term trend is decidedly UP! Those who are in a position to purchase or invest in Atlanta real estate will have an opportunity to create generational wealth.â
âHow long will the ATL housing boom continue?â â December 2020
Weather Forecast: Perfect storm weakens to Cat 3 [audio: 30:20]
The Atlanta real estate market is hyper-localized, which simply means that current and future market conditions can vary greatly from one neighborhood to another. That said, Atlanta is a dynamic metropolis with a robust economy that is inextricably linked to the economies of other cities, both domestic and international. The ATL economy is integrally connected to global industries such as film, healthcare, technology, tourism, transportation and logistics. As the state capital, Atlanta is co-dependent on a diverse state economy, that is evolving and thriving in its own right.
As such, the Atlanta real estate market is and will continue to be influenced by cyclical events and structural trends that are occurring around the world and within specific industries. My mission, with the Atlanta Real Estate Report, is to help you keep up with and make sense of those events and trends.
Current Conditions
Homebuilders say theyâre on the edge of a steeper downturn as buyers pull backâŠ
This presentation by Zonda Home (their clients are builders) provides some interesting insights about the Atlanta housing marketâŠ
Forecast
Now that the U.S. housing market has entered into a recession, it raises the question: Whatâs coming next for home prices? On Tuesday, the Case-Shiller U.S. National Home Price Index will report home prices grew at a double-digit rate between May 2021 and May 2022. However, that data is lagged. The real story, industry insiders say, is one of sharp decelerating price growth. By this time next year, McBride predicts home prices could be up 0% on a year-over-year basis. (Freddie Mac disagrees and says national house prices are set to rise another 4.4%.)
Regardless of where national house prices go next, it wonât be even across the nation. Already, markets like Boise and Phoenix are contracting significantly faster than the rest of the nation.
To get an idea of what might be on the horizon regionally, Fortune reached out to CoreLogic to see if the firm would provide us with its assessment of the nationâs largest regional housing markets. To determine the likelihood of regional home prices dropping, CoreLogic assessed factors like income growth projections, unemployment forecasts, consumer confidence, debt-to-income ratios, affordability, mortgage rates, and inventory levels. Then CoreLogic put regional housing markets into one of five categories, grouped by the likelihood that home prices in that particular market will fall over the coming 12 months.
Source: Falling home prices? This interactive map shows the statistical odds of it occurring in your local housing market â Lance Lambert, Fortune (July 2022)
Local Weather
Industry veteran, Katie Schanck, shares some insights about the current and future state of the Atlanta real estate marketâŠ
Supply & Demand: More here than meets the proverbial thinking [audio: 44:45]
* Both are variable because they are economically sensitive
* Demand ultimately determines price (buyers = transactions)
* Pandemic altered and accelerated demand, which led to supply/demand imbalance and temporary price surge
What happens when demand and supply both plunge?
Thanks to the surge in mortgage rates, we've seen a historic collapse in mortgage affordability. New homebuyers are facing a massive sticker shock relative to what they could have paid just six months ago. So does this mean that house prices are due for a crash? On this episode of Odd Lots, we speak with Morgan Stanley housing strategist Jim Egan about what comes next. Egan argues that while high mortgage rates will discourage buyers, there won't be a significant unlocking of supply, since very few people will be forced to sell. It will be housing activity that sees the biggest change.
Source: âThis Is What 7% Mortgages Will Do to the Housing Marketâ (Bloomberg)
Topics discussed in this podcastâŠ
* How unusual is the housing market right now â 3:55?
* Will house prices crash as rates rise? â 5:40
* The lock-in effect in housing â 8:16
* On credit availability â 10:46
* The importance of inventory â 14:04
* Will more homes get built? â 18:04
* The role of baby boomers in US housing â 21:48
* Could we see big price declines? â 25:15
* How do higher rates feed into mortgages? â 28:20
* Is anyone refinancing now? â 21:13
* What happened to MBS buyers? â 33:28
* What is household formation? â 26:57
On DemographicsâŠ
From a demographic perspective on the housing market, we spend a lot of time talking about Millennials and Gen Z and the demand that they're going to represent as they roll through. We do think that you need to start focusing on the baby boomers. When we look at the percentage of homes owned by people over the age of 65, from 1980 to 2012, it is a very consistent number. It's roughly 25% of the housing stock. It oscillates between 24% and 26%. From 2012 to today, it's gone from 25% to roughly 33%. One out of every three homes in this country is held by somebody over the age of 65. When we look at how long they've owned those homes, over 50% of them, roughly 54%, moved in before the year 2000.
Now, the counterargument there is aging in place. That trend has happened a lot more frequently. People are living longer, they're living in their homes longer. We don't expect this supply to be a factor in our price forecasts for at least another decade. But if that were to come up sooner, that's where we kind of get into more of a bear case, and that would provide more pressure on home prices than we're currently expecting.
Source: âThis Is What 7% Mortgages Will Do to the Housing Marketâ (Bloomberg)
Monetary & Fiscal Policy: Topic de jour by Chef Jerome [audio: 58:26]
Monetary Policy
Refers to the actions of central banks to achieve macroeconomic policy objectives such as price stability, full employment, and stable economic growth.
âWe have both the tools we need and the resolve to bring back price stability,â Jerome Powell, Chairman of the Federal Reserve
A decline in rent prices is 'well out' from where we are now, says Fed Chair PowellâŠ
Fiscal Policy
Refers to the tax and spending policies of the federal government. Fiscal policy decisions are determined by the Congress and the Administration; the Fed plays no role in determining fiscal policy.
The Fed
The U.S. Congress established maximum employment and price stability as the macroeconomic objectives for the Federal Reserve (aka, The Fed); they are sometimes referred to as the Federal Reserve's dual mandate.
The monetary policymaking body within the Federal Reserve System is the Federal Open Market Committee (FOMC). The FOMC currently has eight scheduled meetings per year, during which it reviews economic and financial developments and determines the appropriate stance of monetary policy. In reviewing the economic outlook, the FOMC considers how the current and projected paths for fiscal policy might affect key macroeconomic variables such as gross domestic product growth, employment, and inflation. In this way, fiscal policy has an indirect effect on the conduct of monetary policy through its influence on the aggregate economy and the economic outlook. For example, if federal tax and spending programs are projected to boost economic growth, the Federal Reserve would assess how those programs would affect its key macroeconomic objectives--maximum employment and price stability--and make appropriate adjustments to its monetary policy tools.
Source: Board of Governors of The Federal Reserve System
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atlantarealestate.substack.com
