Shoes Dropping, Tightrope Walking 🧪

In today’s edition:

• Did the Fed finally break something?
• A closer look at the Consumer Price Index
• Rental housing supply shows signs of increasing

🎯 What's Stirring

Many say “The Fed will keep going until something breaks,” and it appears we finally had that event on March 10th. Now things get interesting - how will they strike a balance between controlling inflation and stabilizing sentiment? And even despite the event, we still see positive economic indicators for employment, housing starts, existing home sales, etc. Trying to untangle it all? Us too.

• Silicon Valley Bank and Signature Bank collapse, while other troubled banks including First Republic and Credit Suisse are rescued, putting increased pressure on the Fed to walk a tightrope between fighting inflation and restoring confidence in the financial system.
• The employment-to-population ratio for adults without a high school diploma reached an all-time high in February. This group is often an early warning for overall employment, so this uptick is good news. And more than half of that employment growth was in residential construction - which is a positive sign for the residential housing shortage.
• Gary Beasley outlines a case for the Fed to pause rate hikes with a close look at what’s inside of the Consumer Price Index. The CPI numbers have looked much better recently, and the highest months of CPI from 2022 will soon be dropped from the 12-month rolling metric that the Fed likes to reference. We could see a 12-month CPI of 3-4% by June.
• The undersupply of housing continues to be a major economic concern, as detailed by the National Rental Home Council in their Housing Undersupply report. Single-Family Rental (SFR) households have increased by 3.1% while the share of SFRs as a percent of overall housing stock has decreased by 1.4% since 2011. The report cites a Freddie Mac estimate that the housing deficit is over 3.8 million units, emphasizing that more entry-level housing is needed (the number of new entry-level homes built in 2020 was down over 50% compared to the early 2000s).
• Signs of downward pressure on rent prices are appearing in markets throughout the country, with an uptick in supply from both the Multi-Family and Single Family Build-to-Rent side. Building permits in February were up 13.8% compared to January, and MF buildings with 5+ units make up a lot of that number - up 24% MoM. Builders are also turning to rentals since interest rates are still high, contributing even further to the rental supply. Will this trend finally start chipping away at the rental housing shortfall?

📊 PlanOlabs Insights

Proprietary insights into the SFR industry from our research and consulting team

An ongoing PlanOlabs study shows that the number of rental homes available online (Multi-Family and Single Family) has increased by 49% since Q2 2022. To read about more factors contributing to longer vacant days on market, read the full article.

For more PlanOlabs insights, visit our blog.

🔍 I Like Big Data (Releases) And I Cannot Lie

All the relevant data releases from the past month

• The Consumer Price Index was up 6% over the last 12 months, with shelter costs accounting for 70% of that increase (there is some controversy on how shelter costs are taken into account in CPI… more on that in the full blog post)
• The Single Family Rent Index from CoreLogic was up 5.7% YoY - the lowest rate of appreciation since the spring of 2021
• Existing Home Sales jumped 14.5% in February, the largest monthly percentage increase since July 2020 (+22.4%)

For the rest of the housing and economic indicators we track, check out the full blog post here.

📰 SFR In The News

Everyone knows this stuff and you should too

• Tricon Residential reports quarterly earnings
• Latchel raises funding from Allegion Ventures
• Camillo Properties rebrands as SimplyHome by Camillo
• Roofstock cuts workforce by 27% in the second round of layoffs

The Beaker is a bi-weekly briefing from PlanOmatic on the economy, housing, and the forces shaping both. Have something we should cover? Reply to this email.

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