Grant Ellison

Rental vacancy hit 7.6% in Q3, the highest since 2014. Asking rents have accelerated every month since the spring. Those two don’t usually happen together. Either rents are repricing a thin margin while the stock loosens, or one series is wrong. SOM №3: scndordereffects.substack.co…

Really amazing to me how much absolute fascism is being spewed by those who claim to be anti-fascist. Putting opponents in jail, seizing companies and assets, etc. Truly a wild time to be alive. What has happened to our country? For one, our education system has very obviously failed... I feel terrible for how badly our young adults in particular have been hoodwinked.

Payrolls 165k against a 65k consensus, unemployment down to 4.1%, participation up to 61.9%. Strong print. One series inside it went the other way. U6 rose from 7.6% to 7.9%. The gap between U6 and the headline rate widened 40bps in a single month, to 3.8pp.

Payrolls tomorrow. The thing I’d watch is the revision to the prior two months rather than the headline. Last year’s benchmark took 79k off total nonfarm, and 178k off private, with government revised the other way. The monthly print is the least reliable part of the release.

Wages rose 3.1% over the last year. Headline PCE rose 3.6%. Real compensation went backwards, and that’s before you get to the fact that benefits grew 3.9% while the paycheck line grew 3.1%. Employers and employees are seeing very different things.

PMMS 7.18%, down 6bps and the third straight weekly decline. 7.40 to 7.32 to 7.24 to 7.18. Twenty-two basis points over three weeks works out to about $60 a month on a $400k loan. The rate is still 96bps above where it sat a year ago, which is worth $255 a month.

Initial claims 189k against a 197k consensus. Four-week average down to 194.75k. Continuing claims 1,718k, up 23k and above consensus. Nobody is getting fired. The ones who do lose a job are taking longer to find the next one, and this part is what stalls a home purchase.

Rental vacancy printed 7.6% for Q3, up from a year ago and statistically significant. Homeownership is 65.5%. Both of those move the same variable, which is why holding vacancy against any single historical average tells you more about the average than the market.

Immigrants from the 2022-24 surge rent overwhelmingly in small and medium buildings. 70% are in properties under 50 units. Other renters split much more evenly. So a demand shock there lands on small private landlords and barely touches the institutional product.

Housing is no less affordable today than at the October 2023 peak, even with prices higher. Rates are 29bps lower and median income rose 8.5% over those three years. That offset a 3.8% rise in home values almost exactly. SOM №3: scndordereffects.substack.co…

Treasury renewed the buyback schedule: up to $70bn of off-the-run purchases next quarter for liquidity support, plus $25bn in the 1-month to 2-year bucket for cash management. The standing long-end bid that filled four straight $6bn operations survives.

MBA’s 30yr has fallen three weeks running, 7.50% to 7.30%. Applications over those same three weeks: −5.3%, +3.4%, −1.2%. Twenty basis points of relief and the composite is net lower than where it started.

Mortgage locks to non-permanent residents are down 30% YoY. Their share of all locks went from a 4.0% peak in late 2024 to 2.3% now. Still almost double the 1.3% that was normal before Covid. The pullback is real and the level is not back to baseline.

The silver tsunami assumes older owners eventually sell in bulk. Census says at age 90 roughly half are still living in a home they own. The rest split four ways between renting, moving in with adult children, and group settings. The unwind is real but it is slow.

Midterms today, and the honest take is that the housing stuff that matters moves slower than any election. Zoning is municipal, the rate is set by a committee that just voted 10-2, and the builder financing decision was made six months ago.

Share of 25 year olds living with parents or as an extra roommate: 40% today, 27% in 1994. By age 34 it’s 12% against 9%. The delay in the twenties is enormous and most of it closes by the early thirties. That’s a timing problem more than a lost generation.

Genuine question for anyone running apartments. What vacancy rate in your market puts rent growth at roughly inflation?

Q3 employment costs: total compensation up 3.4% YoY, wages up 3.1%, benefits up 3.9%. So employers paid 3.4% more and workers saw 3.1%. The difference is health premiums, and it shows up as a cost to one side and never as income to the other.

Wednesday is the quarterly refunding, and buried in it is whether Treasury renews the buyback schedule. The current schedule’s last long-end operation runs that same day. Four straight full takes at $6bn, and the standing bid ends on Wednesday unless they extend.

The curve changed shape last week. 2yr fell 13bps to 4.56, 10yr only 6 to 4.94, so 2s10s steepened 7 to 0.38. Three weeks ago it was flattening hard.