This morning I was back in the gym lifting. Post-COVID workouts are no fun. While I was in the squat rack Bill Ackman was on CNBC discussing his predictions for the economy over the next year. He believes the US is about to experience a huge economic boom.
To a certain extent – I think he is right. This past weekend me and a couple buddies were hitting the bars and clubs in Houston. We hung-out after the bars closed at a friends house with two gals from the University of Minnesota. One lives here and her friend graduates this semester. The friend in MN mentioned how great it is that things are somewhat back to normal in Texas.
I have a tendency to forget that a large portion of the country is still closed. When I was in Ely, Mn., they just opened dinning about 3 weeks prior. Rob, Brian, and I are chomping at the bit to get back to CA, NY, and NJ – however each of those states have massive restrictions on gatherings.
Keep in mind that behaviors have changed since the COVID lockdowns began. Spending habits, socializing, travel, etc, have all changed and it is not just the older demographic that has a real fear of COVID.
Friday night after we went to Moxies and Kirby ice House we visited Pour Behavior and Cle. Pour had a light crowd and Cle was closed – on a Friday night. Midtown was essentially dead. As I was leaving Pour I texted a buddy and he had a table at Sporting Club. All of Washington was hopping – but not nearly as full as I have seen on a Friday night.
Saturday night was a little better, Ra Sushi was packed, Cle was opened but looked dead from the traffic outside, Pour was packed. Kirby’s had a lighter crowd than the night before. We ended up at Fabian’s downtown and it was packed. Thankfully a buddy had a table so we could skip the near hour long line and head right in. Across the street Cherry, a new 80’s themed club, was packed.
Why do I mention these adventures from the weekend? It illustrates that, although Houston is open, it is not really back-to-normal-open. All these clubs, pre-COVID, would normally be slammed with people. The clubs and bars that are doing well, have a specific value proposition, theme, that keeps people coming back.
So there are two theories at play here – a significant number of people are still not comfortable with going out to bars, restaurants, or clubs.
- And they will eventually return to their pre-covid activities or, This is the new normal.
Either way I am relentless optimistic – especially for single and multifamily real estate.
One common theme I experienced chatting with a ton of people from both nights, is how many of them had recently moved to Houston or who were visiting friends and about to move to Houston.
If you think real estate is expensive now, just wait. – JB
I looked over the HAR report during my bought of COVID. Single Family – which includes 1-4 units – rents are up nearly 10% YoY. That means what rented for $1,300/month last year is now $1,430/month. An extra $130/month may not seem like a lot, however in a quadplex that is an extra $520. These numbers are absolutely insane and wont stop anytime soon – if my field report is evidence of what is happening on the streets of H-town – expect these numbers to increase.
The retail market is even more insane. 20% increase in prices at the median. Meaning – 50% of the market appreciated more than 20%. There is nearly a 0% chance of a real estate crash in the next five years. Price reductions happen at 10 months of inventory – we are currently at 1.5 months. We need a 2008 style crash, by a factor of 3X, to get back to a normal market of 6 months of inventory.
There are two things you can do today to take advantage of this market.
Invest in the Texas Appreciation Fund. We started a new single family fund that offers 7-8% preferred return quarterly and an additional 10-14% return on your capital when we liquidate the fund in a few years.