Dan Passarelli, CEO - Market Taker Mentoring

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This morning we had the housing data. We had housing starts, USA housing starts, and USA building permits. And this is some very relevant information, even if if you're not into real estate, even if you're just investing in the stock market, for a few reasons.

So as far as the housing starts go, for July, we had 1.446 million housing starts versus 1.54 million estimated. So we had fewer new homes being started to be built than were expected. Now, as far as building permits go, which is sort of the step before building a house, for July, we had 1.674 million permits versus 1.64 million estimated. So a little bit more than estimated. So now all that said, one was less than estimated. One was more than estimated, but both were drops.

Housing starts dropped 9.6% and building permits dropped 1.3%. Now, how that all comes into play is well, let me first show you the net effect of how this comes into play. If we look at some of the top REITs, okay, so REITs are real estate investment trusts, and it's basically a big fund that invests in a lot of real estate.

The biggest one by marketcap is American Ttower; symbol AMT. And you see that one's just sort of been climbing, I mean, really all year with some ups and downs, but we can really draw a couple of nice, really straight lines since June. This is a six month chart. In fact, if we take this out to a one year chart, it might be a little bit more relevant. We see that it sort of started dropping here in February and then has been making its way back. If we look at another read, let's just go back to the six month version of this because I think it's a little bit more relevant.

This is symbol PLD, which is prologious that has just been really steadily climbing since June. And let's just look at one more here, Crown Castle, CCI. And that one's been pretty steadily climbing. Now, why is this? It's kind of interesting.

We're seeing fewer units being built, fewer permits being applied for. Well, that in and of itself is the reason. If we look at a five year chart of existing home inventory, okay, so this is the number of houses that are out there back in 2018. I mean, these things are a bit seasonal. It always kind of slows down in the winter.

People tend to not shop for houses in the winter, at least in the north where I live. And on average, this map proves that, right? So 20, 18, 20, 19, 20, 20. But then after that, it really started to fall off. And so there's some pretty big implications there when there's less inventory.

What is inventory? It's supply, right? When there's less supply and you still have the same number of people or more, if the population is growing, you have the same or greater demand, and that just drives prices higher. And it gets to the point where some people can't afford to buy a house.

And so what we've seen is we've seen that in rents, rents are very, very high compared to where they were in the past. They've grown a great deal. Now, what does all this mean? One is the wealth gap sort of grows, right, which is very unfortunate. Another thing, though, is that it drives inflation yet higher, which is really kind of arguably bad for everyone, right, and bad for the economy. And it causes the Fed to raise interest rates faster, which could lead to inflation. So all this data is really important, really useful.

There could be some trading opportunities in the REITs, but the implications as far as inflation goes are really relevant to any investing decision that you could be making. So I hope that helps.