The "There is No Inflation" Report: Rents Are Up Over 8%

A combination of rent controls and Fed money pouring into the greater Silicon Valley area is pushing rents through the roof in Northern California.

The cost of renting an apartment in Northern California is rising more quickly than anywhere else in the country, according to a new Trulia report.

The second and third highest increases in the nation belong to San Francisco and Oakland, which jumped to 14.5 and 14.4 percent respectively in August from the year before.

Trulia reported the median monthly rent is San Francisco is now $3,500, tied with New York City for the highest among metropolitan areas in the country.

Across the bay, the median rent in Oakland comes in at $2,600 a month.

The Sacramento metro area leads the list with a 14.9 percent hike in rent.

Nationally, the month-over-month increase in asking home prices rose to 1.0% in August, up a bit from 0.7% in July. Asking prices rose 7.8% year-over-year,

 At the local level, asking prices rose year-over-year in 96 of the 100 largest U.S. metros.

Rent Trends in the 25 Largest Rental Markets
#	U.S. Metro	Y-o-Y % change in rents, Aug 2014	Y-o-Y % change in rents, May 2014	Median rent for 2-bedroom, Aug 2014
1	Sacramento, CA	14.9%	8.0%	$1,250
2	San Francisco, CA	14.5%	15.1%	$3,500
3	Oakland, CA	14.4%	10.7%	$2,600
4	Denver, CO	13.1%	10.4%	$1,550
5	Miami, FL	11.3%	8.5%	$2,450
6	Philadelphia, PA	9.2%	5.0%	$1,600
7	Los Angeles, CA	8.8%	5.4%	$2,450
8	Seattle, WA	8.7%	8.4%	$1,850
9	Baltimore, MD	8.3%	7.4%	$1,600
10	Phoenix, AZ	8.3%	6.7%	$1,050
11	Chicago, IL	7.7%	5.9%	$1,650
12	Atlanta, GA	7.7%	8.7%	$1,250
13	New York, NY-NJ	7.0%	5.3%	$3,500
14	San Diego, CA	6.6%	11.0%	$2,000
15	St. Louis, MO-IL	6.4%	5.9%	$950
16	Riverside-San Bernardino, CA	6.3%	4.9%	$1,550
17	Las Vegas, NV	6.0%	3.0%	$1,000
18	Tampa-St. Petersburg, FL	5.7%	4.1%	$1,150
19	Orange County, CA	5.1%	2.8%	$2,100
20	Boston, MA	4.9%	3.3%	$2,350
21	Dallas, TX	4.6%	4.2%	$1,400
22	Houston, TX	4.5%	3.3%	$1,500
23	Portland, OR-WA	3.8%	4.5%	$1,300
24	Washington, DC-VA-MD-WV	3.7%	1.4%	$2,200
25	Minneapolis-St. Paul, MN-WI	2.2%	3.5%	$1,300

There Certainly is No Inflation (Butter Edition)

Butter futures prices on the Chicago Mercantile Exchange have reached an all-time high.

On Friday, the October contract traded as high as $2.5500002,the highest ever for a most active contract. It was a gain on the day of 1.1%.

The price is up 62% this year.

-RW

The "There Is No Inflation" Report (Philatelic Edition)

 The One-Cent Magenta from British Guiana

A  one-cent postage stamp from the 19th century — sold for $9.5 million on Tuesday, the most ever paid for a stamp at auction.

The buyer, bidding by telephone at Sotheby’s on the Upper East Side, was not identified. The auctioneer, David N. Redden, opened the bidding at $4.5 million — $5.4 million once a 20 percent buyer’s premium was added.

The bids climbed in $500,000 increments to $7.5 million. After three more offers a bid hit $7.9 million, closing the auction at $9.5 million with the buyer’s premium.

The stamp is known as the One-Cent Magenta from British Guiana. It was printed by a local newspaper — the scheduled shipment of thousands of stamps from Britain did not arrive, and the local postmaster did not want to run out — and issued in 1856.

It carries the image of a schooner and Latin words that are often translated as, “We give and expect in return.” It had not been seen in public since the mid-1980s until Sotheby’s sent it on a recent tour of museums and libraries.

(via NYT)

The "There Is No Inflation" Report: Manhattan Rent Edition

Bloomberg reports:

Manhattan’s apartment market is heating up in the busiest season for moving, sending rents to a five-year high and shifting the advantage back to landlords after a brief respite for tenants.

The median monthly rent rose 3.1 percent in May from a year earlier to $3,300, the highest since February 2009, according to a report today by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The vacancy rate slipped to 1.58 percent from 1.60 percent.

Rents are rebounding after a six-month slide that started in September, when a surge in home sales helped push up apartment vacancies. Rigid mortgage standards and higher prices are tipping would-be buyers into the rental market, while employment growth is increasing the pool of potential tenants, said Jonathan Miller, president of New York-based Miller Samuel.

“Weakness in the rental market was short lived,” Miller said in an interview. “This pent-up demand from purchasers has been worked off and more people are getting hired. Rents tend to react more to rising employment than purchases.”

New York City added 75,000 jobs in the 12 months through April, according to the state Labor Department. The unemployment rate was 7.9 percent, down from 8.8 percent in April 2013.

The "There Is No Inflation" Report": Prices on Maxwell House, Folgers and Yuban Coffee Raised

Kraft  raised the prices of its Maxwell House and Yuban coffee brands last week, following J.M. Smucker Co.

The prices on the brands’ roast and ground coffee products increased by about 10 percent on June 6, according to Caroline Krajewski, a spokeswoman for the company.

Smucker, the maker of the best-selling U.S. coffee brand Folgers, said June 3 that it increased coffee prices by an average of 9 percent after bean costs rose.

The "There Is No Inflation" Report (Rent Edition)

The "There Is No Inflation" Report: Manhattan Condo Priced at Record $110 million

According to Bloomberg News, developers are seeking $110 million for a penthouse condominium apartment that is located in the Woolworth Building in Manhattan.

The penthouse has nine floors and is about 8,975 square feet in size. It includes four bedrooms, media room, wine cellar and an observation deck at the top.

Prices for other condos in the Woolworth Building start at $3.5 million for a 1,209 square-foot unit on the 44th floor. Three units are listed at more than $20 million, including a 6,084-square-foot apartment for $24 million.

At 56 Leonard, a planned 60-story tower in southern Tribeca, a 7,800-square-foot penthouse recently sold for $47 million.

A living room at 56 Leonard.

-RW

The "There Is No Inflation" Report: Air Rights Edition

Capital New York reports:

A development consortium has purchased the air rights of two Manhattan theaters from the Shubert Organization for a record $409 per square foot, according to city records filed last month.

The sale of nearly 45,000 square feet at that price represents a steep increase in the cost of theater development rights in the district. In 2012, Shubert sold air rights from two of its theaters for about $225 per square foot. That's a more than 80 percent rise.


But this latest deal may just be the tip of the iceberg. It takes about a year to finalize a sale and for its price to become public, meaning $409 was the going rate quite a while ago.

How much are development rights in the theater district going for now? About $600 per square foot...

 The sales were spurred by a 1990s zoning change that allowed the landmarked buildings—which can't fully utilize the rights on their own lots—to sell the sky above them. That has meant an infusion of cash for the theaters, while developers have been able to assemble rights to build much taller buildings elsewhere within the district. In exchange, the developers must contribute about $18 per square foot they purchase to a special fund for the arts.

The "There Is No Inflation" Report (Hawaiian Edition)

Garth Yamanaka emails:

Aloha Robert,

Just received my recent update from Marshall & Swift for local multipliers which is utilized for cost estimates in real estate valuation.  The multipliers are published quarterly  and is based on two Marshall & Swift building cost indexes.

December 2013
Local Multiplier - Hawaii - 1.42
                       - Hilo  - 1.41
March 2014
Local Multiplier - Hawaii - 1.66
                       - Hilo - 1.69

In the past 5 years I have been monitoring the Hawaii sector I have never seen a jump this big for the local multiplier.

I didn't see any other states being affected in a similar manner.

Mahalo,

The "There Is No Inflation" Report [Chipotle and Netflix Edition]

Sam Ro at Business Insider provides the news:

Simply put, the American consumer has been getting squeezed to line the pockets of corporate America and its investors.

However, we're now seeing more evidence that businesses will attempt to bolster their profits by raising prices on their customers. Chipotle and Netflix recently announced that they would soon be raising the prices of their goods and services...

Chipotle Mexican Grill's CFO announced it would raise prices by mid-single digits (~5%) by the end of the quarter. This comes as the burrito chain faces rising food costs. "A 5% increase would raise the cost of Chipotle's chicken burrito from $7.81 to about $8.20 in New York," reported BI's Hayley Peterson.

Netflix is raising the prices of new subscriptions by $1 to $2 per month. That would represent a 12% to 25% increase over a $7.99 subscription. "The company justified the price increase by saying it has greatly expanded its streaming video library," reported BI's Steve Kovach. "It'll use the new revenue to acquire even more content."

The "There Is No Inflation" Report [$2 million+ Homes In Naples Florida Edition]

By Chris Rossini

Helicopter money is dropping on Southwest Florida (again).

News-Press reports:

Sales of multimillion dollar homes in Naples skyrocketed in the first quarter of 2014, according a report released Thursday from the Greater Naples Board of Realtors.

From January until the end of March, 48 homes valued at $2 million or more were sold in Naples, an 83 percent increase over the first quarter of 2013, according to the report. (emphasis added)

---

Chris Rossini is on Twitter

The "There Is No Inflation" Report: Steel, Aluminum, Carbon... Edition

Nick Badalamenti emails:

Below is a fascinating report from one of my vendors for steel. Notice not only the price increases in every category, but the tightening inventory.

 [RW highlights]

Dear Valued Customers, Ryerson regularly updates customers of metals industry dynamics that may impact their ability to find the best value for processing and distribution, including ways Ryerson can support their business. As you may know, every metals product category is presently reflecting activity that may impact prices and lead-times spanning suppliers, service centers and customers: CARBON COIL & SHEET CARBON PLATE Carbon Coil and Sheet is experiencing delivery lead-times and  price increases of $60/ton (.03 lb.) reflecting in current indices. This was the result of unplanned producer and weather-related transportation issues that limited scrap and raw materials, including iron ore and coal for suppliers. Carbon Plate continues to see strong demand and extending lead-times are expected to continue through the third quarter of 2014. Pricing set by metals producers continues to increase indices to their highest point in 52 weeks. STAINLESS ALUMINUM Stainless is experiencing longer lead-times and price increases, including an increase April 1 for base and polish. Domestic producers are pushing lead times into August, and inventory is leaner as a result of increasing demand in the appliance, automotive and construction markets. Concerns for global supply of nickel increased commodity pricing and raw material surcharges month-over-month this year for nickel-bearing grades. Aluminum continues to experience increased demand from aerospace and automotive, limiting heat-treat capacity affecting 6XXX, 2XXX and 7XXX grades. Supplier mills announced price increases (.05/.10 per lb.) Midwest premiums have increased this year .08 cents more than the average for 2013. Offshore depot inventories are leaner and future import pricing is increasing. CARBON SBQ Carbon SBQ Bar is also experiencing lead-times twice that of 2013 and controlled order entry as a result of strong energy and automotive demand. Additionally, producers continue to increase prices, most recently $30-35/ton (.015/018 lb.) To navigate this environment, Ryerson is actively managing its inventory, working closely with trusted suppliers and leveraging its network of more than 90 service centers to help enhance customer efficiency and profitability. The company wants to support you and your business during the current industry environment. Please contact your Ryerson representative for more information. Sincerely, Your Ryerson Sales Team

The "There Is No Inflation" Report (Chipotle Edition)

From CNN:

Chipotle has been on an big expansion push, opening new locations around the country with people often lining up for the restaurant's debut in their towns. And it has no plans to slow its roll. The company expects to open up to 195 new stores in 2014.

But rising prices for staple ingredients have been giving Chipotle some indigestion. Food costs ate up nearly 35% of its revenue in the quarter.

Beef prices have risen to all-time highs as cattle farmers recover from two years of drought. Chipotle said its paying 25% more for steak. It expects cheese prices to increase 10% and the supply of avocados is down due to dry weather in California.

With all the food price inflation, Chipotle plans to increase menu prices for the first time in three years, said chief financial officer Jack Hartung.

"We're at a point where we need to pass along these rapidly rising food prices," Hartung said in a conference call with analysts. Menu prices will go up "somewhere in the mid- single digits" on a percentage basis, beginning this quarter, he said.

The "There Is No Inflation" Report: Fruit and Vegetable Edition

Although the California drought may be a catalyst for fruit and vegetable price increases, I have been pointing out in the EPJ Daily Alert that the supply side causes of price increases are only part of the problem. Once these prices start to climb, they really tend to heat up. We are seeing this in the food sector and the metals sector. Below, via a WSJ chart, are some price forecasts put together by Arizona State University.

The "There Is No Inflation" Report: Beef Prices Hit All-Time High in U.S.

LaTi reports:

Come grilling season, expect your sirloin steak to come with a hearty side of sticker shock.
Beef prices have reached all-time highs in the U.S. and aren't expected to come down any time soon...

The retail value of "all-fresh" USDA choice-grade beef jumped to a record $5.28 a pound in February, up from $4.91 the same time a year ago. The same grade of beef cost $3.97 as recently as 2008.
The swelling prices are roiling the beef supply chain from rancher to restaurant.

Norm Langer managed to go two years without raising prices at his famed Westlake delicatessen.
But last week, he reluctantly began printing new menus showing a 50-cent increase for sandwiches at his 67-year-old restaurant.

Langer accepts it's one of the perils of business when your bread and butter happens to be corned beef and pastrami. But he fears he may have to raise prices again, driving away customers.

"No beef, no delicatessen. That's the bottom line," Langer said after a typically frenetic lunch service. "Jewish delis aren't vegetarian, they're based on corned beef and pastrami. Things are beyond my control. With the price increase, I hope my customers are tolerant."

Langer said beef prices are the main reason his wholesale food costs have risen 45% in the last two years...

The biggest fast-food chains aren't immune to the price pressure either. Experts say $1 value menus could soon be a thing of the past.
In October, McDonald's said its Dollar Menu of more than a decade would morph into a so-called Dollar Menu & More, which mixes $1, $2 and $5 items. Wendy's made a similar move last year.
Yum Brands Inc., which owns Taco Bell, said in December that it expects 4% price inflation for beef and other meats in 2014, though the company didn't indicate whether the costs would be passed on to consumers.


http://www.latimes.com/business/la-fi-beef-prices-20140406,0,2966247.story#ixzz2ySerO2uN

The "There Is No Inflation" Report: Downtown L.A. Condo Prices Surge 6% in March

Despite a boom of apartment building, the condo market in downtown Los Angeles remains tight as a drum. And that’s pushing up prices, reports LaTi.

The price per square foot of a new condo downtown climbed 6% in March from February to $656, according to a new report from the Mark Co.

Mark said, there were only 27 new units for sale downtown, and the inventory of existing condos for sale would burn off in less than three months -- half of what’s considered a healthy supply. Prices for condo resales are 23% higher than a year earlier, at $534 per square foot.

The "There is No Inflation" Report: Brooklyn Studios: $2,260

According to the latest report from real estate firm Douglas Elliman, median rental prices in Brooklyn rose 11.6% from this time a year ago, reaching $2,890, the highest point in five years.

Average Brooklyn rental prices increased nearly 3% to $3,178. While the the median rental price for studios has increased a whopping 27% to $2,260.

The "There is No Inflation" Report: Maid’s Apartment in NYC sells for $3M

NyPo reports:

Sandy Weill just sold his “maid’s apartment” at 15 Central Park West for around $3 million, more than three times what the former head of Citibank paid for it in 2007.

The billionaire had already sold his penthouse in the city’s most expensive building for $88 million, more than double his purchase price.

The apartment has 1,079-square-feet of living space.

The "There Is No Inflation" Report (Real Estate Edition)

More than 40 percent of the homes for sale in metro San Francisco are now asking more than $1 million, reports WaPo.

That figure, according to WaPo, comes from Jed Kolko, the chief economist at the real-estate tracking site Trulia, who has calculated a similar share for each of the 100 largest metros (xlsx) in the country. San Francisco is not surprisingly on top:

It should be obvious that Fed printed money is landing first in the greater Silicon Valley area and in the greater NYC area (including hedge fund country, Fairfield County, CT). The money will eventually works its way through the rest of the country, though not as dramatically. As of now, in 68 of the 100 largest metros — including Chicago, Philadelphia, Atlanta and Dallas — million-dollar homes comprise less than 5 percent of what's on the market. They make up less than 2 percent of for-sale housing in 44 of the largest metros.

The "There Is No Inflation" Report (Soaring Beef Edition)

Prices for beef saw their biggest monthly change in February since November 2003.

(Chart via WSJ)