Rocket Fuel Newsletter – 07/29/2024

How does a global cybersecurity powerhouse atone for temporarily halting the world’s economy? Following its faulty update on July 19 that had an estimated $5 billion impact (plus additional losses due to lost productivity), CrowdStrike issued its vendors and third-party agents a $10 Uber Eats gift card that stopped working after Uber Eats flagged the large-scale gift card purchase as fraudulent. 🤦

In this edition: A powerful mortgage team shares its wisdom, Rocket Pro TPO visits Miami, and we finish our look at renting policy with a case study in creative alternatives to rent regulation.

Fuel Up! 🚀

Check Out The Latest Build-A-Broker™: The Journey Podcast

In this week’s episode of the Build-A-Broker™: The Journey podcast, the crew finishes their series on DNVR Lending by bringing the entire DNVR Lending leadership team together: Jerre Allyn, Tim Tacl and Abby McDaniel.

Their individual backgrounds as a former accountant, retired Naval officer and former social worker, respectively, have given them unique perspectives into building a successful mortgage brokerage. Listen in as they discuss their initial challenges, the hacks and shortcuts for a smoother transition and their strategies for effective conflict resolution!

New Home Sales

Sales of new homes dropped again slightly in June as high rates and home prices continue to keep sales low.

Builders typically start to limit the production of new homes once the ratio of monthly sales to inventory exceeds ~7.5 months. However, with the larger market of existing home sales still strained for inventory, builders have more room to continue growing the housing stock.

Blue Screens

After their CEO was recently vocal about their superior reliability compared to other airlines, last week’s CrowdStrike update that left much of the business world sitting idle on Friday was especially crippling for Delta. Through Wednesday, over 500,000 customers were affected by Delta’s cancellations, which continued for multiple days after their competitors had resumed normal activities.

Transportation Secretary Pete Buttigieg announced that his department will be investigating why Delta cancelled significantly more flights than other airlines; meanwhile, Delta will surely be focused on creating more redundancies in their core business processes to avoid this kind of catastrophe again.

Over the past 2 weeks, we have taken a deep dive into rent regulations and their impact on affordability. Rent regulations have come with unintended consequences, and we therefore looked at alternatives to make housing more affordable. This week, we will look at a city that has had success implementing alternatives to rent regulation to make for more affordable housing.

Minneapolis had a similar problem to many cities across the country: Affordable housing was becoming less and less accessible. To address this, Minneapolis took a different approach than many and turned to reforming their zoning code.

“Single-family zoning” is commonplace in the United States and ~75% of land zoned for housing in major cities is for single-family homes. This encourages the development of only single-family homes in these areas and keeps the supply of housing lower.

In 2018, Minneapolis became the first major city to eliminate this and allowed for duplexes and triplexes to be built where previously only a single-family home could be built.

After removing this zoning regulation, the number of multifamily housing developments surged, allowing supply the opportunity to keep pace with demand.

Minneapolis didn’t stop there. They removed other regulations that inhibited the development of new units, like parking requirements. Often, there is a requirement for how many parking spaces are required for a development, which can add costs and take up a lot of space. In 2021, parking minimums were eliminated, removing another obstacle from building new units.

By making it easier to build more units, Minneapolis has been able to spur development within the city. The increasing supply kept pace with demand and caused prices to stabilize.

Compared to the rest of Minnesota, Minneapolis has seen a larger increase in new housing units, a lower average change in rent, and a dramatic decrease in homelessness.

On a national level, rent in Minneapolis rose only 1%, while the rest of the nation rose over 30%.

Home affordability is not an easy problem to solve, but Minneapolis has shown that there are other answers than simply regulating rent prices. In fact, Minneapolis’ approach is legitimate proof that the underlying issues of home affordability are so much deeper than most realize, and surface-level policy changes are less effective because they don’t treat the root causes.

Zoning code reform is not guaranteed to work everywhere, but Minneapolis can and should be studied as a prime example of how to systemically address the home affordability issues plaguing our cities today.

Our team traveled down to the Rock the Market 2024 event hosted by the Miami Association of REALTORS last week. Thanks to everyone who stopped by the booth!

Another great week of puzzle times! Jim, Megan M and Jim M were all under 40 seconds, with Jim’s 31 seconds narrowly topping Megan’s 34- and Jim M’s 37-second times.

This week’s puzzle gets 3 Rockets out of 5.

Click here to solve!

Good luck!