Discussing construction jobs, the possibility of work requirements for Section 8 housing, another big bank settlement, economic inequality and home ownership, buying versus renting, more millennials buying homes and home builder confidence
Construction Job Openings Increase
From Eye On Housing:
The count of unfilled jobs in the construction sector declined in February, but remains higher than a year ago.
According to the BLS Job Openings and Labor Turnover Survey (JOLTS) and NAHB analysis, the number of open construction sector jobs came in at 196,000 in February. The post-recession high count of open, unfilled construction jobs was 255,000 in July of last year. The number of open construction sector jobs was 169,000 a year ago.
The overall trend for open construction jobs has been increasing since the end of the Great Recession. This is consistent with survey data indicating that access to labor remains a top business challenge for builders.
Despite the strong demand for new homes, home builders are still having a hard time finding qualified workers. This has been a problem for quite some time and leads me to wonder if builders need to develop OTJ training programs to help with this problem?
Reducing Poverty by Promoting Opportunity and Economic Mobility
It appears that the Trump administration is looking at adding work requirements to government housing programs such as Section 8 according to a press release:
The United States and its Constitution were founded on the principles of freedom and equal opportunity for all. To ensure that all Americans would be able to realize the benefits of those principles, especially during hard times, the Government established programs to help families with basic unmet needs. Unfortunately, many of the programs designed to help families have instead delayed economic independence, perpetuated poverty, and weakened family bonds. While bipartisan welfare reform enacted in 1996 was a step toward eliminating the economic stagnation and social harm that can result from long-term Government dependence, the welfare system still traps many recipients, especially children, in poverty and is in need of further reform and modernization in order to increase self-sufficiency, well-being, and economic mobility.
While some people DO abuse or become dependent upon government assistance, not all people that use these programs are. But there is no doubt that many government programs are abused or have become bloated bureaucracies.
It is unclear if HUD and other government housing programs will implement a work requirement. Work requirements cannot be implemented by executive order but it is possible that we could see work requirements being pushed in DC.
What effect this would have on investors that own Section 8 rentals is unknown at this time. We will need to keep an eye on this as it could hurt a lot of investors as well as the households that rely upon government assistance.
I would think that focusing on more affordable housing options also needs to be addressed. But anytime that we might reduce government bureaucracies or waste is a good thing since the deficit is HUGE.
That being said, we need to weigh the cost versus the benefit to society of providing housing for those facing a tough time.
Wells Fargo Could Pay $1 BILLION to Settle Federal Probes
Wells Fargo could pay up to $1 billion in fines to two federal regulators to settle claims they inappropriately charged customers for unnecessary or unwanted banking and insurance products, the bank revealed Friday.
The CFPB and OCC have been investigating Wells Fargo over reports that the bank had charged customers for auto insurance products they did not need, along with unnecessary fees to lock in mortgage interest rates.
Yet another big bank settlement. The article does not say if any Wells Fargo executives are going to jail…
This is a pretty big fine and you have to wonder how much it will hurt Wells Fargo.
Does Economic Inequality Equal Housing Inequality?
A growing body of research suggests that inequality in the value of Americans’ homes is a major factor—perhaps the key factor—in the country’s economic divides.
The rise in housing inequality brings us face to face with a central paradox of today’s increasingly urbanized form of capitalism. The clustering of talent, industry, investment, and other economic assets in small parts of cities and metropolitan areas is at once the main engine of economic growth and the biggest driver of inequality. The ability to buy and own housing, much more than income or any other source of wealth, is a significant factor in the growing divides between the economy’s winners and losers.
I constantly write about the benefits of owning a home. While it is not for everyone, the wealth building effect of home ownership cannot be denied!
The Shift From Renting to Owning for Millennials
From First American:
Are millennials destined to be a generation of renters? Consider that myth busted. Quite the opposite, actually – and they’re just getting started.
Many millennials have prioritized furthering their education and thus delayed getting married and having children, which are critical lifestyle triggers to buying a first home. However, now the oldest millennials have made those lifestyle decisions and are entering the housing market. In fact, the data supports this trend – the homeownership rate among households headed by someone under age 35 increased the most of any age group in the fourth quarter of 2017, jumping from 34.7 percent a year earlier to 36 percent.
It appears that despite some of the criticisms of millennials NOT buying homes, they are actually doing the smart thing and waiting until the time is right. Buying before you are ready or before it fits your lifestyle and goals is not a smart decision.
When the time is right to buy a home, do not hesitate. If it does not make sense for someone to buy a home, they should NOT!
If buying a home isn’t right for you at this time, focus on your other goals. I would suggest that you should continue to pay down debt and save for a down payment if possible.
That being said, right now buying does beat renting according to the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index. The BH&J Index is a quarterly report that compares renting versus buying.
The BH&J Index looks at all of the US housing market and then compares 23 major cities. This is a pretty independent look at the rent versus buy question without any buy a home now cheer leading that you might get from many other studies.
They compare buying real estate and and building wealth via increases in equity to renting a comparable property and investing in a portfolio of stocks and bonds. While there are countless variables to consider, I consider this a great indicator for those thinking about buying a home.
Some may be concerned that home prices have increased too much and we are ripe for a price correction. This is NOT true according to Eli Beracha, Ph.D., Co-Creator of the BH&J Index:
Our data indicates that prices are above their 40-year trend but not significantly so as they were in 2007. Rather than a crash, I anticipate slower growth in prices accompanied by longer marketing times for sellers and increasing inventories, which should bring prices back in conjunction with their 40-year trend.
This echoes my feelings about the US housing market. Home prices have increased rather dramatically but the rate of increases should slow down in the coming years.
Of course, we do not know what the future holds and whether or not a natural disaster or some man made problem will cause the economy and housing market to hit the skids. You must decide what is best for you at this time in your life!
Home Builder Confidence Decreases Slightly
Builder confidence in the market for newly-built single-family homes edged down one point to a level of 69 in April on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) but remains on firm ground.
NAHB Chairman Randy Noel said:
Strong demand for housing is keeping builders optimistic about future market conditions. However, builders are facing supply-side constraints, such as a lack of buildable lots and increasing construction material costs. Tariffs placed on Canadian lumber and other imported products are pushing up prices and hurting housing affordability.
Good news but we heard again about how tariffs are hurting and not helping. The increased costs due to tariffs will be passed onto home buyers which is especially bad since we have a shortage of affordable homes.