I said last week that higher new home sales and rising homebuilders’ optimism foretells a strong summer sales season if builders and existing-home inventories don’t run out of housing stock.
The construction industry is responding. Spending in March 2023 rose 0.3 percent above the revised February estimate of $1,829.6 billion, according to the Census Bureau. The March figure is 3.8 percent above the March 2022 estimate of $1,768.2 billion.
This is even with the Fed’s latest 0.25 percent hike that means higher construction costs.
Why? We know there is a tremendous housing shortage. There are 63,000 homeless in Los Angeles alone, more than 150,000 nationally, and rental rates aren’t coming down because of low vacancy rates. People have to live somewhere: for too many it’s on the streets.
Calculated Risk’s Bill McBride reports private residential construction spending is down 10.0 percent. Non-residential spending is up 21.3 percent year-over-year. Public spending is up 15.0 percent year-over-year.
That is because of the $ trillions being fed into the economy with the Infrastructure and Inflation Reduction Acts. It’s what governments—both state and federal—are supposed to do doing recessions and other uncertain times (such as wars, pandemics, global warming, etc.).
So, it’s a very good sign for our economic future and the reason I believe what some economists are calling a ‘rolling recession’ will be short-lived.
But that’s not helping the homeless. States like California are addressing the problem, but a national survey reports that NIMBY zoning laws and local governments’ recalcitrance to rezone for denser housing is the main reason residential construction isn’t meeting this demand.
Surveys have shown time and again the reluctance of communities to build more affordable housing, since residents believe it harms their own housing values. The answer must be the better design of neighborhoods that improve accessibility to jobs as well as affordable housing.
A recent Stanford University study of California’s homeless problem highlighted its complexity. Twenty-five percent of the homeless have either drug addiction or mental health problems that could be mitigated with better treatment centers.
Single-family zoning and local opposition to housing, often embodied by the “not in my backyard,” or NIMBY, sentiment makes neighborhoods more expensive. Each additional growth control policy a community added was associated with a 3-5 percent increase in home prices (Taylor 2015; Rothell 2019), said the study.
The construction industry is also playing catch-up, as new construction almost ceased during and after the Great Recession. The aftermath of the busted housing bubble produced an excess of one million homes, which large corporations and hedge funds snapped up at rock bottom prices, which took many homes off the housing market.
The Biden administration has chipped in more than $250 million to subsidize more affordable housing, but $ billions more will be needed to encourage more such developments.
The Great Recession caused almost as much economic damage as the Great Depression. Great Depression programs in the 1930s subsidized homeownership during record unemployment of that time.
More government support will be needed to support such efforts once again.
Harlan Green © 2023
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment