“Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,428,000. This is 5.2 percent above the revised June estimate of 1,358,000 and is 12.9 percent above the July 2024 rate of 1,265,000. Single-family housing starts in July were at a rate of 939,000; this is 2.8 percent above the revised June figure of 913,000.” US Census Bureau
The housing shortage is something most of us worry about but are helpless to fix, it seems. There are many culprits—the NIMBY crowd that won’t allow more affordable housing near their single-family homes in cities, too high mortgage rates, but most of all the seeming inability of builders to supply enough new homes due to the shortage of construction workers.
First some history. Originally, much of it was due to the busted housing bubble that led to the Great Recession in 2008. More than one million new homes were built than could be sold, a classic example of oversupply. This resulted in just 600,000 new homes being constructed annually until 2012 when the Fed began its quantitative easing policies under Fed Chair Ben Bernanke that dropped 30-year fixed mortgage rates below 5% for the first time since the 1970s.
This is why I’m using residential housing construction as a good way to measure housing supply in the above FRED graph of housing construction. Starts have hovered around 1.4 million units since 2022 and the end of the COVID-19 pandemic (gray bar).
Construction had soared immediately after the pandemic due to the rock-bottom 30-year fixed mortgage rates, then plateaued to the current 1.4 million. But the Fed raised the rock-bottom rates to combat surging inflation and fixed mortgage rates soared to 7%, making housing purchases almost unaffordable to first-time, entry level buyers.
So, we know high mortgage rates are a major component of the housing shortage. But we can also answer maybe the largest part of the problem, the lack of new homes as highlighted in a recent Forbes Magazine article. Trump’s immigrant sweeps are not only hurting housing construction, but the job market in general.
“Immigrants make up 34% of the construction workforce, according to the Associated General Contractors of America. In states like California, Texas, New Jersey, Florida, Georgia and New York, they account for about half. Construction drives 4.5% of U.S. gross domestic product, making it the country’s tenth largest industry.
“Broaden the view and the impact grows. Residential housing, once you include rent and utility payments, fuels 15 to 18% of GDP, according to the National Association of Home Builders. Add commercial building to the mix and construction rises to the top of the chart.”
The good news what may come out of the housing shortage and homeless scourge. The highly unpopular immigrant sweeps of ICE agents invading homes, public streets, and workplaces.
The sharp drop in nonfarm payrolls in the last three unemployment reports is being blamed on the loss of possibly one million immigrants from our labor force, according to labor economists. This will hurt economic growth, because immigrants have traditionally supplied one million new Americans each year to our rapidly declining population growth rate.
Forbes cites a working paper published this month from the American Enterprise Institute (AEI), a conservative economics policy center, that found the Trump administration’s immigration policy will “likely result in a negative net migration in 2025—something the U.S. has not experienced in decades”—that would shrink labor participation and “put significant downward pressure on growth in the labor force and employment.”
It's a very sad tale. Trump’s Republicans have turned their backs on what has been the life blood of American Democracy that we can do little about without without recognizing that we can't do it without immigrants.
Harlan Green © 2025
Follow Harlan Green on: https://twitter.com/HarlanGreen
No comments:
Post a Comment