Housing Challenges Abound in U.S.

Housing that is affordable remains a continual challenge in the United States, and faces renters at almost every income level, with the exception of the ultra wealthy; and while it can be had, most people face higher prices, but both the rental market as well as home ownership is becoming a deep concern, especially for those living in higher priced locations on the East and West coasts.

The major obstacle for home ownership are high interest rates, established by the Federal Reserve Board to fight inflation, but it has also affected the rental market by increasing rents for new renters, while offering them incentives but preserving rents for them and those existing renters.

Additionally, economic uncertainty, basic affordability, and a tight inventory are also factors, and with the resumption of federal student loan payments in October are creating a perfect storm in the quest for affordable housing.

Demand has exceeded inventory in most areas, and while there has been an increase in new construction, often these are targeted to upper income renters, or owners, leaving many in the middle class struggling.

As a result of the rise in interest rates the traditional 30 year fixed mortgage has ballooned from a previous low of 5 percent to now just hovering at 7.3 percent, from late August, the most recent figures available. 

At the mid September meeting by the Federal Reserve Open Market Committee, it was decided to not raise interest rates, but an increase at the end of the year is a strong possibility, say many economists, and Fed watchers.

Forbes Magazine, on their website, reported, “Year over year existing home sales sagged in July for the second consecutive month, slipping by 22 % to a six month low, with all four major U.S. regions posting year over year steep declines, according to the National Association of Realtors (NAR).”

As is well known, the target goal, said Federal Reserve Chair Jerome Powell, is two percent inflation, making potential buyers wary of what’s coming, as he continues the bank’s efforts to bring inflation down.

There is caution, said Keith Gumbinger, vice president at mortgage website HSH.com, who told Forbes, “right now, it’s more about what the Fed intends to do rather than what it does,” and “[W]hile not meaningless, another quarter point hike at this point won’t change the big picture much, as a lot of the 'damage’ from higher interest rates is either done or is already in process.”

Some markets have seen a decrease in rents, compared to a year ago in an analysis by CNBC.com, these areas “have not shown negative annual growth in well over a decade. When they did, it was due to a recession hitting demand.”

Now, impacted by those high interest rates for home ownership, there is a 94 percent occupancy rate in the rental market, and the deleterious effect on older residents, and millennials who are priced out of home ownership; and, while there is an increase in construction for rental properties, there is not enough of it to make a dent, and what has been created is mainly for high income earners.

Other sources, mainly CoStar Analytics, show that there is some negativity in the rental market, but it is limited, and has mostly been seen in parts of the Southwest, and in some Southeastern parts of the US, such as Austin, Texas, Phoenix, plus Jacksonville and Miami, Florida.

Other areas, such as the Midwest are showing increases, and this is especially seen in Chicago, which is showing high increases, where rents are now 3.6 percent over the market average of 1.2 percent, according to local real estate columnist Don DeBat.

New rental construction is, according to current figures, at 13,000, reaching an expansion of only 2.3 percent; and, again on the higher end, resulting in a substantial rent increase  for existing tenants.

It should be noted that the average rent in the US is $2,052, and the vacancy rate is 6.3 percent, as tracked by the St. Louis Federal Reserve using Census Bureau data.

For those people living at the poverty level, or those who have to spend more than 30 percent of their income on housing, their situation is severely strained. The cost burden as given by the Institute of Housing Studies at DePaul University in Chicago gives a bleak picture where both renters and homeowners are often forced to compromise on health care, and healthy food.

They also face a diminishing housing supply, especially in two and four unit buildings owned by private landlords who while offering below market rates, also own older properties where maintenance costs can be expensive; and, this is especially true in Black and brown communities.

The National Low Income Housing Coalition has stated that, “no state has an adequate supply of affordable rental housing for the low income renters,” and now with the increasing numbers of migrants, that creates further strain, especially in large metropolitan areas.

They also cite the figure of 293,354 renters that fall short of affordable and available for existing low income renters, and for those renters that are severely cost burdened, the current percentage is 73 percent.

In brief, the U.S. is short 7.3 million of affordable and available rental units. And, on the ownership side many of them are over 65 years of age, are of color, and struggle with many of the same issues that renters do.

It’s impossible to predict how these numbers will play out for the future, and as lawakers, and other officials struggle to meet the challenge, the interplay between local and federal government will be crucial.

US Economy keeps chugging on in the August Report

For many the past Labor Day weekend was hot, sunny, and often miserable, and for those suffering from the effects of hurricanes, and floods, the possibility of the American custom of barbequed ribs, and potato salad took a backseat to survival, but for many in the country whose lives lay outside of those tragedies, the August Jobs Report issued by the US Dept, of Labor, last Friday, showed that the American economy was still resilient, and many who had been on the bench joined the workforce.

187,000 non farm jobs were created showing that Americans were working, albeit at lower wages, and handling inflation as best they could, despite unemployment inching up to 3.8 percent, and wages a notch lower at 4.2 percent, much of this was good news as Federal Reserve Chair Jerome Powell probably was pleased at the numbers, the most significant was, of course, that inflation has leveled off to 3 percent, and why that figure is encouraging is it is still above the level of 2 percent, the mandate of the Feds, along with full employment.

Economists are speculating whether the Feds will raise interest rates again, or hold off, but at the annual Jackson Hole, Wy. meeting Powell was noncommittal, and as usual gave a data driven response.

"We will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data," Powell said in a keynote address. "It is the Fed’s job to bring inflation down to our 2% goal, and we will do so,” reported Reuters two weeks ago from that meeting.

Overall the economy is at a much better place than previously thought in the dark days of the pandemic, and nearly all of those jobs have been recovered, a fact that was not lost on President Joe Biden as he addressed a rally in Philadelphia on Monday, tagging onto previous remarks in the White House Rose Garden, when he noted, “Take note of the fact that America is now one of the strongest job creating periods in out history.”

Monday brought out the strongest remarks, to date, that Biden has uttered, when he said: “jobs you can raise a family on, union jobs,” Biden told the crowd. Instead of standing at the podium, the president held the microphone in his hand and walked around the stage behind signs that read “UNION STRONG,” reported the Associated Press.

As the president faces low polls, union support is crucial to a strong primary showing, so his remarks do have a dual purpose. 

Unions are making a resurgence after some dormant years, under the Biden administration, and as a tagline he stressed, in a victorious tone, “Now you’re going to get paid overtime,” the president told the crowd.

“Biden has used executive actions to promote worker organizing, has personally cheered unionization efforts at corporate giants like Amazon and has authorized federal funding to aid union members’ pensions. Just last week, the Biden administration proposed a new rule that would make 3.6 million more U.S. workers eligible for overtime pay, the most generous such increase in decades, “ added the AP.

With labor force participation increasing by 2 percent, the evidence of resilience could not be underestimated. This is also the 29th month without a dip below 200,000 jobs gained, and the increase of labor force participation is an encouragement, of sorts, say many economic observers.

Black unemployment was 5.3, generally at a higher rate than white unemployment, There was, for August, a slight decrease from 5.8 in July.

Foremost, for those Cassandra’s of doom, there is no imminent sign of a recession, despite many people earnestly telling us, “You know there is going to be a recession”.

Employers are still being cautious and overtime is not being made mandatory in many jobs, and the offer of super benefits are no longer dangled before job seekers, as an inducement.

There are, however, some wrinkles in the outlook, for example the bankruptcy of Yellow Trucking that axed 30,000 employees and auxiliary staff. That sent trucking transport to the basement with a decrease of 34,000, along with warehouse work.

Another is a possible showdown between Democrats and Republicans, and the specter of a government shutdown looming this September. And, as the AP also reported, “A short term funding measure to keep government offices fully functioning will dominate the September agenda . . . “

With the political battle lines drawn between Speaker of the House, Kevin McCarthy, and President Joe Biden, the losers, if there is a shutdown, will be those who are employed by the federal government, seniors, and others receiving federal benefits.

The good news was that leisure and hospitality increased to 40,000 jobs as it struggles to reach pre pandemic levels in February 2020, or 1.7 percent; construction added 22,00 jobs and ambulatory (outpatient healthcare jobs) increased to 40,000, and overall showed progress to 71,000 jobs; but perhaps, most significantly for observers is that the labor force participation inched up to 0.2 percent, but maybe a concern for the Federal Reserve, as it watches for any salary bumps, but as we have seen wages have flattened and employers are reluctant to give significant increases.

Wages over the last 12 months increased by 0.2 percent, or $33.82, and for non-supervisory production workers there was a 6 cents increase, also at 0.2 percent, or $29.00 per hour.

Resilience is still the watchword for the US economy, but with the dips, as well as the gains, the future is anyone’s guess, but the fight is on by the Reserve to tame inflation.