A previous post discussed how the current shortage of subcontractors in residential construction is becoming more acute. This is significant, because subcontractors are very important to the construction of the typical home. Periodically, NAHB has found it worthwhile to remind the public just how important.
NAHB addressed the topic most recently in the September 2015 Special Study in Housing Economics. The study clearly shows that builders’ use of subcontractors remains as strong as ever. For example, 70 percent of builders typically use somewhere between 11 and 30 subcontractors to build a single-family home. On average, 22 different subcontractors are used to build a home.
The questions covered how often builders subcontract 23 specific jobs. In every case, the job was always subcontracted by at least two-thirds of the builders. At the low end of the scale, “only” 68 percent of builders said they always subcontract finished carpentry. At the other extreme, subcontracting is nearly ubiquitous for some jobs. Over 90 percent of builders said they always subcontracted concrete flatwork, masonry contractor specialists, drywall, foundations fireplaces, technology, plumbing, electrical wiring, HVAC, carpeting and security systems.
Even when builders don’t always subcontract these jobs all they time, it’s common to subcontract them out at least part of the time.
About two-thirds of the builders in the survey reported subcontracting out 75 percent of the construction cost in the average single-family home they build. The average share of construction costs subcontracted was 77 percent.
Chinese cities where home prices rose exceeded those where they declined for the first time in 16 months in July, as authorities removed some property curbs and interest rates fell.
New-home prices rose in 31 cities of the 70 the government monitors, from 27 the previous month, according to data released by the National Bureau of Statistics on Tuesday. They dropped in 29 and were unchanged in 10.
Prices, led by some of the biggest Chinese cities, extended gains from the second quarter, spurred by the easing of mortgage policies at the end of March and four reductions in borrowing costs since November. The trend will continue this year as liquidity remains ample and expectations of rising prices further prompt more people to buy, overriding any potential impact from a devalued yuan and a stock-market selloff, according to Mizuho Securities Asia Ltd.
“The average price gains may accelerate in the second half as prices in the second- and third-tier cities are just starting to rise,” Alan Jin, a Hong Kong-based real estate analyst at Mizuho, said by phone. “The demand is still there.”
The average price of the 70 cities rose 0.17 percent from June, gaining for a third consecutive month, according to Bloomberg calculations of official data. Prices in Sanya, a tourist city on the southern Hainan island, climbed 0.2 percent, reversing declines since at least August last year.
“Come on, this is bullshit, this is for show, it can’t actually be real.”
When travel journalist Nick Watt was told that travelers to Havana’s Paseo del Prado could find not just snack vendors and tourists on the famous promenade, but a thriving, open-air real market where Cubans buy and sell homes, he was a bit incredulous. But as he discovered during filming of his Travel Channel Show Watt’s World, the promenade plays host to a key part of Cuba’s nascent real estate market, a recently unleashed aspect of capitalism in the socialist country that, as relations with the United States normalize, opens up a host of questions and possibilities.
“Consider real estate in the same way people look at classic cars on the street here,” he says. “People like me love Cuba, we think the cars held together with Band-Aids and the old colonial buildings are amazing. But once the money comes in, will Cubans want up-to-date buildings? In 20 years, will there be old, dilapidated buildings here?”
Footage of the open-air real estate market in Havana. Footage courtesy Travel Channel
Watt’s trip to the market provides just a small glimpse at a larger shift happening in Cuban real estate. In 2011, Raúl Castro allowed his countrymen to buy and sell real estate for the first time in decades, revolutionizing a socialist system that previously only allowed citizens to trade property, like for like. It set off a small boom in home renovations, as well as interest in acquiring and fixing up potential hotel properties that could house an influx of new tourists.
The prospect of a more open market, even incrementally so, raises the possibility of massive foreign investment in prime beachfront real estate and the country’s classic housing stock. Currently, Americans can invest by sending money to a Cuban relative or associate who acts as a frontman, but legally the deed remains in the name of the Cuban buyer, adding a degree of risk. A potentially bigger question around foreign investment may be the right-of-return issue; Fidel seized all foreign-owned property in 1962, and the U.S. government currently estimates that American citizens and corporations may have up to $8 billion in property claims to sort out as relations normalize
So far, Castro has held strong to his decision to limit real estate sales to Cubans only. Considering that a few years in, the market is still in a bit of an embryonic stage, that makes sense.
Photo courtesy Travel Channel
The sea change in property law has also encouraged entrepreneurial activity. Seizing the opportunity in Raul’s policy shift, Sandra Arias Betancourt decided to become a residential real estate agent in early 2013. Not surprisingly, she believes Cuba’s market is unlike any other. A lack of regular internet access means information sources American buyers and sellers use every day are non-existent, and only about half of sellers feel the need to involve an agent. Most just place handmade signs outside their property and negotiate themselves, Betancourt says. But still, she sees a booming market and increased opportunity.
“The market has exploded, especially since the beginning of this year,” she says. “We have a lot of people buying.”
Right now, transactions are 95% cash, she says, and she takes a standard five percent commission for any sales. To succeed, she says agents have to understand the people and what they really want. She sees a day coming soon when Americans will begin to buy more property.
“People have been sniffing around this for years,” says Watt. “I was being asked by my American friends 10 years ago to buy property. People have been trying to find ways for years.”
Tom Miller, author of Trading with the Enemy: A Yankee Travels through Castro’s Cubaand a writer who has made annual trips to Cuba since 1987, also believes that Cubans are just starting to get a sense of how the market functions. Its evident in new online property sites, such as EspacioCuba.com, which are still in their early days (founder Yosuan Crespo, a computer programmer, launched the site in 2012).
“There’s a certain amount of speculation,” says Miller, “but you need a certain amount of funds to do that, and Cuba’s not a country where people have the money for that kind of investment. What people are mostly talking about is foreign investment. You can buy things with a frontman, and Cuban-Americans are already doing it, but the whole phenomena hasn’t played out yet.”
Miller believes a few serious issues need to be resolved before Americans are snapping up homes. The mortgage system in Cuba is currently non-existent—it’s all “cash on the barrelhead”—and Cuba needs to push through planned reforms of its financial system (currently, prices are listed in CUC, the Cuban Convertible peso unit). Both legally and financially, it’s impossible for foreigners, he says
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,174,000, up 9.8% (±19.9%) above the revised May estimate of 1,069,000 and is 26.6% (±19.6%) above the June 2014 rate of 927,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development.
Most of the gains in starts and permits were in multifamily, not single-family contruction.
But the problem is single-family housing starts in June were at a rate of 685,000, 0.9% (±11.5%) below the revised May figure of 691,000. The June rate for units in buildings with five units or more was 476,000.
“While the rise in housing starts was driven by an uptick in multifamily housing, there are positive signs looming for the single-family housing market,” said Bill Banfield, vice president at Quicken Loans. “Homebuilder confidence is at its highest level in almost a decade and the number of first-time homebuyers looking to enter the market is increasing – making programs like FHA even more vital to support continued growth.”
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,343,000. This is 7.4 % (±1.2%) above the revised May rate of 1,250,000 and is 30.0 % (±2.3%) above the June 2014 estimate of 1,033,000.
“Housing construction has nearly returned to pre-recessionary levels, as builders ramped up activity on multi-family projects including condos and co-ops,” saidStifel Chief Economist Lindsey Piegza. “While builders and lenders benefit regardless of the type of construction, the economic benefit, however, is significantly greater from single family construction as opposed to multi-family units, particularly rental properties; single family housing activity results in additional spending and borrowing power as a result of equity building which is not necessarily present in multi-family properties.
“The housing market continues to take steps in the right direction, however, growth remains far from robust; as we have seen in the recent decline in retail sales, consumers continue to struggle to afford purchases – particularly large ticket items – amid stagnant income growth,” she said. “Still, with the threat of rising rates on the near horizon, some homeowners are jumping in to lock in low rates. As we saw during the taper tantrum of 2013, despite a still-sluggish ability to finance a home purchase, many potential homeowners are willing to jump into the market sooner than later if it means avoiding a significantly higher mortgage rate.”
Single-family authorizations in June were at a rate of 687,000; this is 0.9 % (±1.1%) above the revised May figure of 681,000. Authorizations of units in buildings with five units or more were at a rate of 621,000 in June.
If you’ve gone through the painstaking process of renting a new apartment in the past few years, you probably faced some sticker-shock. Vacancy rates are low, really low. And despite ever-present scaffolding, construction in many cities is still slow, as new tenants move in but few move out. The result is that in almost every major metro area, the rent is, in fact, too damn high.
Basic wisdom (which was largely established by rules governing public housing eligibility) warns a healthy bank account means that one’s housing costs shouldn’t exceed about one-third of a person’s take home pay. While that might be a prudent suggestion because, after all, people do have other bills and savings goals, it’s become virtually impossible to adhere to for many who live in major metro areas.
A recent report from the Joint Center for Housing Studies (JCHS) at Harvard, puts some numbers on just how bad this problem is: About half of all renters in the U.S. are using more than 30 percent of their income to cover housing costs, and about 25 percent have rent that exceeds 50 percent of their monthly pay.
It’s not just the poorest city-dwellers who are feeling the rent pressure. As prices rise, even those who make median incomes are finding that their rent eats away at a more significant portion of their pay than it once did for those in the middle class. It’s also not just the Millennial crowd: This problem is also evident across different age groups, including Gen X and Boomers who never left the rental market, or find themselves back in it after the housing crash.
A big part of the problem is that fewer households are making the transition from renting to owning, which means more competition for limited inventory—driving rental prices up. Renters who would previously be able to qualify for mortgages are either finding that mortgage lenders are still super strict post-recession, or that there simply aren’t many homes in their price range—or both. “In normal times when homeownership was achievable you could get a starter home for between $150,000 to $250,000,” says Andrew Jakabovics, a senior director at Enterprise Community Partners, a nonprofit that focuses on affordable housing. “That segment of the market is basically dead.”
So instead, households with higher incomes and dreams of white picket fences remain in the rental market. Those households take up available units in the mid-to-high price ranges, for which they can afford to pay a premium. In fact, renters with incomes that top $75,000 are among the fastest growing group in the market, says Chris Herbert, the managing director of the JCHS. “Developers will be drawn to build the houses that provide the highest returns,” he says. That means not enough new apartments are affordable apartments that can accommodate low- and middle-income residents. Instead, high-priced luxury units get built first, pushing rents up and middle and low-income earners into apartments that are more expensive than they can afford. Sometimes this means pricing them out of cities altogether.
In a May 2015 survey conducted by NAHB, 62 percent of builders reported that the overall supply of developed lots in their areas was low to very low, up 2 percent from May 2014, but up from 43 percent in September 2012. Sixty-two percent is the largest low supply percentage recorded since NAHB began periodically asking the question in 1997 on its monthly survey for the NAHB/Wells Fargo Housing Market Index (HMI).
The continued low supply of developed lots is a hindrance to housing recovery that is still quite modest by most standards. Figure 1 compares the HMI responses on lot supply to housing starts. Starts have recovered from a low of 550,000 in 2009 to just over 1 million in 2014 (after averaging 1.5 million a year from 1960-2000, without ever plunging below 1 million until 2008).
The 62 percent includes 39 percent who characterized the supply of lots simply as “low” and 23 percent who said the supply of lots was “very low.” The shortages tended to be especially acute in the most desirable, or “A” locations. Thirty-four percent of builders said that the supply of “A” lots was very low, compared to 19 percent for lots in “B” and 14 percent for lots in “C” locations.
A shortage of buildable lots, especially in the most desirable locations translates into higher prices, as 38 percent of home builders said the price of developed “A” lots was somewhat higher than it was a year ago, and 32 percent said the price was substantially higher. In comparison, 16 percent of builders said the price of “B” lots was substantially higher than a year ago, and 12 percent said the price of “C” lots was substantially higher (Figure 2).
According to NAHB tabulations of the Census Bureau’s quarterly data, property taxes constituted 39.7% of state and local tax receipts among major sources for 2014. Sales taxes had the second largest share at 27.8%, followed closely by individual income tax at 27.9%. At 4.6%, corporate income taxes held the smallest share of state and local tax receipts among major sources.
Further gains are expected in all tax receipts as the economic recovery strengthens, however state and local individual income tax, corporate income tax, and sales tax collections are particularly responsive to changing economic conditions.
Gains in state and local individual income tax, corporate income tax, and sales tax collections had outpaced increases in property tax receipts until recently. This trend pushed the property tax share of total receipts from the four major sources from a high of 44.9% in the third quarter of 2010 to just below 40% as of the end of 2014. The share did stabilize recently as property tax revenues continue to grow. The current property tax share remains higher than pre-housing boom measures.
Revenues from property taxes totaled just under $498 billion for 2014.
Lagging property assessments and annual adjustments smooth property tax collections across business cycles. Nominal property tax collections are not as prone to cyclical fluctuations as other tax collections and have tended to increase with minor business cycle fluctuations.
Mamaroneck: SIX Rotating Vendors Offer Delicious Foods + More!Ossining: Cooking Demonstration by Susan Chasen of the Organic Teaching Kitchen + More! March 26th – April 1st, 2015 DowntoEarthMarkets.com
What’s New, In Season, and On Sale This Week
$2 OFF when you buy 2 items: Frozen samosa, kofta, saag, rajma, and/or chutneys Bombay Emerald Chutney Co.
$3 OFF Ginseng Kombucha OM Champagne Tea
Chicken Bone Broth $10 for one 24 oz bag or $18 for two.Great for the “Bone Broth Challenge” (a cup a day) or in wide variety of cooking! Yellow Bell Farm
Curried Beef Pot Pie Stone & Thistle Farm
Gluten Free Peasant Bread Meredith’s Bread
Gluten Free Rosemary Olive Bread Meredith’s Bread
Ham and Sweet Potato Pot Pie Stone & Thistle Farm
Hot Cross Buns Robinson & Co. Catering
Lamb Pies Robinson & Co. Catering
Nutella Stuffed Chocolate Chip Cookies Christiane’s Backstube
Pie-Tin Baked Pork Pie Stone & Thistle Farm
Pork Rillette Stone & Thistle Farm
Click on a market to see all vendor and event details…Ossining Winter Saturdays 9:00 am-1:00 pm Claremont Elementary School on Van Cortlandt Avenue, off of N. Highland (Rte. 9)
Note: The market moves back outside to the corner of Spring & Main Streets in downtown Ossining on Saturday, April 4th.
Best Farmers Market in Westchester: Vote Larchmont or Ossining
We’re thrilled to announce that two Down to Earth Farmers Markets — Ossining and Larchmont — are in the running for Best of Westchester 2015 by Westchester Magazine. The voting is open until 5 pm on April 3rd. Cast your vote for your favorite Down to Earth Farmers Market HERE. High five!
Down to Earth Markets is Hiring
It’s Hiring Season here at Down to Earth Markets. As we prepare for the 2015 markets, we have PAID, part-time positions available in Westchester. Most markets run one day per week, from May through Thanksgiving. Click here for details. Applications are due to Frankie Rowland, Westchester/Rockland County Territory Manager, by Tuesday, March 31st. We look forward to hearing from you.
Ossining: Please Order Tierra Farm Nut Products with Market Manager, Samantha
Down to Earth Markets is happy to partner with Claremont Elementary School to hold the Ossining Indoor Winter Farmers Market. In an effort to meet the needs of the school community, Tierra Farm will no longer be a vendor at the indoor market. For customers interested in purchasing Tierra Farm products, there will be weekly order forms available at the market. Please submit your Tierra Farm order form to the market manager, Samantha, during market hours, 9 am to 1 pm. During the week, you can pick up your Tierra Farm order at Down to Earth’s office on Main Street in Ossining. We look forward to seeing you. Tierra Farm will return on Saturday, April 4th, when the market moves back outside to its longtime home at the corner of Spring and Main Streets in downtown Ossining.
Ossining Loyalty Card Update
Due to the unexpected closure last week (snow on first day of spring?!), the Ossining Shopper Loyalty Card is now for attendance at THREE days of the market, rather than four. So, come get your third punch this Saturday and claim your prize. See you there.
Mamaroneck: Shovel Ready String Band Plays 10 am-noon; Honey, Indian Simmer Sauces, & Ice Cream Tempt Local Palettes + More!Ossining: Celtic Fiddle with Brian Vegh this Saturday; Welcome Back Taiim Falafel Shack & OM Champagne Tea + More! March 19-25th, 2015 DowntoEarthMarkets.com
What’s New, In Season, and On Sale This Week
Chicken Bone Broth Sold in re-sealable bags, easy to recycle. $10 for one 24 oz bag or $18 for two Great for the “Bone Broth Challenge” (a cup a day) or in wide variety of cooking! Yellow Bell Farm
Gluten-Free Pasta Varieties: Including Egg + Spinach and Egg Trotta Foods
Click on a market to see all vendor and event details…
Ossining Winter Saturdays 9:00 am-1:00 pm Claremont Elementary School on Van Cortlandt Avenue, off of N. Highland (Rte. 9)
Note: The market moves back outside to the corner of Spring & Main Streets in downtown Ossining on Saturday, April 4th.
Down to Earth Markets is Hiring!It’s Hiring Season here at Down to Earth Markets. As we prepare for the 2015markets, we have PAID, part-time positions available in Westchester. Most markets run one day per week, from May through Thanksgiving. Click here for details. Applications are due to Frankie Rowland, Westchester/Rockland County Territory Manager, by Tuesday, March 31st. We look forward to hearing from you.
Ossining: Please Order Tierra Farm Nut Products with Market Manager, Samantha
Down to Earth Markets is happy to partner with Claremont Elementary School to hold the Ossining Indoor Winter Farmers Market. In an effort to meet the needs of the school community, Tierra Farm will no longer be a vendor at the indoor market. For customers interested in purchasing Tierra Farm products, there will be weekly order forms available at the market. Please submit your Tierra Farm order form to the market manager, Samantha, during market hours, 9 am to 1 pm. During the week, you can pick up your Tierra Farm order at Down to Earth’s office on Main Street in Ossining. We look forward to seeing you.
Tierra Farm will return on Saturday, April 4th, when the market moves back outside to its longtime home at the corner of Spring and Main Streets in downtown Ossining.
Rotating* Vendors This Week *Vendors who rotate through various markets during the season. They enjoy getting to know many communities. Here’s where to find them this week: Mamaroneck – Saturday, March 21st
Data for the study came from a set of special questions added to the April 2015 survey for the NAHB/Wells Fargo Housing Market Index.
Even when builders don’t always subcontract these jobs all they time, it’s common to subcontract them out at least part of the time.
