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Reasons to Suspect the US Housing Market is Starting to Coo

Low unemployment doesn’t ensure more Americans can afford a home, and rising home prices say more about target markets than the supply of motivated buyers

AUGUST 8, 2018
2018Housing Slowdown Inventory
Months of supply for existing homes ticked up year-over-year in June for only the second time in three years. Given the number of existing homes for sale has been falling, the uptick in months of supply is likely attributable to a slower pace of sales.
DATA: NATIONAL ASSOCIATION OF REALTORS; GRAPH: CURBED.COM

With housing inventory shortages rampant across the nation, the summer of 2018 was supposed to be “the most competitive housing market in recorded history.”

But as July turns to August, reports suggest the rush of buyers missed many markets. Existing homes sales have fallen, compared to the same months last year, in four of the last five months. New U.S. home sales fell 5.3% in June to an eight-month low. It was the second drop in new-home sales in three months. June housing starts plunged 12.3%. Residential building permits issued in June dropped for the third consecutive month.

2018Housing Slowdown Existing SalesExisting homes sales have fallen year-over-year in four of the last five months. New U.S. home sales fell 5.3% in June to an eight-month low. It was the second drop in new-home sales in three months.“It’s alarming that single-family construction permit growth is decelerating, at a time when homeownership is rising and Millennials are reaching their peak age to really enter the market and buy their first home,” said Sam Khater, chief economist for Freddie Mac, in a statement about the Commerce Department’s June housing estimates. “The growing imbalance between demand and supply is the reason home prices continue to escalate.”

Home price growth has yet to be affected but the apparent weakening of demand suggests that the housing market may finally be cooling.

Housing inventory shortages have been a primary factor in rising home prices over the last three years. At the same time, skyrocketing building costs and the demographics of those who have money to spend in a period of declining wages has ensured a steady flow of expensive premium housing. Home prices have been rising at least twice as fast as incomes for the past four years.

“Home sales, new home construction and outlays for renovations and repairs were collectively a net drag on overall growth during the first half of the year, even as real GDP growth ramped up to a 4.1% pace during the second quarter,” according to special commentary on housing by the Wells Fargo Economics Group.

After nine years of U.S. economic growth, the housing industry is starting about 30% fewer single-family homes than the 1.3 million units that the National Association of Homebuilders calls a normal level of housing starts. The pace of multifamily starts has trended down since January.

“Higher lumber prices in light of tariffs on Canadian softwoodAtlanta Fed Wage Growth TrackerU.S. wage growth has slowed since November 2016 more steeply than it rose between November 2013 and 2016. Despite strong employment, wage growth has lagged economists’ expectations. After accounting for inflation, today’s average wage has about the same purchasing power it did 40 years ago.FEDERAL RESERVE BANK OF ATLANTAlumber and higher building material prices in general may be causing some builders to hold off on some projects, particularly starts of lower priced homes, which simply do not have enough profit margin in them to absorb these higher costs,” according to analysis by Wells Fargo Economics of the U.S. Commerce Department’s June monthly housing construction estimates. “Those higher costs are likely weighing even more heavily on apartment projects, which have seen permits tumble at an astounding 58.2% annual rate over the past three months.”

With prices already at all-time highs in most markets, rising interest rates exacerbate affordability problems. Rates were hovering below 4% going into 2018 but have since shot to as high as 4.6%.

Although it can vary market to market, these factors all point to housing affordability being pushed beyond what many people can pay. The clearest evidence is that months of supply for existing homes ticked up year-over-year in June for only the second time in three years. Given the total number of existing homes for sale has been falling, the uptick in months of supply is likely attributable to a slower pace of home sales.

In some markets, the increase in inventory is more pronounced. According to Realtor.com, active listings in July were up 44% year-over-year in San Jose, 29% in Seattle, 19% in Portland, 18% in San Diego, and 15% in Dallas.2018Housing Slowdown RatesInterest rates were below 4% going into 2018 but have since shot to as high as 4.6%. Prospects of rising rates pushes premium buyers to buy sooner, but can put off first-time buyers indefinitely.

Moody’s just released a positive outlook for the U.S. homebuilding sector, reflecting enthusiasm for fundamental business conditions overcoming housing headwinds over the next 12 to 18 months:

Momentum – key underlying drivers of housing demand, with homebuilding growth, now in year seven, and the overall economic expansion, now in year nine, show few signs of slowing.

Millennials – the biggest population cohort in the U.S. workforce is entering the housing market – both for purchases and for rentals – in powerful and increasing numbers.

Consolidation – homebuilders are finding it cheaper and quicker to enter new markets, and easier to go much deeper in existing markets, by buying competitors rather than “green fielding.”

Credit metrics – for much of the homebuilding industry, debt leverage is gradually being reduced, interest coverage is strengthening and recent declines in gross margins are slowing and even stopping.

It does appear U.S. economic fundamentals are little changed over the past few years. Those fundamentals have produced two-thirds of normal housing construction volume since the economy turned solidly up five years ago. Those aren’t laurels to rest on.

It’s possible the larger economy’s momentum and the direction of home buying might diverge, as this spring and summer have already seen a few months’ declines in home sales, home construction and permits issued. Home prices and mortgage rates continue to rise, and mortgage-interest deductions have been curtailed. These conditions are unfolding in an environment where U.S. wage growth has slowed since November 2016 more steeply than it rose between November 2013 and 2016.

Millennials should be doing a significant portion of home buying, given 20-somethings’ high potential for forming new households. Instead, they earn 20% less than the Baby Boomer generation did when they were in their 20s. And Millennials also have exponentially more student loan debt to repay than any other generation before. Inflated home prices and limited starter inventory are not in their favor.

I’m not an economist, so even if I wanted to make predictions, they wouldn’t be worth much. But here’s an early warning from somebody who knows: “Housing market activity – sales and construction – likely has peaked for this cycle,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told clients after the Commerce Department’s release of June housing construction data this month.

Continue reading Reasons to Suspect the US Housing Market is Starting to Coo

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More millennials now live in suburbs than in cities

Self-made millionaire: Don't buy a house before you ask yourself this question

Self-made millionaire: Don’t buy a house before you ask yourself this question  

Millennials aren’t killing the ‘burbs. They’re embracing them. A new Ernst & Young survey of 1,200 adults aged 20-36 shows that more millennials are buying homes in the suburbs than in cities.

In fact, when choosing where to live, millennials are behaving much like their parents did. Overall, rent or own, 38 percent of millennials live in the suburbs, compared to 37 percent in the city.

Among millennial homeowners, the suburbs are the clear No. 1 choice: 41 percent of millennial owners opt for suburbs over cities, small towns or rural areas. That’s up from 36 percent in 2016, Cathy Koch, EY’s Americas Tax Policy Leader, tells CNBC Make It.

It’s not just that they’re settling down as they get older, either, Koch says. When looking at the very same age group today compared to two years ago, there’s an increase in the share of millennials living in the suburbs.

 

“It was a surprise to me to see this generation increasingly choosing suburban locations to buy homes,” Koch says, but the trend makes sense: “The ‘suburbs’ may very well be smaller cities close to larger urban areas — these still afford the richness of city living (including employment opportunities) at maybe lower home prices.”

Money is likely a significant factor. Home buyers can expect to pay 26.5 percent of their income to purchase a median-value home in a city, but only 20.2 percent of their income for a similar home in the suburbs, according to a recent report by Zillow.

Roughly two out of five millennials currently own a home, Ernst & Youngfinds, which is up 14 percentage points from two years ago. But millennials are still buying homes at a slightly lower rate than previous generations: Roughly 45 percent of Gen-Xers and Baby Boomers owned when they were between the ages of 25 and 34.

Student loan debt and higher real estate prices play help explain why. Over 80 percent of renters aged 22-35 with student loans say that debt has delayed home-ownership, or made it all but impossible.

And although Koch is not a realtor, she expects millennials to continue gravitating to the ‘burbs because they believe the economy is strong and that’s keeping them optimistic and open to home-buying.

That optimism may also be fueled by an increasing number of homes available in many markets. The inventory of homes for sale over the past year is up by 1.3 percent, according to real estate website Redfin. The site also found that nearly one in three homes for sale in October had lowered its price, the highest level seen since 2010.

Overall, the national median sale price in October was $297,000.

Don’t miss: Almost 70% of millennials regret buying their homes. Here’s why

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David Bach: There are only 3 situations in which you should rent instead of buying a home

David Bach: The 3 situations in which you should rent instead of buying a home.
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Building Boom: 10 Cities Approving The Most Multifamily Permits

Register for IREM’s MEGA Meeting featuring Steve Rizzo on Wednesday, Oct. 4, at the Marriott Wardman Park. His Attitude Adjustment Keynote will teach attendees to shift their way of thinking to produce quality sales, teamwork and communication in the workplace. Click here for more info and to register.

Continue reading Building Boom: 10 Cities Approving The Most Multifamily Permits

Antiques for millennials: You want old stuff — you just don’t know it yet

In case your favorite millennial hasn’t told you yet, he’s ready to start fixing up his place. Generational trends show that people from the largest group ever to hit the American landscape, who are now roughly 36 or younger, have been converging on real estate for the past few years, so naturally it’s time for their thoughts to turn to decorating. Not just any decorating will do — it must be individual, focused on self, an aesthetic so personal it’s as though the home were furnished with their very own style DNA.

At least, that’s what the antique dealers are hoping

Individual style has been a mantra of designers for years and is considered a watchword of good taste in interiors circles. And one of the best ways to get it, to find the raw materials that can be shaped into that cool space that no one but you (and your interior design guru or that woman you obsess about on Pinterest) could ever have come up with is to buy antiques.

“It’s all about individuality and what best expresses your personality,” says New York designer Nick Olsen, a style savant who gets the Everyman sensibility. “You want something different that’s not in every store window. As much as I still love a cheap and cheerful style moment from CB2 or elsewhere — I’m sitting next to a drum table from CB2 in my own apartment right now — antiques, vintage pieces have a level of personality that should be speaking to the younger market right now.”

Olsen, who is co-design chair of the Chicago Antiques, Art and Design show at the Merchandise Mart on May 17-20 with California designer Ruthie Sommers (they’ll be hosting a “lively talk” May 18), notes that even as midcentury design stalwarts have remained popular, classic antiques have plummeted in price.

“The contemporary market is so hot in the collectible area, and even the prices of catalog-quality furniture are creeping up,” says Olsen. Which makes antiques, quite frankly, a steal. “Right now, antiques are a really good deal.”

Millennials, take note: For prices that are likely to be lower than the ones you’ll see in your favorite home catalog, you can get a quality piece of furniture that will get you instantly closer to the cool, original place you crave. Here’s what you need to know to get started.

You can’t beat the quality. “I hate that old ‘they don’t make ’em like they used to’ refrain,” says Olsen, “but it’s pretty true. Even as far back as the 1960s, it’s just a higher level of quality. And craftsmanship, structure, fabrication — a sofa that might be 40 years old might be better quality than what you’re buying at one of those mass-market retailers.”

Seriously, it’s not haunted. “You have to get over the stigma of ‘Oooh it was pre-owned,’” says Olsen. “I mean, don’t pick up something from the side of the road because of bed bugs. That’s the only thing that stresses me out, but otherwise, get over it.”

Don’t let the vocabulary throw you. One client told Olsen she didn’t want anything like a breakfront (a style of bookcase) in her home, then admitted that a breakfront “sounded like something her mother would have.” Listen, if you want to buy a sofa, no one’s going to try to sell you a davenport.

Focus on form. It’s the shape of vintage pieces that matters (upholstery can be changed) and the contrast between antiques and newer things. “I think there needs to be a re-appreciation of how cool antiques look next to contemporary pieces,” Olsen says. “How long have we been saying, ‘It’s all in the mix,’ but that somehow still needs to sink in. The market is now educated enough that people are not buying a suite of furniture, but they also might not get that something curvy and art nouveau might look really cool next to the Florence Knoll classic modernist sofa.”

Buy when your heart is in it. Though Olsen has a savvy eye for trends (art deco has already had its return to glory, art nouveau is coming back, American arts and crafts such as Stickley, not so much), he counsels clients to stick to pieces they fall in love with. “They should be things that speak to you. You’re not buying it because all of your friends have it or just because it’s old or because you need to have vintage to round out your living room. I want people to respond to the personality of something.”

If you don’t get the French armchair … we’re going to grab it. “I’m always looking for an interesting French or Italian armchair,” says Olsen. “One interesting chair, next to a modern sofa, can make a room.” And at these prices, “it brings out the hoarder part of me.”

cdampier@chicagotribune.com

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5 major ways millennials are changing office culture and design

 
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Millennials are changing office culture in visible ways — you can see it in the design sensibilities of modern workplaces and the thoughtfulness of office layouts. But they are also making figurative improvements which can be a little more difficult to see at first glance. Read on to learn how this younger generation stands to change the workplace, and even the economy, as we know it.

 

millennials changing office culture, millennials changing office design, the modern office, work-life balance, company culture, green office space

1. Flatter company hierarchy and open offices

In both a literal and a figurative sense, millennials want to flatten the average company model. The quintessential office — cubicles at the bottom and high-powered offices at the top — presents physical and psychological barriers to workplace harmony and productivity. It doesn’t have to be that way.

Millennials seem to understand this. Employees who had direct interaction with their managers within the last six months report being up to three times more engaged than workers who had no interaction with company leaders. This engagement gap is something millennial employees are trying to change for good. From open offices to more frequent opportunities for feedback and exchanging ideas, millennials crave flatness in company structure and communication channels.

Open-door policies don’t mean anything, after all, if your CEO’s office is inaccessible. Millennials also prefer to work in an environment with great natural lighting — probably because this, too, contributes to a sense of openness and harmony.

Three people are sitting at a table, hunkered over their laptops and laughing.

2. The vanishing office

The office is vanishing — not completely or overnight, but certainly with time. It’s all about allowing employees to do their work in familiar, comfortable or novel environments.

You have probably heard of communal work spaces, which offer an interesting middle-ground between a home office and a company campus. Home offices are booming, too, thanks to millennials. In one survey, 85 percent of millennial respondents indicated they would prefer telecommuting from home or elsewhere 100 percent of the time, versus commuting to a central location.

There are plenty of ways for employers to support this new way of working — even in the smaller details like outfitting home or satellite offices. Many companies provide their employees with allowances to buy furnishings, decorations or electronics for their spaces at work, and the same concept can apply for telecommuters. A stipend for remote workers can help them create a unique work environment at home, which contributes to their productivity and makes them feel more connected to the company’s home base.

millennials changing office culture, millennials changing office design, the modern office, work-life balance, company culture, green office space

3. The rise of the side-hustle

Depending on whom you ask, this is either a gift of market-driven society or a symptom of it. Either way — and whether out of necessity or the sheer pleasure of developing new skills — millennials are encouraging a new aspect of the economy.

The side-hustle isn’t the second job that parents and grandparents knew. It might not be incredibly lucrative, but the side-hustle does provide an opportunity to develop skills, pursue interests and gain a new stream of income in addition to a full time job. According to many economists, a side-hustle economy might soon become reality.

A robotic arm.

4. Building a brighter future with technology

Many jobs that require repetitive motion or manual labor may soon be performed by machines. What comes after that? According to some experts, one solution includes taxes on the robots, which would fund a citizen stipend known as “universal basic income.” Even now, polls are finding a majority of millennials to be in favor of UBI, since it could help many underemployed college graduates find some financial security as they monetize their skills.

We’re getting ahead of the point, but the fact remains: millennials have been extremely quick to read the writing on the wall when it comes to technology and the future of the world economy. They’re envisioning a future where everyone is free to pursue talents and passions, while also learning to integrate these passions with our work responsibilities.

A large office filled with greenery, including a live plant wall.

5. Companies that benefit the world

Millennials want to spend their time working for organizations that contribute to the common good in some way. They see the challenges facing the world, and recognize the importance of the triple bottom line: social, environmental and financial sustainability. They’ve also given more of their earnings to charity than their parents’ generation.

It doesn’t stop there. When it comes to the physical environment of the workplace, green design is very much in demand. The younger generation wants to work in spaces with eco-friendly lighting, solar power and even down-to-earth structural designs using recycled materials.

The point of all this is that young people seem to see a better way of doing things when it comes to working. Step one is to make work more comfortable and relevant for the people doing it. Step two is to make it relevant to the rest of the world.

Via NBC News, OnRec, Flex Jobs, Market Watch, SF Gate, The Street and Generosity

Images via Brooke Cagle, Marc Mueller, Bruce Mars, Johnson Wang, Scott Webb, RawPixel.com and Deposit Photos

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10 Social-Media Trends to Prepare for in 2018

In the past year, a number of significant stories involved social media: Facebook lured Snapchat users to Instagram, the president of the United States communicated official policy positions in 140 characters and Apple announced plans to alter the way we interact with our mobile devices.

Next year, social media is poised to create even more disruption as a number of new technological advancements go mainstream, and as social norms related to social media change. Here are the top 10 social media trends to prepare for as 2018 draws near.

1. Rise of augmented reality

At the first-ever event hosted in the Steve Jobs Theater, Apple announced the iPhone 8 and the iPhone X. Both devices incorporate a new chip that allows the phones to provide users with extraordinary augmented reality experiences. While augmented reality will have its initial impact on mobile gaming, it is likely that social media platforms will find ways to incorporate the new technology as well.

In the past year, a number of significant stories involved social media: Facebook lured Snapchat users to Instagram, the president of the United States communicated official policy positions in 140 characters and Apple announced plans to alter the way we interact with our mobile devices.

Next year, social media is poised to create even more disruption as a number of new technological advancements go mainstream, and as social norms related to social media change. Here are the top 10 social media trends to prepare for as 2018 draws near.

1. Rise of augmented reality

At the first-ever event hosted in the Steve Jobs Theater, Apple announced the iPhone 8 and the iPhone X. Both devices incorporate a new chip that allows the phones to provide users with extraordinary augmented reality experiences. While augmented reality will have its initial impact on mobile gaming, it is likely that social media platforms will find ways to incorporate the new technology as well.

2. Increasing popularity of Instagram Stories

Over 200 million people use Instagram Stories each month, which is over 50 million more than those who use Snapchat — and Instagram Stories is just one year old! At this rate, nearly half of all Instagram users will be using Stories by the end of 2018. This means that brands interested in connecting with Instagram users must take the time to master Instagram Stories.

 

Related: The Low-Down On Using Instagram Stories For Your Business

3. Continued investment in influencer marketing

Over 90 percent of marketers who employ an influencer marketing strategy believe it is successful. Companies like North Face, Hubspot and Rolex use social media–based influencer marketing strategies to connect with new audiences and improve engagement with existing audiences.

This year we saw that brands that opted for traditional advertising strategies struggled to connect to social media users. Next year, it is likely that more brands will embrace influencer marketing as a way to connect with audiences who tend to ignore traditional strategies.

Related: Why Brands Big and Small Continue to Fail at Influencer Marketing

4. Focus on Generation Z

A recent study conducted by Goldman Sachs concluded that Generation Z was more valuable to most organizations than millennials. Today, the oldest Gen Zers are 22 years old. They are just beginning to enter the labor force, and will have increased buying power for some time.

Brands will begin to recognize this, and will shift their social media strategies accordingly. Expect great investment in platforms loved by Gen Zers like Snapchat and Instagram.

Related: 4 Marketing Tactics for Appealing to Generation Z

5. Increasing brand participation in messaging platforms

Over 2.5 billion people use messaging platforms globally, and yet brands are still primarily focused on connecting with consumers on pure social networks. In 2018, expect brands to invest more time and money in connecting with consumers on messaging platforms. Artificial intelligence, voice assistants and chatbots will enable brands to offer personalized shopping experiences on messaging platforms like Messenger, WhatsApp and Kik.

Related: The Future Of Native Advertising for Brands and Publishers

6. Expansion of live streaming

What was once a novel gimmick has become a mainstream part of social media. Today, brands big and small have started using live streaming to capture the attention of followers.

GORUCK, a backpack manufacturer and the organizer of extreme endurance events, is one example of a medium-sized brand that has grown its reach by live streaming compelling content on Facebook. Thousands of followers tuned in to watch 48-hour coverage of a recent endurance race.

In 2018, more brands will begin to realize the power of live streaming, and will incorporate it into their monthly content plans.

Related: 12 Live Streaming Video Tips to Build Your Brand and Business

7. Rethinking Twitter

Twitter has failed to grow followers significantly in 2017. In fact, LinkedIn, Facebook and Instagram all have more social media followers. This year, Twitter also lost access to streaming NFL games (Amazon won the rights). In 2018, it is likely that Twitter leadership will aim to rethink how the platform operates.

THE KITCHENS OF THE FUTURE AREN’T JUST ABOUT TECH

U.S. kitchen design has changed drastically in recent years, says designer Michael Schluetter, toward simple and clean materials and away from decorative elements.

“A decade ago, high gloss lacquers and exotic veneers such as makassar or Indian apple were all the rage,” he says. “The design language in the last two years has changed to using matte surfaces such as ultra-matte laminates and matte lacquers as well as rough finished wood veneers and solid woods such as wild oak, walnut, refurbished driftwoods or core ash.”

Continue reading THE KITCHENS OF THE FUTURE AREN’T JUST ABOUT TECH

Millennials Want to Own Homes Too, If U.S. Economy Would Consent

Kelsey Marshall and her boyfriend Chris Eidam, both 27 years old, call the home-buying process “terrifying.” But they’re clear about one thing: It beats the heck out of renting.

 

“We’re wasting money where we are right now,” near Bridgeport, Connecticut, Eidam said. “We just take our rent and we throw it away. That money doesn’t go to anything.”

Continue reading Millennials Want to Own Homes Too, If U.S. Economy Would Consent

TINY SOLUTION: DESIGNING MICRODWELLINGS FOR MILLENNIALS

Jessica Ocasio understands the frustrations of affordable housing options for young adults. A native of Puerto Rico, she saw the scarcity of student housing as an undergraduate student.

Now, Ocasio is equipping herself with a Master of Fine Arts in Interior Architecture in hopes of easing the housing burden for young adults. Her research explores how microdwellings may offer a creative solution.

Continue reading TINY SOLUTION: DESIGNING MICRODWELLINGS FOR MILLENNIALS

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