Even without looking at the prices, you can also know when real estate is “hot”. More people wanted to be agents and more “family disruption” programs were shown on TV.
Why would anyone want to be an agent? The National Brokers Association says fewer homes are available for sale than at any other time in nearly four decades – 1.04 million by the end of January. However, the NAR said 1.45 million dealers, up 4.8 percent from a year earlier, were competing to sell them.
According to Real Trends, a Colorado-based research firm, sales commissions are falling, the same way they usually do when the market is active.
So let’s summarize: More agents chase less homes and earn lower commissions. Where do I sign?
These are all signs of a market leading. It’s like buying stocks on the S&P 500
is trading about 42 times more income (as of Tuesday), but that’s another discussion.
There is hardly any mystery as to why the real estate price is up.
The first reason, of course, is that the epidemic has strongly spurred the work-from-home movement. Many people wanting more rooms have tried to change seats. This demand combined with the above inventory scarcity have increased prices.
While working from home is here to stay – 71% of Americans work from home “all or most of the time” in October, and 54% want to stay home even after the pandemic ends, according to one Pew Research survey – It might take a little while when the economy opens and people go back to the office. How many people return to the “pre-Covid” work environment and how fast is unclear. But it has the potential to reduce demand for larger homes to some extent.
Raw material prices surged
Another reason for the price increase is the sharp increase in input material prices. Take lumber, for example. MarketWatch’s Jacob Passy, for example, reported last week that this added “Tens of thousands of dollars for the price of a newly built house. ”
In fact, instead of trying to make money in real estate, you should invest in raw materials like lumber, which has soared from about $ 360 per thousand feet to about $ 1,130 since May. 7, according to CNE Futures data. All told, that helps to explain why Lumber alone now adds about $ 24,000 According to Chuck Fowke, president of the National Association of Builders, the cost of a new home.
Why is there a leap? The Covid-19 pandemic reduced yields in timber mills, but politics was also a factor. In 2017, the Trump administration imposed tariffs of up to 24% on Canadian lumber imports. The important thing here is to call the tariff what it is: the tax on the end user. So when a tariff applies to lumber, that ultimately contributes to an increase in house prices. Trump’s Commerce Department has lowered tariffs on soft lumber 9% in December of last year. NAHB’s Fowke calls this a “positive development, but more needs to be done.”
House builders have been lobbying for the Biden administration to eliminate tariffs entirely. The American General Contractor Association (AGC), representing 27,000 companies, sent this letter to the president in February asking him to lower his tariffs. AGC’s chief economist, Ken Simonson, told me that the letter was acknowledged by the authorities, but nothing went beyond that.
But sawn timber is not the only thing driving housing prices up. Latest Manufacturer’s Price Index data shows the prices of metals and metal products at our highest levels.almost a decade. The reasons are similar for sawn timber: pandemic and import duties imposed by the Trump administration. Like lumber, steel prices have soared: Reuters reports that the standard price of hot rolled steel has not been that high for at least 13 years.
Loss of jobs in the steel industry
Regarding Trump’s steel tariffs, new Commerce Secretary Gina Raimondo said “the data shows those tariffs are in effect.” It was news for the American Coalition of Metal Manufacturers and Uses, which represents 30,000 companies, told the Biden administration that there were “There is little evidence that Trump’s steel and aluminum tariffs have helped domestic steel industry, as it continues to close factories and reduce jobs. ”
Like house builders, the coalition has also asked the Biden administration to lift tariffs under the Trump administration, which contributed to the price hikes. But CEO Paul Nathanson told me he didn’t get any response to a recent letter.
“We’ll ask for a meeting with them,” he said.
Metal is not a big cost input for homes like wood, but for things going indoors – home appliances and perhaps a new car in the garage – metal taxes are on. is applicable.
The government has proposed one $ 15,000 homebuyer tax credit – for first-time buyers – but this is much less than the price increase caused, partly due to the tariff, which has yet to be lifted. Until the president removes the tariffs that the industry after the industry says is counterproductive, for many Americans the dream of owning a home may be just a dream.