… designed in partnership with luxury architecture firm Candelaria Design.
According to Habitat for Humanity, 3D printing could be an economical way to address said crisis.
“When we consider the housing issues facing Arizona, the need for affordable homeownership solutions becomes clear,” Jason Barlow, president and CEO of Habitat Central Arizona, said in the press release.
“If we can deliver decent, affordable, more energy-efficient homes at less cost, in less time and with less waste, we think that could be a real game-changer,” Barlow continued.
Homebuilding methods like 3D printing or prefabrication are increasingly being considered as feasible alternatives to “traditional” construction.
Using a 3D printer to create homes is often seen as a more efficient and sustainable alternative to traditional construction methods.
“In addition to affordable homes, the market increasingly demands innovative housing concepts,” Yasin Torunoglu, the housing and spatial development alderman at the municipality of Eindhoven, said in regards to a different 3D-printed home in the Netherlands.
In total, the home will sit at 2,433 square feet, but its living space will fall a bit shorter at 1,738 square feet.
All of this space will then accommodate three bedrooms and two bathrooms.
“Beyond our city borders, this project can serve as a model for other communities as we all work to meet the critical needs of families who truly are the faces of this growing housing affordability crisis,” Corey Woods, the mayor of Tempe, said in the press release.
“We didn’t want to get into homeownership,” Joe Paul, a resident of a community in Arizona, told the Journal. “We still want to travel and don’t want to have to maintain a house.”
Offering professional property management, routine maintenance and repairs that are the responsibility of the landlord, not the tenant, the new developments provide a sort of souped-up version of the homeowners’ association model that some communities already have.
In addition, some tenants have gone from owner to renter – and welcome the flexibility of life without a mortgage.
Matt Marooney, who rents a five-bedroom house a house in a community in Georgia, told the Journal that he previously owned a house and that renting has helped him get back on his feet financially. He would like to go back to owning, but not just yet.
Institutional ownership of single-family rental properties has been the subject of much criticism, but analyst Brad Hunter told the Journal that built-to-rent homes make up about 6% of all new homes, but could soon approach 50% as demand grows for more flexible housing.
Homeownership has traditionally been the largest factor in building household wealth in the US, but that equity doesn’t grow when paying rent.
“We need to be thinking more about different ways that people can still own the communities that they live in, outside of the primary residence model,” said Christopher Ptomey, executive director of the Terwilliger Center for Housing at the Urban Land Institute, according to the Journal.
Ptomey suggested several alternatives that could provide the economic benefits of ownership without a traditional mortgage, such as neighborhood-scale real estate investment trusts, or other fractional ownership models.
It’s not just the US housing market that’s on an absolute tear.
Home prices around the world are surging as strong demand squares off against strained supply. The average home price across 56 countries and territories rose 7.3% in the year to March 2021, according to the Knight Frank Global House Price Index. The jump marks the fastest rate of global home-price inflation since late 2006. Thirteen countries registered double-digit increases, and developing nations made up most of the top-ten gainers.
Turkey saw the largest price increase over the period, notching a 32% year-over-year bounce. New Zealand and Luxembourg followed with 22.1% and 16.6% increases, respectively.
The US registered the fifth-largest jump, with prices climbing 13.2% in the year to March. That marks the fastest rate of price growth since early 2005.
Government responses to the COVID-19 crisis are partially behind the international housing boom. Central banks around the world slashed interest rates in March 2020 which quickly dragged borrowing costs to historic lows. Couple the ultra-easy monetary policy with trillions of dollars in fiscal stimulus, and demand quickly outpaced supply across several markets.
What began as a surging sales pace has since turned into a red-hot housing boom. Supply shortages have hindered a pick-up in construction activity, leaving prices to surge as demand holds strong.
With home inventories under incredible pressure, some countries are moving to cool markets down before prices skyrocket further. Officials in China, New Zealand, and Ireland have used a range of tools to rein in home inflation, including new residential taxes and stricter lending policies.
“With governments taking action and fiscal stimulus measures set to end later this year in a number of markets, buyer sentiment is likely to be less exuberant,” Knight Frank said in the Thursday report. “Plus, the threat of new variants and stop/ start vaccine roll-outs have the potential to exert further downward pressure on price growth.”
Not all large-scale economies face overheating housing markets. Prices contracted 1.8% in Spain and 1.6% in India in the year to March, according to the Thursday report. Such declines were likely powered by strict lockdown measures and excess supply, Knight Frank said.
How to cool a red-hot market
Housing indicators in the US suggest the market tightness will last for a while longer. Home starts slid nearly 10% in April as soaring lumber costs and lot shortages cut into the supply rebound. Roughly 20% of contractors said in an April survey that they were delaying construction and sales, possibly due to squeezed profit margins.
Economists surveyed by the Urban Land Institute expect homebuilding to accelerate over the next few years as firms look to service outsize demand. The increase in home inventory should help price growth cool; The economists see home-price inflation returning to its pre-pandemic average of about 4% in 2023.
Still, the forecasts see demand outstripping supply into the mid-2020s. Unless the trend changes, millennials risk being priced out of the US housing market just as they reach their peak buying age.
One report found that 11% of Americans have moved since the start of the coronavirus crisis. Unmoored by remote work and driven by the desire to be near family or enjoy a lower cost of living, buyers have been snapping up primary residences and second homes, fleeing the coastal cities and flooding states such as Texas and Florida, as well as smaller cities, spacious suburbs, and vacation-home spots.
The mass relocations and purchases – coupled with the reluctance of existing homeowners to find a new place to live during a pandemic – have driven the number of homes for sale down to record lows, which in turn has propelled home prices to their highest rates in 15 years.
Intense bidding wars are commonplace. Take one California home that got 122 offers in two days. A May Zillow report found that nearly half the homes for sale in the US are selling in under a week.
Add that up and it’s harder than ever to break into the real-estate market.
Here are five things to understand in order to decide whether you’re ready to take the plunge into homeownership.
1. There’s a striking imbalance of supply and demand
Competition to buy a home is fierce.
There are more people who want to purchase properties than there are homes on the market. (There are even more real-estate agents in the US than there are homes for sale.)
The tightening housing market is goading prospective buyers into expensive homes that don’t ultimately fit their wants or needs. But for those with cash to spare who are prepared to compromise, now could be a decent time to scoop up a property.
3. Building a new home may not be much of an alternative
While existing listings dwindle – in part because homeowners are reluctant to resell their homes out of fear that they may not be able to afford their next one – a possible solution is to buy land and build a new house.
But the raw materials necessary to construct a new property have gotten exorbitantly expensive amid the pandemic. Logistics and shipping issues have resulted in long waits for certain supplies.
There’s also a finite number of contractors and workers to erect such homes. Those workers are in demand, meaning labor costs are also high. Builders nationwide are facing severe delays to complete new builds or even finish renovation projects on fixer-uppers.
The added costs and delays slow down builders, lead to even more expensive home prices, and act as a deterrent to hopeful buyers.
America is in a housing crisis. “US home sales are surging. When does the music stop?” asked the New York Times’ Stephanos Chen last month. CNBC reports that “when is the housing bubble going to crash?” is a “red hot” Google search. Meanwhile, US News and World Report warns that “cities need a building boom to avoid a housing bubble.”
While inflated housing prices might be concerning, it is not the most pressing housing crisis facing America today. Much more alarming is the lack of affordable housing and the lack of financing options for low-income borrowers. The way we score credit, and the way we qualify borrowers, is inherently classist, and America’s fixation on wealthy borrowers and its credit scoring system are unfairly keeping low-income but responsible people off the housing ladder. If we really want to help people into homes, we must change the way we qualify borrowers for mortgages.
The lack of affordable housing is often cited as the most pressing obstacle to homeownership. This is indeed a problem. The coronavirus has left many homeowners reluctant to sell, whether for fears of financial insecurity or because they didn’t want strangers traipsing through their home during a pandemic. However, for those of us familiar with the mortgage industry – which I spent much of the past decade working in – the shortage of available homes for sale is nothing new.
From an underwriting perspective, you want to look at the “Three Cs:” capacity to repay, collateral, and creditworthiness. Certainly, you want to know a borrower makes enough money to make timely mortgage payments and that they have a sufficient down payment (so that they have a financial stake in making said timely payments) and the home is worth what you are lending. It is how we determine creditworthiness, however, which is unfairly punishing lower-income borrowers.
You must have credit to get credit. Depending on the lender and the investor – that is, who the loan will be sold to on the secondary market, which is where servicing rights to loans as well as the mortgages themselves are sold (most often Fannie Mae or Freddie Mac) – you will need a certain amount of existing tradelines in order to obtain a mortgage. Yet even applying for credit can lower your score. Those with higher scores – usually (but not always) higher-earners – are better able to absorb this blow. Furthermore, lower-income and younger borrowers are less likely to have credit cards and other traditional tradelines that actually report to the bureaus that score credit, and a history of racial discrimination has left Black Americans at an unfair credit disadvantage.
These people are, however, paying bills, and often on time. Most people, even with insufficient traditional credit history, pay rent, electric, water, gas, phone bills, and so on. Yet these bills do not report on credit unless they go into collections, meaning that the bills lower-income people are paying do not help them but can hurt them.
This puts lower-income borrowers at a disadvantage and paints an incomplete picture of a borrower’s creditworthiness. After all, someone who might be delinquent on their credit card or jewelry payment might be very consistent in paying their rent and their electric bill, prioritizing needs (like housing) over luxuries. Credit reports will never show this.
This presents another problem with credit underwriting: We do not account for the bills people actually need to pay. Because the debt-to-income ratio (DTI) used in underwriting comes from the debts reporting on a borrower’s credit report, monthly expenditures like utilities and car insurance are not counted (again, unless they go delinquent). Adding these “nontraditional tradelines” to a credit report means counting them against the borrower when calculating their DTI. While some might argue that including these would do a disservice to lower-income borrowers, as it would increase the number of debts that underwriters must count against them (thus lowering purchase power), it is important that borrowers do factor these bills into any decision to buy a home. Including them in the DTI ratio would give everyone, including borrowers, a better idea of what they can and cannot reasonably afford.
Over the past decade, a cottage industry dedicated to dissecting why millennials are not buying homes has emerged. While many point to delayed marriage ages and a more rootless existence among this generation, the numbers show otherwise. A 2019 survey from the Urban Institute found that 53% of millennials said they could not afford a down payment, while 33% said they could not qualify for a mortgage.
Because of this, loan officers and underwriters are frequently forced to qualify borrowers with payments which are higher than the borrower’s actual payment. This lowers the purchase price and loan amount for which a borrower can qualify, hindering their ability to bid for homes in a market skewing more expensive by the year. And while it is true that the Federal Housing Administration (FHA) allows for higher DTI ratios than conventional lending, too often I have seen student loans put borrowers above even that qualifying threshold. This disproportionately hurts low-income borrowers, who might not qualify for conventional loans so rely on FHA to access credit.
This problem shows no signs of going away. Student loan debt is at a crisis point in the United States, and higher education an increasing necessity in an ever-changing job market. I saw this change happen in real time in the mortgage industry. The entry-level position I was hired for in 2011 then required only a high school diploma, but within two years my company was requiring entry-level applicants to have a college degree.
The mortgage industry has yet to adjust to this new reality. Underwriters should be allowed to treat student loans as they currently treat medical debt. Recognizing a fundamental unfairness in America’s healthcare system, lenders are regularly able to discount medical debt from a borrower’s DTI ratio. They should look at student loans the same way, understanding them as a necessity which should not stop borrowers from buying a home.
As anyone who has ever lent on new construction knows, it takes a long time to build a home. The housing shortage is not going to end anytime soon. We need to look at other ways to help solve America’s housing crisis, including making access to home loans fairer and more equitable. By modernizing credit scoring and underwriting practices, the mortgage industry can do its part to help a new generation of hard-working Americans achieve the dream of home ownership.
Rent prices tumbled at the start of the pandemic and are only just now on the rise. But where inflation in other pockets of the economy is expected to cool off, rent might just keep climbing.
The Federal Reserve, Biden administration officials, and much of Wall Street see elevated overall inflation eventually moderating as the economy settles into a new normal. The last inflation report, while stronger than expected, showed price growth picking up in services closely linked to reopening. The consensus holds that as such bottlenecks and pent-up demand fade, inflation should moderate, but “shelter inflation,” or rent, could be the big exception to that.
Rent prices are flashing “signs of more persistent inflationary pressures” on the horizon, Morgan Stanley economists said in a Sunday note. Shelter inflation – which covers rent and owners’ equivalent rents – is only just picking up after prices cratered through the pandemic.
Goldman Sachs echoed its peer in a Monday note, saying the “special factors” that held down shelter inflation during the health crisis will soon ease up and drive prices higher.
The shelter-inflation gauge is critical for broader inflation, since it represents “more cyclical, more persistent, and more inertial sources of price pressures,” Morgan Stanley said. And as shelter inflation accelerates through 2021, it could lead broader inflation to normalize above 2%, the team led by Ellen Zentner added.
Such an outcome could be worrisome for the Fed. The central bank has said it aims to let inflation run above 2% for some time before looking to pull it back to that threshold for the long term. Inflation settling above that level could force the Fed into an unforeseen corner.
Forecasts suggest soaring shelter inflation could also push inflation expectations permanently higher. Shelter prices are expected to grow 3.8% year-over-year by the end of 2022, Goldman economists said. Inflation will accelerate further and land above 4% in 2023, exceeding the highs of the last economic expansion.
With renters making up nearly one-third of the housing market, such strong inflation could spark intense price concerns. Elevated inflation expectations can drive real inflation higher, as businesses tend to raise prices and workers ask for higher wages when they expect price growth to accelerate.
Skyrocketing home prices could add to the sector’s price pressures, the team of Goldman economists led by Jan Hatzius said. A historic shortage of home inventory and surging demand led home prices to climb at their fastest-ever rate in February, according to the Federal Housing Finance Agency. Although home prices don’t directly affect shelter inflation, Goldman found that 5% to 15% of home-price growth eventually spills over into shelter inflation.
To be sure, shelter inflation counts for just 20% of the core Personal Consumption Expenditures index and 40% of the core Consumer Price Index, two of the most popular broad inflation gauges. It would take considerably strong shelter inflation to pull both indexes to worrying levels.
Still, the component is one to watch as the country reopens, Goldman said. The end of pandemic-era payment forgiveness will likely skew data later this year, as will a tighter labor market. If those factors can fuel stronger shelter inflation expectations, broad inflation could follow.
With the pandemic-era ability to work from home, the desire for homeownership has been on the rise this past year, with a housing inventory crisis developing as a result.
But the Indianapolis Star reported last week that Black homeowners who want to put their houses on the market or seek lower mortgage rates are at a disadvantage just because of their race.
The Star spoke to Carlette Duffy, a Black homeowner who had sought three appraisals on her home to start the process of refinancing her current mortgage loan. The first two appraisers valued it at $125,000 and $110,000, respectively, but when she had a white friend stand in for her during a third appraiser’s visit, the value of her home shot up to $259,000. She had suspected the appraisers were lowballing her because of her race, and she was right.
“I had to go through all of that just to say that I was right and that this is what’s happening,” Duffy told the Star. “This is real.”
Duffy and the Fair Housing Center of Central Indiana filed complaints against the mortgage lenders and appraisers, accusing them of undervaluing her home because of race with the Department of Housing and Urban Development (HUD), and her case is now in the hands of the government.
Duffy’s situation is far from unique. A 2018 study from Brookings found that homes in Black neighborhoods are undervalued by $48,000 on average, amounting to $156 billion in cumulative losses.
“That metric shows there’s racism in the housing market,” Andre Perry, a fellow at the Brookings Institute, told Insider last year. “There’s something going on in the practices and policies of appraisals, real estate agent behavior, and lending.”
Insider previously reported that Black Americans lag behind white Americans on homeownership, with Black people being denied mortgages at higher rates than white people, even though many are credit-worthy.
And studies have shown that there’s a long history of structural racism is the housing market, significantly setting back Black homeowners. A study from the Center for American Progress (CAP) found that federal, state and local policies have prompted housing discrimination through tactics to prevent Black Americans and Americans of color from building wealth through homeownership.
For example, President Franklin Delano Roosevelt’s Home Owners’ Loan Act and the National Housing Act in the 1930s had the goals of making homeownership more affordable, but when determining which neighborhoods would get guaranteed mortgages, the Home Owners Loan Corporation denied Black people access to mortgage loan refinancing “while perpetuating the notion that residents of color were financially risky and a threat to local property values,” CAP said.
“Homeownership has traditionally been the primary way that Americans accumulate wealth,” Cleaver said in a statement. “High-profile cases of homes owned by people of color being devalued in comparison to homes owned by their white neighbors have renewed calls for federal action.”
The bill would create task forces comprised of civil rights advocates and industry representatives to respond to racial disparities in real estate valuations, and it follows a March letter from 35 lawmakers calling on the Federal Financial Institutions Examination Council to take action on housing discrimination.
Duffy told the Star that she wants justice and hopes that HUD will address discriminatory housing practices.
“I’m excited, vindicated, relieved, angry, extremely peeved since I can’t say the other expletives that were running through me at that point in time – destroyed that I had to go through all of that,” she said. “This is real … just being able to prove it is the hard part.”
Just a few months ago, in February, the National Association of Home Builders (NAHB) released shocking data about how the historic appreciation in lumber prices was crimping the housing market. A newbuild was $24,000 more expensive, on average.
The housing market took off last summer, as the pandemic enabled many to work from home indefinitely, and with mortgage rates so low, many people rushed to buy new homes. But the pandemic shut down lumber production, and it hasn’t kept pace with building since.
“This unprecedented price surge is hurting American home buyers and home builders and impeding housing and economic growth,” NAHB Chairman Chuck Fowke said in a statement. “These lumber price hikes are clearly unsustainable. Policymakers need to examine the lumber supply chain, identify the causes for high prices and supply constraints and seek immediate remedies that will increase production.”
A report from the NAHB in February said the lumber supply chain impact came as factories shut down almost immediately last March for safety reasons, and then as demand spiked, supply couldn’t keep up. Lumber prices have jumped by 340% compared to last year.
Insider reported on March 26 that because lumber prices are so high, home builders have been building fewer homes and intentionally raising prices to keep up with the high demand for houses amidst the low supply of lumber.
In addition, a report from Redfin – a real estate brokerage- found that the average home sale price hit an all-time record in March, increasing 16% year-over-year t0 $331, 590, and with about one in three homes being sold for more than the asking price in February, experts like Redfin Chief Economist Daryl Fairweather are concerned.
“When the pandemic is over, purchasing a home is going to cost much more than ever before, putting homeownership much further out of reach for many Americans,” Fairweather said in a statement. “That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society.”
Insider’s Hillary Hoffower reported on April 30 that the pandemic and the lumber shortage are combining to put homeownership out of reach for many, but especially the millennials entering their prime homebuying years. Fairweather told said the housing shortage is leaving millennials “boxed out of the housing market.”
On March 12, the NAHB, along with more than 35 other housing organizations, wrote a letter to Commerce Secretary Gina Raimondo asking her to examine the lumber supply chain and look into solutions for the high costs.
They said: “Housing and construction can do their parts to create jobs, boost the economy to its pre-pandemic strength, and provide safe and affordable housing for all Americans, but in order to do so the federal government needs to address skyrocketing lumber prices and chronic shortages.”
They increased by 41.6% in the first three months of 2021 over the first three of 2020, according to a recent Redfin report that defined luxury homes as those selling for an average of $975,000. It’s a sharp contrast from sales for what Redfin deems “affordable” homes (those selling for an average of $184,400), which only increased by 7% in the same time frame.
It’s emblematic of the wealth divide that has deepened in America since the pandemic began, with the wealthy doing just fine and lower-income earners struggling to the point of falling into poverty. This K-shaped recovery is manifest in the housing market.
The report stated that home sales growth is typically similar across price tiers, but the pandemic’s exacerbation of economic inequality has caused it to diverge. “Affluent Americans with the flexibility to work from anywhere are taking advantage of low mortgage rates and buying up high-end houses – particularly in popular vacation destinations -which is contributing to the surge in luxury-home sales,” it reads.
The luxury housing market hasn’t been riddled with the same problems plaguing the more affordable housing market. The latter has seen cutthroat competition rife with ubiquitous bidding wars, as desperate buyers have resorted to all-cash offers, waiving inspections, or forgoing appraisals to win them. It’s resulted in a shortage of homes, Insider’s Taylor Borden reported, with current homeowners afraid to sell their houses for fear of being unable to find another.
But while multimillion-dollar luxury properties are also seeing heated competition with multiple offers and selling for more than the asking price, Redfin’s Chief Economist Daryl Fairweather told Housing Wire, there are enough of them to go around.
Miami saw the biggest increase in luxury home sales (101.1%), which could partially be explained by the number of Wall Streeters who have moved there during the pandemic. California gobbled up the next round of luxury home sales, with San Jose leading the way, followed by Oakland and Sacramento.
It seems that the wealthy are in search of sunshine and space, and they are once again exempt from the many pandemic-related economic problems afflicting many Americans.
In an interview with Bloomberg’s Sonali Basak on Thursday, Blackstone’s President and Chief Operating Officer Jonathan Gray said his firm invested in the travel, sustainability, and housing sectors amid the economic reopening and is “excited” about the sectors’ potential moving forward.
Gray added that Blackstone has moved toward “thematic investing” during the pandemic due to the transformation of the US economy by technology and said the firm plans to continue the strategy in 2021.
“In an environment that’s being transformed by technology, how can you see the best neighborhoods, the areas that will benefit from what’s happening,” Gray said. “We’ve done a lot in technology and life sciences, global logistics, we had huge appreciation in the quarter in our portfolio and a lot of that was in those areas.”
Gray said Blackstone’s top themes for 2021 are travel, sustainability, and housing due to the COVID recovery.
“Looking forward, and certainly in the first quarter, we’ve been doing a lot around the COVID recovery play, so we’ve invested in a bunch of travel-related businesses…that’s an area we’re excited about,” Gray said.
Gray also said Blackstone is “excited about what’s happening in sustainability” and that the firm did a number of deals in Europe and the US to build out the electrical grid and help with environmental remediation.
Finally, Gray said he’d “add housing as another area where we have a bunch of enthusiasm” and that his firm has done deals in the US both in rentals and in single-family housing in the first quarter.
According to Bloomberg, Blackstone invested $17.7 billion in the travel, sustainability, and housing sectors in the first three months of 2021, buying hotels like Extended Stay America, private jet operator Signature Aviation, and a UK-based travel company called Bourne Leisure.
Gray was also asked about his views on inflation.
“I think that really is the big question, that’s the concern that exists and you see it in steel and lumber prices which are up double digits. Used cars are up 25% year-over-year. We’re beginning to see pressure on wages…and so I think that’s something that all investors need to take into account. I think there’s some risk on valuation multiples,” Gray said.
Gray’s comments come after Blackstone posted strong earnings results on Thursday.
Assets under management grew to $649 billion and private equity distributable earnings jumped 160%. Real estate distributable earnings also doubled to $540.8 million.
This pushed total first-quarter distributable EPS to $0.96, which beat analyst estimates for $0.76 and topped the $0.46 figure the company turned in the first quarter of 2020.
Shares of Blackstone traded up over 4% on Thursday after earnings were released.