The Impact of Trade Battles
There seems to be a lot of rhetoric going back and forth on the topic of trade wars. Much of this debate centers upon the question of whether we are in a trade war or not. We can’t answer that question definitively, but certainly we do understand that some of the basic characteristics of a trade war have been implemented and others have been threatened. We have imposed tariffs on other countries’ goods and they have done the same to our goods.
The important question is not whether this is a full-blown trade war, but what is the impact of the implementation of tariffs? In the short run, we have seen one major impact — the stock market has become very volatile. As we have previously discussed, this volatility is caused by more than one factor. However, the risk of trade wars certainly is playing a significant part in contributing to volatility. Why are the markets uneasy regarding these tariffs?
For one, tariffs raise prices to our consumers. On the other side of the equation, when other countries retaliate against our goods, it hurts the producers of these goods — from manufacturers to farmers. These two factors can actually balance each other out. For example, higher prices contribute to inflation which can bring higher interest rates. On the other hand, lowering exports can hurt certain sectors of the economy and that might bring rates down. Which side of the equation might win out? It is hard to tell. We actually hope that these “shots being fired” are precursors to the negotiation of better trade agreements that will benefit all parties. In the meantime, there will be some negative impacts and certainly a lot of noise.
Millennials are increasingly entering the housing market as first-time buyers and are expected to lead the growth in new home buyers too, the National Association of Home Builders reports from its analysis of Census data. The overall homeownership rate of millennials is at 36 percent, which is the largest gains among all age groups in 2017, the Census data shows. Millennials are the nation’s largest demographic group, and more than 70 million are expected to enter the housing market over the next few years. “Millennials are recognizing the benefits of homeownership and are eager to buy their first homes,” says Randy Noel, chairman of the NAHB. “And contrary to conventional wisdom, this generation is in the market for single-family homes in the suburbs as they look ahead to raising their families.” Homebuilders are responding by increasing the amount of entry-level homes they are building, according to the NAHB. But they note that rising construction costs and limited lot availability have created challenges to building smaller, single-family detached homes that are affordable to first-time buyers and yet still cost-effective for builders. More townhomes may be the answer, builders say. The townhome sector plunged during the Great Recession, but it has steadily been on the rise since 2009. Townhouse construction was up 7 percent in 2017 over 2016, according to Census data. Builders are also taking note of millennials’ preferences as they look to add inventory. Millennials desire a three-bedroom and two-bathroom home, outdoor space, flexible areas that can be used for multiple purposes, and more luxurious finishes, such as quartz countertops, the NAHB says of its surveys. Source: National Association of Home BuildersSome housing economists believe that “granny flats” could be the key to alleviating housing shortages across the country, and they are calling on more municipalities to ease up the rules to allow such dwellings to be built on or into more single-family homes. Nicknamed “granny flats,” these accessory dwelling units tend to be separate, cottage-like structures, but may be a converted garage or basement that houses an extra living area. Some city and state governments have zoning laws that prevent these extra living quarters from being added into single-family homes. But that is changing in several areas of the country. “At a time when many housing markets are experiencing severe supply constraints and housing affordability is under stress nationwide, accessory dwelling unit legalization represents a low-profile free-market solution that requires little from government actors beyond getting out of the way,” noted Jonathan Coppage, a visiting senior fellow at R Street Institute, a think tank, in a 2017 report. Granny flats also might allow more homeowners to generate extra income from short- and long-term rentals of these units. But many counties either still have zoning restrictions that don’t allow these units, or they are making the building permit process difficult. There are concerns that the extra dwellings could lead to limited parking spaces and more congestion on their streets from tenants renting the units. Source: MarketWatch
There’s a lack of rich information about American neighborhoods according to Trulia, which aims to plug the gap. The online listings service has launched ‘What Locals Say’ to help prospective buyers and renters get a deeper understanding of local housing markets. Around 7 million polls have been answered with locals providing their unique insights such as nearby parks and restaurants, to help buyers get a feel for living in the neighborhood. The service launch follows Trulia research conducted in 2017 which found that 85% of homebuyers who plan to buy within 18 months said that the neighborhood is equally or more important than the house. “We understand that neighborhoods matter. Our new mission will guide Trulia to deliver even more innovative products to help buyers and renters discover and understand what it’s really like to live in a home and neighborhood before they move in, much like a trusted friend or neighbor,” said Tim Correia, senior vice president and general manager of Trulia. Trulia’s ‘mission’ to serve homebuyers and renters with better information about neighborhoods is being supported by a new advertising campaign. The ads showcase Trulia’s 34 different map overlays that offer details on commute, reported crime, schools, and nearby businesses, and the new What Locals Say feature. Source: Trulia