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Eco-Friendly Homes: New Study Shows a Giant Increase in Value for the Average Solar-Powered Home Jul 06, 2021

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Transcript:

Installing solar panels on your home could give you a big boost in value. A new study from Porch.com shows that the average solar-powered home is worth $680,000 which is almost 50% more than the average home in a given area. But it also depends on where you live.

Hi I'm Kathy Fettke and this is Real Estate News for Investors.

Porch.com tallied the number of listings and the average sales prices for the top 500 most populated U.S. cities. It then eliminated the cities that didn't have at least five solar-powered homes for sale. That left 175 cities in 29 states, and the District of Columbia. (1)

It also surveyed homeowners to ask them about home prices in their areas, and how much more solar-powered homes were going for. But the difference in the added value was substantial from city to city.

Wide Range in Added Value

Pensacola, Florida had the biggest increase in value for homes with solar. The average is $615,000 which is three-and-a-half times the average home price in that area. At the opposite end of the spectrum is Billings, Montana. It was the only city where homes with solar panels were worth less than homes that had them. The average home in Billings costs $286,000, while the ones with solar average just $170,000, according to this study.

The state where solar-powered homes are the most expensive is California, because home prices are so high to begin with. But in some cities, solar did add a substantial amount of value to an already higher-priced home. For example, in the city of Concord, solar increased the value by 113%, on average. In Fresno, it was 89%. But in Santa Monica, the difference in value was negligible, at just 1%. Twenty-five California cities were included in this analysis and were spread across that spectrum.

Studies Show Varied Results

Other important studies on this topic include one from the Lawrence Berkeley Laboratory in California. It was done in 2015 and found that solar panels add $4 per watt to the value of your home. As reported by the Solar Nerd, if you have a 6 kW system, the value of your home could increase by $24,000. That's an attractive number because in 2015, the average cost of a solar system was "less" than $4 per watt. (2)

The study authors the higher value may be due to buyers who are willing to pay a little extra for solar because it's environmentally friendly. They call it a "green cachet" or the "Prius effect." That study dug into 12 years of data and almost 23,000 homes in 8 states. It also made adjustments to the results to account for different features of the homes, such as square footage, number of bedrooms, and the location of the homes.

Zillow conducted a study in 2019 and found the premium for a solar home was 4.1%. That adds about $10,000 onto the value of a home in the median price range. In San Francisco, a home typically sells for around $1.45 million. The added value for that home would be about $60,000. That study also adjusted for various attributes of the home. (3)

According to Homelight, the Office of Energy Efficiency and Renewable Energy states that solar will likely increase the value of your home, and that buyers are willing to pay about $15,000 more for a home with an average-sized solar system. (4) As you can see, there are wildly different figures for the value of solar-powered homes. And not everyone agrees that they are an attractive feature for all homebuyers.

A Contrarian Viewpoint

In Sacramento County, real estate agent, Michael Miller, told Homelight that: "Some people value solar, but it's on a case-by-case basis." That's mostly because the seller doesn't actually own their solar systems. He says: "A seller may own the solar outright, but in other cases, they may be involved in a lease where a third party owns the equipment. In other scenarios, the seller may have purchased the equipment with a loan." And that would create a lien on the property. Miller says some buyers tend to steer clear of solar-powered homes involving a lease or a lien.

He also believes that as more people adopt solar, we may see a standard develop on the added value. And that of course, people like the energy savings that solar power provides. But, one thing noted by the Porch.com researchers is that even though prices for solar panels are coming down, they are typically found on more expensive homes.

You'll find links to these studies in the show notes at NewsForInvestors.com.

Thanks for listening. I'm Kathy Fettke.

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://porch.com/advice/solar-power-homes-study

2 - https://www.thesolarnerd.com/blog/do-solar-panels-add-value-to-your-home/

3 - https://www.zillow.com/research/solar-panels-house-sell-more-23798/

4 - https://www.homelight.com/blog/buyer-do-solar-panels-increase-property-value/

Building Integrity: Structural Damage Known Long Before the Building Gave Way in the Middle of the Night Jul 02, 2021

Show notes

The Miami condo collapse has got a lot of people wondering about the safety and integrity of their own buildings. The 12-story oceanside condo partially collapsed while people were sleeping. At the time of this podcast, 18 people are confirmed dead and 145 are still missing. As crews continue their search through the rubble, there are reports that the building was in dire need of repair.

There were 136 condos at the 40-year-old Champlain Towers South building. More than 50 of them collapsed on June 24th at 1:30 a.m.

Eyewitness Accounts of the Collapse

The investigations are only beginning to get underway, but there's growing evidence that the building's pool deck had a major design flaw, and the concrete under that slab was in bad shape.

A Tik Tok video may reveal a lot about what happened. Adriana Armiento took the video from across the street. It shows the entrance to the condo garage just moments before the building came down. You can see what looks like huge chunks of concrete on the floor and water pouring out of the ceiling. The post says: "The basement was the first to collapse!" (1)

Another resident told the Washington Post that she ran to the lobby to tell a security guard about a loud boom, and that part of the surface-level parking area and the pool deck had collapsed into the underground garage. She then ran back to her condo to get her two children and the three of them escaped just minutes before the building became a pile of rubble. (2)

Condo Warned about Problems in 2018

The condo association had been warned by an engineer in 2018, at the start of a 40-year certification process. But residents spent the next two-and-a-half years negotiating whether millions of dollars in repairs were truly needed.

Frank Morabito was hired by the association to get a jump start on the certification process. According to ABC News, Morabito's initial inspection found "significant cracks and breaks in the concrete." (3) The report mentioned a major design flaw to the pool deck area, and the failure of waterproofing under the pool deck which was "causing major structural damage" to the concrete below. He also warned that repairs were needed "to ensure the safety of the residents and the public."

Residents Debated the Need for Repairs

That set the stage for a lot of negotiating among residents and board members about the cost of repairs. At first, the price tag was about $7 million. By waiting, the price tag had recently grown to more than double that amount. In the meantime, the issues grew worse, and the need for repairs became more critical.

In April, the board president wrote to residents about the urgent need for repairs. USA Today got ahold of the letter. (4) In it, Jean Wodnicki described a situation that you might expect when condo owners are told about expensive repairs. She said: "We have discussed, debated, and argued for years now." And she speculated that that would continue. But, she also sent details about the extent of the repair work in an attempt to convince residents that pricey owner assessments were justified.

She explained that much of the work would be structural repairs to the concrete but also warned that because so much of the damage was underground, that crews would have to pull up almost all of the ground-level slab. She also said that crews may discover even more problems once the damaged areas are exposed and inspected.

Roof Repairs Has Recently Begun

According to the Real Deal, work on the roof began in April. That work was given priority because of the start of the hurricane season on June 1st. Some people have speculated that heavy equipment on the roof helped destabilize the building, but an attorney for the association doesn't agree. Donna Berger told the Real Deal: "A building doesn't fall down because you work on a roof or because there are 16 cracks in the stucco." (5)

There's also speculation that shifting sand under the condo may have contributed to the problems. The part that collapsed faced the ocean. And a study at the Florida International University had found that the building was sinking about 2 millimeters a year in the 1990s. That study didn't raise much of an alarm, apparently.

Conclusions won't be known for quite some time. For now, our hearts go out to the people who are missing and their loved ones.

We'll have a few links to our sources in the show notes.

Thanks for listening. I'm Kathy Fettke.

Links

1 - https://www.washingtonpost.com/nation/2021/06/30/florida-condo-building-collapse-live-updates/

2 - https://www.washingtonpost.com/investigations/interactive/2021/building-experts-miami-condo-collapse/

3 - https://www.nbcnews.com/news/us-news/condo-board-president-warned-deterioration-need-repairs-months-collapse-n1272583

4 - https://www.usatoday.com/story/news/2021/06/28/miami-condo-deterioration-worsening-april-letter-says/7790478002/

5 - https://therealdeal.com/miami/2021/06/25/details-emerge-in-search-for-cause-of-fatal-surfside-condo-collapse/

The Real Estate News Brief: Mortgage Rates Rise, Forbearances Dip, California to Pay 100% of Back Rent Jun 29, 2021

Show notes

In this Real Estate News Brief for the week ending June 26th, 2021... mortgage rates are back above 3%, forbearance programs are dwindling, and California renters could get their back rent paid off.

Economic News

We begin with economic news from this past week. The latest report on inflation shows the PCE index rose 3.4% in May, compared to a year earlier. (1) That's the largest annual increase in almost 30 years, according to CNBC. The Personal Consumption Expenditures index tracks changes in the price of goods and services. It's considered a more wide-reaching index than the Consumer Price Index, and is the one used by the Federal Reserve.

The weekly unemployment report shows the job recovery may be hitting a speed bump. (2) The Labor Department says that initial jobless claims only fell 7,000, and are still above 400,000. MarketWatch says that Wall Street economists had expected a much bigger drop in new claims. The total number of people collecting unemployment from state and federal programs was 14.8 million as of June 5th.

Consumer spending has settled down from a reopening surge in recent months. The government says it was about the same last month as it was in April, but spending is still higher than it was before the pandemic. MarketWatch says it's increasing enough to "keep the economy humming." (3)

Turning now to the housing market, economists say that new home sales were disappointing. The Census Bureau says they were down 5.9% in May compared to the month before. (4) But even with that drop, they are still up more than 9% from May of 2020. Realtor.com says about 20% of builders are putting limits on production because of high lumber and material prices and a labor shortage. Lumber prices have started to come down, however. (5)

Existing home sales are also down. They were down .9% in May, to a seasonally adjusted annual rate of 5.8 million. But they are still 45% higher than they were a year ago. (6) Although economists say the pandemic-inspired home buying frenzy may be cooling off, they don't expect a huge drop in demand. Michael Gregory of BMO Capital Markets told MarketWatch that "demand should remain warm" because of low mortgage rates, millennials moving ahead with home buying plans, and pandemic savings that are helping people come up with a down payment.

Mortgage Rates

Mortgage rates moved back above the 3% mark. Freddie Mac says the annual 30-year fixed-rate mortgage was up 9 basis points, to 3.02%. The 15-year moved up 10 basis points to 2.34%. Freddie Mac economists expecte that rates will continue to move higher, but gradually. (7)

In other news making headlines...

Housing Affordability Falls

Housing affordability has fallen in all four regions of the U.S. thanks to higher home prices. Realtor.com says the median family income has dropped about $7,000 to $88,500 while mortgage payments have risen. NAR's index shows they have gone up 16% year-over-year. The average was $1020 in April of 2020 and it's now $1,184. (8)

As a percent of income, mortgage payments accounted for 13.7% of a family's paycheck last year. This year, they account for about 16%. NAR's research data specialist, Michael Hyman, says the combination of higher prices and smaller paychecks "is not a good combination for a potential home buyer."

Forbearances Dip Below 4%

Some homeowners are getting their mortgage payments back on track. The Mortgage Bankers Association says that forbearances have dipped below 4% for the first time in a year. (9)

According to an association survey, they fell 11 basis points last week, to 3.93%. The report also shows that new forbearance requests have dropped to an extremely low level.

California Extends Eviction Ban But Will Pay Back Rent

California landlords may appreciate this next story. Governor Gavin Newsom and lawmakers announced a plan to extend the moratorium through September, and pay 100% of all back rent for eligible tenants. (10)

The current moratorium is set to expire on June 30th, which is the same day that Federal eviction protections expire. The agreement between Newsom and the leaders of the state Senate and Assembly, could be approved as early as Monday, June 28th.

Senate President Pro Tem, Toni Atkins, says the goal is to avoid mass evictions. Atkins said in a statement that the "housing situation in California was a crisis before COVID, and the pandemic has only made it worse."

New Record for Digital Real Estate

Real estate that only exists in cyberspace is gaining ground as an investment option, although it's considered to be very speculative and volatile. Realtor.com reports that a chunk of digital real estate in the online world of Decentraland sold for almost a million dollars. This kind of real estate is bought and sold with a type of cryptocurrency called nonfungible tokens, or NFTs, and is based on a blockchain.

In a news release for an NFT Summit that took place recently, it says: "From music to sports, real estate to digital fashion, art to collectibles: non-fungible tokens (NFTs) are transcending industries and transforming economies. They've led to an explosion of disruptive technologies, the digitization of culture and assets, and the creation of an immersive internet.

The piece of digital real estate that was purchased consisted of 259 units of land. That's equal to 16 square acres. Earlier this month, another large purchase was made for digital real estate in a virtual world, or "metaverse," called The Sandbox. That piece of cyberspace was bought for $650,000.

You might wonder what people do with this real estate. Realtor.com explains that "users purchase land to show off their digital art collections, walk around with friends, visit buildings, or to attend events."

Okay, wrap your head around that one! You'll find links to our sources in the show notes at NewsForInvestors.com

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://www.cnbc.com/2021/06/25/us-bonds-10-year-treasury-yield-rises-ahead-of-inflation-data.html

2 - https://www.marketwatch.com/story/u-s-unemployment-claims-barely-fall-and-disappoint-for-second-week-in-a-row-11624539532?mod=economy-politics

3 - https://www.marketwatch.com/story/consumer-spending-barely-rises-in-may-as-federal-stimulus-money-dries-up-11624625957?mod=economy-politics

4 - https://www.marketwatch.com/story/new-home-sales-fall-short-of-expectations-but-dropping-lumber-prices-could-provide-breathing-room-11624457962?mod=economic-report

5 - https://magazine.realtor/daily-news/2021/06/24/new-home-sales-drop-to-lowest-pace-of-year

6 - https://www.marketwatch.com/story/existing-home-sales-slump-as-momentum-slows-in-the-housing-market-11624370746?mod=economy-politics

7 - http://www.freddiemac.com/pmms/

8 - https://magazine.realtor/daily-news/2021/06/21/mortgage-payments-are-increasing-despite-low-rates

9 - https://www.housingwire.com/articles/for-the-first-time-in-a-year-forbearances-dip-below-4/

10 - https://www.latimes.com/california/story/2021-06-25/newsom-legislative-leaders-agree-on-extending-eviction-protections-paying-back-rent

11 - https://magazine.realtor/daily-news/2021/06/23/even-virtual-real-estate-is-setting-price-records

12 - https://www.builderonline.com/building/habitat-for-humanity-builds-its-first-3d-printed-home-in-tempe_o

13 - https://www.wsj.com/articles/blackstone-bets-6-billion-on-buying-and-renting-homes-11624359600?mod=hp_lead_pos3

14 - https://abc7.com/10816581/

Housing Market: Fastest Pace for Single-Family Rent Growth in 15 Years Jun 28, 2021

Show notes

Single-family rents are increasing at their fastest rate in almost 15 years. A new CoreLogic report shows that rent growth for single-family homes was up 5.9% year-over-year in April. That's the fastest rate of growth since 2006, before the housing meltdown and the Great Recession.

Demand for detached homes has mushroomed because of the pandemic. Many Americans want more space inside their home as well as a place to go outside for fresh air. Remote work has also allowed for a migration to smaller cities and more remote locations. There's also a lack of affordable for-sale homes to satisfy demand at lower income levels. All those factors are pushing people into rentals, and with that kind of demand, rents are moving higher.

CoreLogic's Single-Family Rent Index

CoreLogic's Single-Family Rent Index tracks SFRs. (1) That includes detached homes and single-family homes that are attached to other single-family homes, like condominiums. It analyzes the same group of homes over time to come up with a reading on rent growth.

The index shows that rent growth for detached homes is three times the rate of rent growth for units that are attached to other units. It also shows that rent growth for all kinds of units is now higher than it was before the pandemic.

CoreLogic economist, Molly Boesel, says: "While rent growth dipped significantly last April at the start of the pandemic, rising affordability issues and supply shortages in the for-sale housing market and ongoing demographic pressure from aging millennials have continued to place upward pressure on the single-family rental market." She also sees these factors continuing and "leading to strong rent growth this year."

Uneven Rent Growth Rate

The growth rate is somewhat uneven, however, between the low and high-priced rentals. CoreLogic says the difference is due to the uneven pace of the job recovery, which it refers to as a "K-shaped" recovery. It defines the low-priced tier as less than 75% of the regional median, and the high-priced tier as more than 125% of the local median.

Looking at the different price tiers: The rate of growth at the low end was 3.9% year-over-year in April. That's up from 3.2% a year earlier. At the high end, the rate of growth was 6.1% compared to 2.2% in April of last year. That high-end increase is the fastest we've seen since May of 2006.

Rent Growth Highest for Detached SFRS

CoreLogic also analyzed the difference in rent growth for the various single-family property types. In addition to condos, those attached properties include duplexes, triplexes, quadplexes, townhomes, row-houses, and co-ops. CoreLogic found that rent growth for all tiers of detached homes accelerated most rapidly, at 7.9% year-over-year. The reading was just 2.2% for other kinds of single-family homes.

The report also shows the highest rent growth in lower-density cities that are attracting more renters. Phoenix tops that list with 12.2% rent growth. Tucson is a close second at 10.6%. Las Vegas, Atlanta, Austin, Dallas, Charlotte, Detroit, San Diego, and Houston round out the top ten.

Supply & Demand Dynamic

The CEO of one of the nation's biggest institutional landlords, Dallas Tanner of Invitation Homes, says that he expects the current dynamic in the rental market to continue. During an interview with CNBC, he said: "You do not see anything in the numbers that suggest the supply and demand factors are going to change dramatically overnight." (2)

He says with some 65 million millennials making major life decisions like buying or renting a home, he doesn't expect a decrease in the need for housing. Although he views the housing market as healthy, he says we're not building enough new homes each year to meet demand. According to St. Louis Fed, builders are producing about 1.5 million new units each year. (3) Tanner compared that to the late 1990s, and says the most urgent need right now is for more "more quality housing... across all spectrums."

Links:

1 - https://www.corelogic.com/intelligence/inaccessibility-in-for-sale-housing-pushes-up-demand-for-single-family-rentals/

2 - https://www.cnbc.com/2021/06/18/invitation-homes-ceo-says-hes-not-worried-about-a-housing-bubble.html

3 - https://fred.stlouisfed.org/series/HOUST

The Real Estate News Brief: Fed's Plan for Rate Hikes, Single-Family Rent Growth, and Metro Migration Among Homebuyers Jun 23, 2021

Show notes

In this Real Estate News Brief for the week ending June 19th, 2021... what the Fed is saying about rate hikes and tapers, how much single-family rents have grown, and where homebuyers are moving.

Economic News

We begin with economic news from this past week. The Federal Reserve is starting to make plans for rate hikes and tapering due to the risks of higher inflation. In a statement after its monthly meeting it said that it might hike short term interest rates two times in 2023. It also continued to say that recent price hikes were temporary, but Fed Chief Jerome Powell said in the news conference that inflation could rise faster and last longer than he and his colleagues had anticipated. The Fed had forecast an annual rate of 3% this year, but it recently surged in May to a 13-year high of 5%. Powell also said that the Fed has had its first discussion about tapering. It is currently purchasing $80 billion in Treasurys and $40 billion in mortgage-backed securities to help stimulate the economy. (1)

The job market recovery had a slight setback last week. Wall Street Journal economists had predicted initial jobless claims to continue their decline, but the Labor Department reported an increase of 37,000. Continuing claims were also up by a small amount to a total of about 3.5 million. And there's still a total of 14.8 million people collecting state or federal benefits of some kind. (2)

Many are collecting an extra $300 a week from a federal program that's set to expire in September. Because it's been difficult to fill all the jobs that are available, 25 states say they are opting out of that program early, as an incentive for people to get back to work. (3)

Housing starts were higher in May, but lumber prices and labor shortages kept those numbers lower than economists expected. The Census Bureau says they were up 3.6% to an annual rate of 1.57 million. And then permits were down 3%, which is also a reflection of the trouble that builders are dealing with. (4) But they may get a break on lumber pricing. They have dropped significantly in just the past two weeks. The Wall Street Journal reports that lumber futures for July are down 41% to around $1,000 for a thousand board feet. That's from a high of around $1,700 in early May. (5)

Mortgage Rates

Mortgage rates shot up on Thursday, after comments from Fed Chief Powell. According to Mortgage News Daily, the 30-year fixed-rate mortgage jumped to 3.25%. Earlier in the day, Freddie Mac had posted it's weekly results for the average interest rate and it was still below 3%. (7)

In other news making headlines...

Single-Family Rent Growth Doubles

Single-family rent growth doubled during the pandemic with a one-year period. CoreLogic says rent growth rose from 2.4% in April of last year to 5.3% in April of this year. That includes both townhomes and detached homes. As CNBC reports, that's the fastest rate of growth in almost 15 years, mostly due to strong demand for larger homes with yards. (8)

If you separate the numbers for stand-alone detached homes, the gains are even larger. CoreLogic says those rents are 7.9% higher, with Phoenix topping the list at 12.2%. Tucson, Las Vegas, and Atlanta were right behind Phoenix. Two big-city decliners include Boston, with a 5.9% drop in single-family rents, and Chicago, with a 2.6% decline.

Moving to a Different Metro

A new report from Redfin shows that homebuyer interest in moving to a different metro that began during the pandemic, continues at an elevated level. (9) Based on where Redfin.com users are searching, 31.4% of those people were interested in moving to a new metro in April and May. That's up from 26% in the first quarter of last year, and only one-tenth of a percent less than the first quarter of this year. The top five destination cities include Phoenix, Las Vegas, Sacramento, Austin, and Miami.

That's also pushing prices higher in those destination cities. Redfin says that prices in Austin are up 42.4% year-over-year. That's the largest increase among all the cities that Redfin was tracking. Phoenix prices had the second largest increase. They were up 33.3%. Sacramento was fifth on the list with prices rising 29.3%.

Redfin chief economist, Daryl Fairweather, says: "Even though homes in popular destinations are much more expensive than they were a year ago, it's still well worth it for many people to leave expensive coastal cities in favor of inland metros."

States with the Most Shopping Centers

Have you ever wondered how many shopping centers and malls there are in the United States? According to a report by the International Council of Shopping Centers, the U.S. has just over 115,000 of them. And 27% of them can be found in just three states. (10)

California has the most wth 15,285. Texas is second with 12,834. And Florida is third, with 10,843. Those three states also pay the most in sales tax as well.

You'll find links to our sources in the show notes for this episode at NewsForInvestors.com

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://www.marketwatch.com/story/fed-now-sees-two-interes-trate-hikes-in-2023-11623866824

2 - https://www.marketwatch.com/story/u-s-jobless-claims-rise-unexpectedly-in-latest-week-11623933361?mod=economy-politics

3 - https://www.cnbc.com/2021/06/16/states-to-end-federal-unemployment-benefits-for-400000-this-weekend.html

4 - https://www.marketwatch.com/story/builders-break-ground-on-more-new-homes-in-may-but-its-still-not-enough-11623848035?mod=home-page

5 - https://magazine.realtor/daily-news/2021/06/16/lumber-prices-are-dropping-fast

6 - http://www.mortgagenewsdaily.com/

7 - http://www.freddiemac.com/pmms/

8 - https://www.cnbc.com/2021/06/15/rents-for-single-family-homes-just-saw-the-largest-gains-in-nearly-15-years.html

9 - https://www.redfin.com/news/april-may-2021-housing-migration-trends/

10 - https://chainstoreage.com/27-us-shopping-centers-are-found-california-texas-and-florida

Home Construction: Big Drop in Lumber Prices and Headed Lower Jun 23, 2021

Show notes

What a difference a month makes! Lumber prices were at a staggering all-time high at the beginning of May. Over the last few weeks they've dropped more than 20%. In the securities world, that's enough of a drop to call it a "bear market."

Prices are still much higher than they were before the pandemic, but they have ratcheted down substantially from their peak. Lumber prices topped $1,500 for a thousand board feet at the end of May, on May 28th. Since then, they have tumbled from their $1,515 high to $1,210, according to an industry trade publication cited by Fortune. (1) That's a tad more than 20%.

Lumber Prices Drop 20%

This is great news for homebuilders and do-it-yourselfers who've stalled on projects because of the high prices. The National Association of Homebuilders says that the cost of lumber has added an extra $36,000 to the price of a new home, compared to April 2020. It also added about $119 a month for rent on a new apartment.

In the midst of the current building boom, builders balked at the cost of lumber and May housing starts pulled back. They were down 8.8%. Home improvement sales were also down by almost as much, but not only because of high prices. The DIY dip also coincided with the lifting of pandemic safety measures, and less interest in doing projects at home.

Meanwhile, the experts say that loggers and sawmills have been ramping up production because they are fetching more money for their products. That has injected more inventory into the supply chain, but as inventory grows, prices retreat, which is what's happening. Fortune reports that southern loggers increased production to a 13-year high this last April. (2)

Demand is Still Skyrocketing

Prices haven't done a complete reversal however, because demand is still skyrocketing, especially among homebuilders. New home construction hit a 14-year high in March, and fell back somewhat in April. But it was still 22% higher than April of 2019, and 67% higher than April of last year.

One commodity trader told Fortune: "The backlog is just too strong. There are too many places to put wood." And we're coming off a year that's marked by a historic lumber shortage. Sawmills cut production at the beginning of the pandemic. They were worried about a housing crash so they also unloaded a lot of their lumber stock and then the crash didn't happen. Instead, there was a recession-inspired housing boom that included a large number of millennial home buyers. There were also many bored homeowners in lockdown who decided to upgrade their homes.

Editor Shawn Church of Fastmarkets Random Lengths told Fortune: "What we're seeing right now is that of all the factors that contributed to the record run, those trends have eased or turned over and are incrementally contributing to the drops." (3) As I mentioned, the turn-around began just a few weeks ago in conjunction with the lifting of pandemic restrictions, and slower home improvement sales.

Retailers Surprised by Price Drop

That caught many big-box retailers by surprise. Nils Martinsson of Sherwood Lumber told Fortune: "Home centers across the country forecasted greater demand from the DIY sector this year based on the frenzied pace we saw over the past 12 months." He says consumers are now more focused on lock-down free activity, and that has loosened up the supply and brought prices lower.

Fortune reports that prices will probably continue to fall, based on lumber futures. But the big question is "by how much." They peaked on May 10th at more than $1,700 for July delivery contracts. As of last Tuesday, on June 15th, they were just $1,010. The futures show September contracts at $907. So the momentum is bringing lumber prices lower. But those prices are still double to triple what they were before the pandemic. Back then they'd range from $350 to $500 per thousand board feet.

And demand hasn't dried up. It may have slowed down a bit, but it's still going strong. The Wall Street Journal says that: "Lumber producers and traders expect that prices will remain relatively high due to the strong housing market, but that the supply bottlenecks and frenzied buying that characterized the economy's reopening… are winding down." (4)

Shadow Inventory Boosts Supply

The Journal also says that many builders were hoarding lumber to make sure that they didn't run out, and are now selling their excess inventory. This so-called "shadow inventory" increases the availability of lumber, and puts downward pressure on prices.

But over the long-term, current inventory issues are just a drop in the bucket compared to what will be needed to increase the housing supply. One lumber producer told the Journal: When you think about the amount of housing that we're going to have to build in the U.S. over the next three, five, 10 years, that's just a significant amount of demand for wood products."

If you want to read more on this topic, check the show notes for links to our sources at NewsForInvestors.com

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://fortune.com/2021/06/16/lumber-prices-falling-2021-chart-update-price-of-lumber-going-down-wood-costs/

2 - https://fortune.com/2021/06/10/lumber-prices-2021-chart-price-of-lumber-production-wood-supply-costs-update-june/?queryly=related_article

3 - https://fortune.com/2021/06/04/lumber-prices-housing-market-costs-back-down/?queryly=related_article

4 - https://www.wsj.com/articles/lumber-prices-are-falling-fast-turning-hoarders-into-sellers-11623749401

Green Energy: What Experts Are Saying About Solar Supply Chain Issues and Higher Prices Jun 18, 2021

Show notes

Solar energy is not a fringe concept anymore. Experts say it's becoming more mainstream, but that supply chain issues are impacting the industry right as it's picking up speed. One reason for the growth of solar is that prices have been dropping, but experts say there's been a recent surge in the cost of components, labor, and freight, similar to what we're seeing in many industries, including construction. And that could cause a major setback for solar.

The website oilprice.com is calling it: "The Worst Setback for the Solar Boom in a Decade." (1) With concerns about climate change and an international push toward clean energy, the industry is getting hit with unforeseen expenses. The oilprice blog cites the tripling of steel prices and higher prices for fuel, freight, and polysilicon. It says that many solar companies are in a "wait-and-see mode," hoping that prices for solar components and freight charges will stabilize at a lower level.

Solar Panel Prices Spike

According to Bloomberg, the solar panel prices are up 15% so far in the second quarter. That's after seven quarters of lower prices, due to the growth of the industry. The report offers some good news about the polysilicon shortage. Bloomberg analyst Yali Jiang says the industry will see a huge increase in the polysilicon supply, mainly from China. Chinese manufacturers are expected to boost their output by about 76%. That kind of output should push prices down, and according to this blog, to levels seen before the pandemic. (2)

The Bloomberg opinion piece also cites a threat to that supply chain, due to allegations of forced labor in China's western region among Muslim minorities and a world spotlight on how China is handling that situation. There is legislation in Congress now that would ban all Chinese products produced with the use of forced labor. The solar industry is working on ways to make it easier to determine which manufacturers are using forced labor. The Solar Energy Industries Association released guidelines this year, to help with supply chain traceability.

According to Bloomberg columnist David Fickling, "something has to give." He says China's solar industry accounts for 70% of the world's panel production, and that "attempts to set up non-China supply chains, whether in India, the U.S., or Saudi Arabia, have done little except raise the cost of photovoltaic installations and put off the moment when fossil fuels are driven out of business."

Solar Demand Is Soaring

All this while solar installations are soaring. During the first quarter, the SEIA reports that the U.S. solar market installed over 5 gigawatts of solar capacity. That's a 46% increase from the first quarter of 2020. It's also the largest year-over-year increase on record. The association's 2021 Q2 Solar Market Insight Report also says that "solar accounted for 58% of all new electricity-generating capacity added in the U.S. during the first quarter." (3) It says the U.S. is on track to install another 24.4 gigawatts of solar this year. That's 24% more than in 2020.

A good portion of that demand is coming from utilities and corporations that are trying to meet climate change goals. Reuters reports that three quarters of the Q1 installations were done by the bigger customers, and that higher prices for materials and shipping could interfere with that growth curve. Wage issues and a tight labor market are also having an impact.

But demand is also being driven by an interest in the federal tax credit for solar before it expires at the end of this year. It's currently at 22% after notching down from 30% and 26% in 2019 and 2020, respectively. (4) The Biden administration would like Congress to extend the tax credit as part of a push toward renewable energy.

Warming Up to the Use of Solar

In the meantime, more and more people are warming up to the use of solar as "normal." As reported by realtor.com, homeowners are "showing more willingness" to install solar panels on their homes. (5) In California, all new homes must be equipped with solar panels, with only a few exceptions. California is the first state to issue a mandate like that. It became law last year.

Senior policy counsel for the U.S. Green Building Council, Elizabeth Beardsley, says: "This mandate normalizes the idea of solar panels as acceptable to regular homeowners." But she says: "It will be a long time before mandates are considered by other states except for the most progressive ones."

Underlying those mandates, is the need for clean energy and cost effectiveness. Recent price surges aside, Kevin Wilson of Tri Pointe Homes says that adoption has grown because of an "extreme decline in the cost of installing a solar panel system." High energy costs in places like California also contribute to the desire for cheaper electricity.

One thing that has changed, Wilson says that homeowners are not as concerned about the "look" of the solar panels as they used to be. They used to want to hide them in the back of the house, but that's not such a big issue anymore.

You'll find links to our sources in the show notes at newsforinvestors.com

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://oilprice.com/Energy/Energy-General/The-Worst-Setback-For-The-Solar-Boom-In-A-Decade.html

2 - https://www.bloomberg.com/opinion/articles/2021-06-13/the-coming-solar-panel-crisis-could-be-less-about-price-and-more-about-xinjiang

3 - https://seia.org/research-resources/solar-market-insight-report-2021-q2

4 - https://www.energy.gov/sites/prod/files/2020/01/f70/Guide%20to%20Federal%20Tax%20Credit%20for%20Residential%20Solar%20PV.pdf

5 - https://magazine.realtor/daily-news/2021/06/02/will-solar-panels-become-more-common

Housing Market: Building Material Shortages Still Dog the Construction Industry Jun 18, 2021

Show notes

The high cost of lumber has challenged the construction industry this past year, but there may be some relief in sight. Prices have been pulling back a bit, but how far will they go? Industry experts are expecting a building boom, and that could put more pressure on the price of lumber and other materials in short supply, like paint.

As reported by CNBC, lumber futures have been pulling back in the last month, after a huge surge during the pandemic. (1) For July deliveries, they were down more than 5% to $1,158 per thousand board feet. That's off about 30% from a record high of $1,711 on May 10th.

Lumber Prices Off Their Record High

But even with that pullback, lumber prices have risen more than 200% in the last year. And that's adding about $36,000 to the average price of a home, according to a recent report. (2)

One lumber industry insider told CNBC that it might make sense to hold off a bit on a project if you can, because of high wood costs. Kyle Little of Sherwood Lumber says: "We do see some relief over the next six to 12 months." But he says "at prices that are much, much higher than prices we've experienced in the recent past." Sherwood Lumber is a private distribution company based in New York.

Little believes that lumber prices came down a bit because some builders were putting off projects. Single-family starts were down 13% in April compared to March. CNBC reports that about 15% of the builders were pouring foundations but had postponed the framing of the homes. (3) An official home start must include both the foundation and the framing.

A monthly survey by the National Home Builders Association supports that idea. Builders said in the survey that they were slowing production to help deal with higher prices for lumber and other materials like steel, copper, and paint.

Paint in Short Supply

Paint shortages are being blamed on the pandemic, as well as the winter storm in Texas last February. A spokesperson for Sherwin-Williams told Realtor.com: "In a supply chain already challenged by COVID-19, the February natural disaster in Texas further impacted the complex petrochemical network, causing significant disruptions." He says: Recovery has been significant in recent weeks and is improving -- but is still far from complete."

The blog says that builders are on waiting lists for paint, and that prices will likely run higher until the shortages are resolved. Paint manufacturers expect increases between 6 and 40%.

New Building Boom Expected

The owner and publisher of Madison's Lumber Report, Keta Kosman, told the Lesprom Network that she expects a new building boom, similar to one in the 1950s. (4) In addition to the surging demand for homes, the U.S. administration wants to act on a huge infrastructure plan. Those projects will use many different materials, including a lot of wood.

She says higher home prices have as much to do with demand as anything else. She says smaller builders may have pulled back because of lumber prices, but the larger builders just raised their home prices. If the homes are pre-sold, builders are now adding clauses to the contract to cover the rising cost of lumber.

When asked if we can expect lumber prices to stop rising, Kosman said: "That's very hard to know. The price of lumber can't go up forever." She says: "Previously, the normal was $300 per thousand board feet. We are never going back to those levels again." As for the lumber supply, she says that sawmills have only so much capacity, and it takes two years to build a new mill.

The U.S. also imports about 40% of its lumber, according to Kosman, and there's constraint in that supply line as well. She says the latest report for Canada's sawmill capacity is from February, and that's showing below normal levels.

The takeaway from Kosman's interview is that lumber prices may come down some more, but don't hold your breath for a return to pre-pandemic levels. She expects another "15 years of robust building" and a new bottom for lumber prices. We'll just have to wait to see where they land.

The National Association of Home Builders would like more to be done to improve the lumber cost situation. 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."

If you'd like to read more about this, you'll find links in the show notes at NewsForInvestors.com

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://www.cnbc.com/2021/06/08/lumber-executive-sees-further-relief-in-sky-high-prices-.html?recirc=taboolainternal

2 - https://www.businessinsider.com/lumber-expensive-increases-price-new-homes-national-association-home-builders-2021-5#:~:text=Expensive%20lumber%20costs%20have%20added,a%20new%20home%2C%20report%20finds&text=Expensive%20lumber%20has%20added%20to,price%20of%20a%20new%20home

3 - https://www.cnbc.com/2021/05/18/home-construction-sees-biggest-drop-since-pandemic-hit-heres-why.html

4 - https://magazine.realtor/daily-news/2021/06/07/paint-shortage-adds-to-construction-remodeling-woes

5 - https://www.lesprom.com/en/news/There_will_be_new_bottom_lumber_price_and_15_years_of_very_robust_building_99039/

The Real Estate News Brief: Inflation Rate Rises, Home Equity Surges, and "The House that SHE Built" Jun 14, 2021

Show notes

In this Real Estate News Brief for the week ending June 12th, 2021… inflation hits a new 13-year high, homeowners make big gains in equity, and "The House that SHE Built" in Utah.

Economic News

We begin with economic news from this past week. The latest inflation report shows another surge in consumer prices. The U.S. Bureau of Labor Statistics reported a .6% jump in the consumer price index last month. That puts the annual rate at a 13-year high of 5%. The core inflation rate, which excludes food and energy, also jumped .7% to a 29-year high of 3.8%. The Federal Reserve has assured Americans that these price increases are the result of a fast economic recovery, and will only be temporary. Some economists worry that the higher prices won't come back down, but as MarketWatch reports, the debate is expected to "play out over the next year." (1)

The number of people filing for unemployment continues to drop. The government reported just 376,000 new claims for the week ending June 5th. (2) The number of continuing claims also fell by another 258,000 to a total of 3.5 million. Combined with seven other state and federal programs, 15.34 million people are collecting checks. That's about half the number at the same time last year.

While jobless claims went down, job openings shot up to a record high. The Labor Department says there were 9.3 million openings in April, which is about 1 million more than March, and about 5 million more than there were during the early months of the pandemic. (3) Employers say they are struggling to find people to fill open positions. A high number of people are also quitting their jobs. Economists say there are several reasons for this situation, including early retirement, trouble finding childcare, extra unemployment benefits, and fear of COVID.

Consumers regained their confidence in the economy in June. The University of Michigan's consumer sentiment survey shows a 4-and-a-half point increase to a reading of 86.4. That's after it hit a 13-month high in April, and then dropped in May. (4)

Mortgage Rates

Mortgage rates were down slightly in the last week. Freddie Mac says the 30-year fixed-rate mortgage slipped 3 basis points to 2.96%. The 15-year was down 4 points to 2.23%. (5)

In other news making headlines…

$1.9 Trillion in New Homeowner Equity

June is National Homeowners Month, and U.S. homeowners have something to celebrate. (6) According to CoreLogic's latest Home Equity Report, homeowners with mortgages have enjoyed a 19.6% year-over-year increase in their equity. That represents an average yearly gain of $33,400 per homeowner, and a total gain of more than $1.9 trillion. (7)

CoreLogic's chief economist, Dr. Frank Nothaft, says: "Double-digit home price growth in the past year has bolstered home equity to a record amount. This reduces the likelihood for a large number of distressed sales of homeowners to emerge from forbearance later in the year." Instead of letting their homes go into foreclosure, they are more likely to sell their homes and pay off the loan.

The first quarter report shows that loans with negative equity decreased 7% to 1.4 million homes. That's about 2.6% of all homes with a mortgage.

Turkey Leads for Global Price Growth

Home prices around the globe have been rising at their fastest pace since 2006. A report from Knight Frank shows they were up 7.3% year-over-year in March. And the country at the top of that list is Turkey at around 32%. New Zealand is second with a 22% increase, and is followed by the U.S. and Sweden at 13%, Austria at 12%, and Canada at 11%. (8)

Frank Knight says it is "not" a global boom, however, because many countries are seeing modest price growth, and four are seeing price declines. Home prices in Malaysia, Morocco, India, and Spain are down between about 1 and 2% year-over-year.

"The House that SHE Built"

The so-called "House the SHE Built" is making a debut at Utah's annual Parade of Homes. The 3,200-square foot custom-home was designed and built by an all-female construction team. It began as a local project in Sarasota Springs to encourage more women to take this career path, but grew into a national event that attracted women from across the country including engineers, designers, architects, landscapers, and skilled workers. Many provided the materials and the labor for free or at cost. (9)

Proceeds from the sale of the home will be used in a number of ways to help women pursue a construction industry career. Some will go toward scholarships, while other funds will go toward charitable organizations geared to help women and educational events that teach young girls about home building opportunities.

Check the show notes for links to further information about these stories at NewsForInvestors.com.

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://www.marketwatch.com/story/consumer-prices-soar-again-cpi-shows-and-shove-rate-of-inflation-to-a-13-year-high-11623328693

2 - https://www.marketwatch.com/story/jobless-claims-drop-to-post-pandemic-low-of-376-000-11623328772

3 - https://www.marketwatch.com/story/u-s-job-opening-leap-to-record-9-3-million-but-hiring-lags-well-behind-11623161366?mod=economic-report

4 - https://www.marketwatch.com/story/u-s-consumer-sentiment-rebounds-in-june-11623421938?mod=economy-politics

5 - http://www.freddiemac.com/pmms/#

6 - https://www.builderonline.com/design/consumer-trends/housing-demand-remains-strong-as-the-industry-celebrates-national-homeownership-month_o

7 - https://www.worldpropertyjournal.com/real-estate-news/united-states/irvine/real-estate-news-rising-home-equity-data-for-2021-corelogic-2021-housing-data-frank-martell-frank-nothaft-coronavirus-pandemic-impact-home-prices-in-2-12564.php

8 - https://www.worldpropertyjournal.com/real-estate-news/turkey/istanbul-real-estate-news/real-estate-news-global-home-price-growth-in-q1-2021-knight-frank-global-home-price-index-for-2021-turkey-property-news-covid-pandemic-impact-on-globa-12556.php

9 - https://www.builderonline.com/design/projects/all-female-built-home-makes-its-debut-at-utahs-annual-parade-of-homes_c

Due Diligence: Cervest Raises $30 Million for Climate Risk Assessment Platform Jun 09, 2021

Show notes

A London-based company is betting on the need for climate risk management for governments, companies, and investors around the world. Cervest just announced $30 million dollars in new venture capital funding to grow its climate intelligence platform called Earthscan. According to media website Axios, the money will be used to expand the company's presence from London to the U.S. and other countries in Europe. (1)

The Cervest website calls the service "on-demand climate intelligence." It promises to help you "understand how current and future climate events will affect your physical assets."

Understanding Climate Change Risk

Founder and CEO, Iggy Bassi, said in a press release: "Climate volatility has thrown us into a new era where climate intelligence needs to be integrated into all decisions. Organizations that fail to do so risk being blindsided by climate events such as the recent floods and fires in Australia, the droughts in Europe and the winter freeze in Texas." (2)

The new Earthscan platform is still under development, but you can see the kinds of information it will provide. You can also sign up for a spot in the company's Early Access Program. (3)

Cervest's Earthscan Tool

Earthscan is described as an on-demand asset-level risk analysis tool that combines statistical science and machine learning with public and private data. And it says it will make the Earthscan platform openly accessible to everyone for free. It calls this a "freemium model."

The company says Earthscan will look at data for things like flooding, droughts, and extreme temperatures going back 50 years, and use that data to forecast the risk to assets over the next 80 years. It says: "EarthScan equips all organizations with the climate intelligence needed to anticipate and act on climate risk to assets."

Cervest anticipates that climate intelligence will soon be a requirement for all major asset-related decisions. It claims that climate risk is business risk, and climate intelligence is business intelligence because climate events are expected to be a threat to assets everywhere.

Climate Risk is Business Risk

Of course, the impact and the timeline will vary from place to place. Cervest says that: "Climate intelligence can tell us what's happening with any asset in the world, right now, as well as how it's changed over time, and how it will change in the future."

The questions that Cervest says its tool will answer include:

1 - What are the physical risks to my assets?

2 - How will a changing climate impact my supply chains?

3 - What competitive opportunities will emerge?

4 - How can I calculate, disclose and comply with regulatory requirements now and in the future?

Axios reports that Cervest has been growing the Earthscan database with asset data from around the world. And that by opening the platform up to the public for free, it will help connect all the stakeholders for a particular asset to the same data on climate risk. For example, that might be an investor, the bank that loaned the money to the investor, and a future tenant.

Climate Risk as a Major Industry

Axios says that Cervest isn't the only player in this field. It mentions a few others including one called Jupiter Intelligence. It says Jupiter claims to have already signed contracts with the U.S. government, a major bank, several insurance companies, and two big U.S. cities.

Jupiter CEO, Rich Sorkin, told Axios that he isn't concerned about competition from Cervest. He says: "We believe that climate risk management will be a major industry, and we think there will be room for multiple companies."

Axios listed a few other climate risk companies such as Demex, First Street Foundation, the Rhodium Group, KatRisk LLC, and The Climate Service. Demex co-founder, Steven Bennett, says these companies can be divided into three types. He says that some focus on extreme weather events, while others assess the risk and help clients make plans for climate change events or they are designed to help customers operate within the context of those extreme events.

The Axios report expects to see more climate risk companies emerging, as demand grows for this kind of data and the AI tools become more sophisticated. It also expects investor interest to rise which will help feed the growth of this space. So it may not be a big surprise to hear more about massive funding rounds for these kinds of operations in the near future.

If you want to read more about this, check for links in the notes for this episode at NewsForInvestors.com.

Click here to join RealWealth now, it's free and only takes a minute!

Thanks for listening. I'm Kathy Fettke.

Links:

1 - https://www.axios.com/prominent-investors-jump-into-climate-change-risk-47e0168b-d416-4338-a427-507f2304b8bc.html

2 - https://www.prnewswire.com/news-releases/cervest-secures-30-million-in-series-a-funding-to-launch-worlds-first-ai-powered-climate-intelligence-platform-and-lead-new-40-billion-market-301295454.html

3 - https://cervest.earth/