— Higher mortgage rates and interest rates likely contributed to a recent decline in new homebuilding in Wisconsin, according to an economics expert at Marquette University.
David Clark is a professor of economics and executive associate dean in the university’s College of Business Administration. In a recent interview, he explained rising mortgage rates are impacting construction loans and related building activity.
The national average for a 30-year fixed rate mortgage fell slightly from 5.52 percent in June to 5.41 percent in July, Clark said. But that remains well above the rate from July 2021 — 2.87 percent.
“Those higher mortgage rates, and those higher rates that are going to show up on construction loans as well, that’s certainly something that will have an impact on people pulling permits,” he told WisBusiness.com. “I think that’s more likely to be the primary driving factor than other things that might impact the decision to take out a loan.”
And he noted federal officials have been raising short-term interest rates in hopes of tamping down inflation, which hit a recent peak of 9.1 percent earlier this summer.
The number of new home construction permits fell 24 percent over the year in the second quarter of this year, a recent report from the Wisconsin Builders Association found. A total of 3,328 permits were issued between April 1 and June 30, compared to 4,382 during the same period of 2021, the report shows.
Clark said it’s unclear whether the United States is currently in a recession, as initial GDP figures showed a continued downturn in the second quarter but the labor market remained strong. Plus, the National Bureau of Economic Research — which officially decides if a recession is taking place — has yet to weigh in, he noted.
“It may well be the case that we are in the recession and ultimately it does have an effect, but I think it’s more likely, just looking at that second quarter data from housing permits, and concluding … the major reason here is the high mortgage rates and interest rates,” he said.
According to Clark, the NBER will likely wait until revised second quarter GDP figures are available before making a call on the recession question. The agency also incorporates other factors such as industrial production and the labor market.
“My guess is, if we don’t hear about it in September, that it will be after the midterm elections in November … they try to avoid appearing to be political in their decisions,” he said.
See the Wisconsin Builders Association report: https://www.wisbusiness.com/2022/wisconsin-builders-association-homebuilding-sees-24-percent-decrease/
— Clark also said a shortage of land for new single-family home construction in metro areas is “not surprising” after a recent report highlighted the issue in southeastern Wisconsin.
The Metropolitan Builders Association, a trade group based in Waukesha, says an “acute shortage” of available lots in the Milwaukee area is holding back new home construction. The group’s report showed the number of available lots in the metro area had fallen dramatically in recent years — from over 20,000 in 2005 to under 3,000 this year.
“We’ve known that there are challenges in terms of the availability of land for development, especially in metropolitan areas,” Clark said. “That’s not surprising when you look at those more central counties in a metropolitan area.”
He said clearing currently occupied lots for new construction “ends up being a relatively expensive venture,” also highlighting the “regulatory burden” associated with zoning land for residential new construction.
“So it is an issue that’s been out there for several years,” he said. “I think the point that builders have made is it’s not an issue that we can’t build, it’s the price point that you have to build at once you consider the regulatory expenses associated with new construction.”
That includes environmental impact mitigation and costs associated with converting land designated for agricultural or light industrial uses, he said. Plus, Clark noted material costs have risen and labor shortages in the trades are also having an impact.
“All of those expenses have combined to make it difficult to build at price points that especially Millennial buyers might be able to afford,” he said.
See the Metropolitan Builders Association report: https://www.wisbusiness.com/wp-content/uploads/2022/08/MBA-Plats-Stats-News-Release.final_.pdf
— In the latest episode of “Talking Trade,” attorney Ngosong Fonkem discusses the “seismic trade shift” in global supply chains caused by sanctions on Russia.
Fonkem, a trade compliance specialist with Chicago law firm Page Fura, notes “this is the first time since the end of the Cold War that sanctions of this magnitude” have been levied on a major global economy. Many nations including the United States have enacted sanctions on Russia following its invasion of Ukraine in February.
“Russia essentially has become the most sanctioned country in the world, essentially bypassing Iran,” he said. “Bear in mind the country is the 11th largest economy in the world in GDP terms … and you pick any commodity out there, Russia is among the top three exporter of that commodity.”
He provides an overview on various types of sanctions against businesses, individuals and specific sectors including finance, energy and others.
“Talking Trade” is now available in audio form through Apple Podcasts and Google Podcasts. See more episodes and subscribe here: https://www.wisbusiness.com/category/talking-trade/
— The seven-day average for new COVID-19 cases in Wisconsin has now been declining steadily for more than three weeks, reaching 1,419 cases per day most recently.
This improvement is reflected in a CDC metric for community-level viral activity, which shows fewer Wisconsin counties in the highest tier for COVID-19 cases, hospitalizations and hospital bed occupancy. The 17 counties seeing high levels of activity are largely grouped in the northern half of the state.
Meanwhile, the percent positivity for COVID-19 testing has also been falling in recent weeks. After reaching a recent peak of around 15.3 percent near the start of August, it’s since declined to 13.4 percent, according to the state Department of Health Services site.
The Wisconsin Hospital Association’s dashboard shows 460 patients in the state are currently hospitalized with COVID-19, including 55 intensive care patients. Both of those numbers saw a recent drop after the overall hospitalization figure had been slowly increasing since the start of July.
COVID-19 deaths remain low, with the latest seven-day average reaching two deaths per day. DHS reports a total of 13,294 confirmed COVID-19 deaths in Wisconsin.
See more data from DHS here: https://www.dhs.wisconsin.gov/covid-19/data.htm
See the WHA dashboard: https://www.whainfocenter.com/Covid-19Update
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— The New North and Competitive Wisconsin are hosting an event tomorrow in Appleton with economic development experts discussing the importance of broadband internet in the state.
The Be Bold Wisconsin Tomorrow Action Accelerator event is being held at Fox Valley Technical College’s DJ Bordini Center from 8 a.m. to noon. Attendees can join the event in person or virtually.
Panel discussions will focus on developing a regional approach for expanding broadband coverage, the “middle-mile and last-mile” strategy, addressing rural challenges and more.
See more event details and register here: https://foxcitieschamber.com/news/2022/08/10/member-news/registration-open-for-broadband-the-new-economic-necessity-on-aug.-23/
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# HEALTH CARE
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# REAL ESTATE
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# PRESS RELEASES
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