Fed Chair: Home Builders Feel Like They’ve Been Hit by a ‘Perfect Storm’

Filed in Affordability, Capitol Hill by on July 11, 2019 13 Comments

Federal Reserve Chairman Jerome H. Powell told the Senate Banking Committee today that the nation’s home builders are facing several supply-side challenges that are hindering housing affordability and “feel almost like they have been hit with a perfect storm here.”

This exchange occurred after Sen. Tina Smith (D-Minn.) said that housing costs are growing faster than wage growth and there is a shortage of housing at price points that people can afford.

“What we hear from home builders is a series of factors that are really holding them back and challenging affordability,” said Powell. “Now you have a shortage of skilled labor so it’s hard to get people on the job – electricians, plumbers, carpenters and other people – no matter what you pay them.”

Sen. Smith then asked Powell if immigration policy has something to do with this.

“That’s what we hear from home builders. That’s part of it for sure,” said Powell. “It’s also hard to get lots … and the rules for creating new lots are challenging. Material costs too, have gone up and some of that is tariffs. The home builders feel almost like they have been hit by a perfect storm here.”

“These longer run challenges I think are going to be there and affordability is going to be a challenge,” Powell added.

You can listen to his testimony in the clip above.

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  1. D Quigley says:

    Yes ! indeed affordability is a serious problem particularly on both coasts. In my estimation, this problem began in the mid to late 80s. “Supply side” never “trickled down”. It was the beginning of skyrocketing costs for raw land. The building (housing) economy never realistically became equalized, where average wages stayed abreast of growing materials and/or labor costs. Yes there’s a major crisis right now. Affordability for starter homes for young first home buyers entering the market, does not exist, without taking on the debt of massive monthly mortgage payments . We are borrowing ourselves, from Washington to the kitchen table , into oblivion. Reread the “Second Coming “ by Yeats. The ‘center cannot hold’.
    My Dad used to say “if you can’t afford it don’t buy it”. Sound advice that I’ve passed on to MY children. Severe Crisis is always the equalizer .

  2. Sheryl L says:

    Why is no one talking about some of the counties raising water taps to $30,000 and Metro Districts doubling property taxes?

  3. Bill Callaway says:

    We have a very limited unskilled labor pool also. They are not available for part time work. All are busy landscaping, cutting grass or handyman for help wanted online requests. We need workers for all site work construction jobs.

  4. Amy says:

    We do not need immigrants to fill trade jobs we need Americans that see a trade job as an opportunity. College is expensive and everyone is doing it. Get a Trade Job people!!! Start making money now in an apprenticeship and you will be one of the few in a high demand field.

  5. joseph amedson says:

    Delay permitting by Government agencies, holding cost, cost of permits,( in Seattle city charges Code change $324.00 per hour for permit review alone ), property tax hikes and other factors are contributing to the cost.

  6. Barbara A Popp says:

    The real estate industry is feeling the tightening of affordability in all price points. The Builders are being challenged to build homes , run a profitable business and fulfill the market needs. The economy is very fragile now in this area and we are loosing our middle class.

  7. Betty Hardle says:

    What I fear most is that the politicians and governments (local, state, national, world wide) will use the problem of home affordability as a talking point. They will talk and talk and talk. And never do anything substantive until a whole generation goes by. The students now in middle school, by the time we would expect them to buy their first home, will not be able to afford to own any home for their own family. The new homes will be too expensive for all but a few. And the smaller existing homes that have been around since the 1980’s will be nearly completely worn out. This is not the legacy I want them to have to deal with.

  8. Howell Lee says:

    We have been yelling in the wilderness for over a DECADE! It is Supply and demand folks .
    A person entering the workforce in the construction industry at say 18 years old , can be earning triple what their friends in white collar entry level jobs by the time they are 25! Only 7 years and you can triple your earnings! what’s to think about?

  9. Laura B says:

    In regards to skilled workers, you are absolutely correct. We took out high school classes that taught trades and just pushed for everyone to go to college. Those who could not afford college are left out in the cold. The baby boomers who were able to take classes learning a trade in high school benefited from the classes and were able to find jobs. The problem is baby boomers will all be retiring and trades will fall apart. We need to get the trades back in high school to show students that it is okay to go into the trades. It is a shame that we started ONLY pushing for college when the prices for college have skyrocketed!

  10. Mary Ann Moos says:

    From a Senior lady’s point of view…all of the above reasons are factors in the housing situation..but there are some others that are common sense. Why in the 1970’s did the builders start building BIGGER & BIGGER houses??? Greed! They would have gotten more housing on the raw land….and had the homes more affordable for more families …& still made money. People who could afford the large ones loved the status…even tho they did’nt need them bigger…And other people who couldn’t afford them , went overboard financially to buy them & many later lost them. Then the Realtors & assessors get a hand in the problem by over-valuation so they can get a bigger cut. On & On it’s gone for 30 years….until we see families not able to afford a home…& and an abundance of people living on the streets…homeless. It didn’t have to be…..

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