2021 Year in Review: A Look at the top ten Housing & Economic Developments
As the economy transitioned through COVID-19 in 2021, a number of developments directly impacted the K&B industry. Let’s take a look at what we consider to be the top ten.
1. House Price Appreciation – Strong demand coupled with record-low inventory led to unprecedented appreciation in single-family homes, with prices increasing nearly 20 percent. In fact, many looking to buy at the end of 2021 were priced out of the market.
2. Mobility – One of the top 2021 headlines was the migration of many homeowners and renters from crowded central cities to more open suburban and exurban locations during the pandemic was a plus for K&B remodeling. The longer-term trend, however, points to lower mobility.
3. Mortgage/Interest Rates – This one is still unfolding and could have major repercussions for our industry. The Federal Reserve Bank had a policy in place for several years that maintained interest rates near zero. This impacted demand for homes as consumers sought to take advantage of the unprecedented situation. However, with inflation beginning to rear its ugly head, the Fed may change its policy of maintaining price stability.
4. Housing Inventory – The number of single-family homes available for sale has been hovering near record lows for most of the year. The desire to move to larger homes due to pandemic along with attractive mortgage rates have led to a plethora of potential buyers. Houses listed for sale are quickly snatched up, not allowing inventory to build.
5. Labor Shortages – Both the pandemic and the economic shutdown have changed consumer attitudes towards work. More people are quitting their jobs, some due to the need to be caretakers, while others have a desire to change fields or because opportunities in their own field have never been greater. This is clearly affecting K&B, causing supply chain delays and limiting the ability to fill the demand for new housing.
6. Energy Issues – Government policies towards sustainable energy are driving price increases in traditional energy sources. Gasoline prices have ballooned by 50 percent in the 12 months through October 2021. Additional domestic pipeline shutdowns could lead to further price increases based on the lag time until new energy sources are built and can enter the system.
7. Federal Reserve Bank – The Fed increased its “balance sheet” to the tune of $4.1 trillion due to several stimulus payments and additional unemployment benefits during the pandemic. Observers are watching to see what impact this will have on the nation in the long-term.
8. Labor Participation – The percentage of adults in the labor force has been declining for 30 years. Those aged 55 or higher have been more involved than their younger counterparts, with those age 25 or lower being the least involved. Since 1990, labor force participation for adults aged 20-24 has dropped by five percentage points. Those aged 16-19 have seen participation rate fall a concerning 14 percentage points. As the construction industry (and others) attempts to work through staffing challenges, the decline is not a welcome trend.
9. Inflation – Over the past year the consumer price index has been rising at a pace not seen in 30 years. Cash added to the economy through direct government payments to consumers, along with cash infusions by the Federal Reserve Bank, suggests inflation will remain an issue for the next few years.
10. Unemployment – Although the unemployment rate has been falling, the decline hides the fact that fewer people are active in the labor force. The percentage of adults who are not employed or who are looking for work has remained essentially unchanged since the beginning of 2020.