7/21/2022
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The Spokesman-Review
About 60% concerned with support for family
The Wall St Journal
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The Spokesman-Review
About 60% concerned with support for family
By Reade Pickert
BLOOMBERG
In the face of decades-high inflation, nearly six in 10 U.S. workers are concerned their paycheck is not enough to support them and their family, a poll released Wednesday showed.
The tally was even higher among parents with children under 18, millennials and Hispanic workers, according to the American Staffing Association report.
Among those employed, 58% said they plan to cut back on expenses in the next six months.
Inflation – now at a 40-year high – has driven up costs across the economy, forcing many families to make tough choices.
Gas prices are near record highs and grocery bills continue to climb.
Despite widespread pay raises, average hourly earnings adjusted for inflation were down 3.6% in June from a year ago, the most in records back to 2007.
The rise in prices has also driven workers to look for new work.
More than a quarter of employed respondents said they plan to search for a new job with a higher salary, and a similar share plan to start a second job.
A separate survey from the U.S. Census Bureau showed a similar picture, with roughly a third of Americans saying it was somewhat or very difficult to pay for their usual household expenses.
The survey was conducted online by the Harris Poll on behalf of ASA from June 2-6.
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The Wall St Journal
The housing market and construction have cooled as higher interest rates start to bite
Updated July 20, 2022 2:15 pm ET
Slower activity in the housing market, halting a torrid stretch of sales induced by the pandemic, is another sign of a slowing economy, economists said, adding to risks of a recession.
The median sales price of an existing home climbed to $416,000 in June, the National Association of Realtors said Wednesday, up 13.4% on the year and the highest since records began in 1999.
At the same time, sales of previously owned homes fell for a fifth straight month, dropping 5.4% in June to an annualized rate of 5.12 million, NAR said. That was lower than the number of sales recorded in all of 2019, before the Covid-19 pandemic became widespread in the U.S.
“A combination of higher prices and higher mortgage rates have clearly shifted the dynamics in the housing market,” said Lawrence Yun, NAR’s chief economist. “People who want to buy are simply priced out given the affordability challenges.”
The housing market has frozen as participants adjust to the increase in mortgage rates, said Mark Zandi, chief economist at Moody’s Analytics.
“Buyers can’t figure out what is the right price,” he said. “Sellers are very reluctant to give up” on the price they expected to sell for a few months ago, he said.
A housing slump could deal another blow to economic growth, already hobbled by accelerating inflation. Growth contracted at a seasonally adjusted annual rate of 1.6% in the first quarter, according to the Commerce Department and some economists expect growth to record another decline or barely advance in the April-to-June period.
Following Wednesday’s home sales data, Goldman Sachs economists lowered their forecast for second-quarter economic growth by 0.1 percentage point to a 0.5% rate.
IHS Markit economists also lowered their forecast by 0.1 percentage point. They now forecast a 2% drop in gross domestic product in the second quarter.
The Commerce Department will release second-quarter growth data on July 28.
Almost 15% of home-purchase agreements that were pending in June fell through, the highest level since April 2020, when the pandemic disrupted the market, according to real-estate brokerage Redfin Corp.
“We have a lot of people that are just sitting on the sidelines waiting to see what happens with interest rates and the overall economy,” said Phil Mount, a real-estate agent in Boise, Idaho. “People aren’t buying right now because they’re nervous.”
Despite forecasts for a cooling housing market in 2022, U.S. home prices are still hitting record highs, even with mortgage rates surging in recent months. WSJ’s Dion Rabouin explains what’s driving demand, evidence of a slowdown on the horizon, and what that could mean for the economy. Photo composite: Ryan Trefes
Despite the higher prices, homes are still selling quickly, suggesting that demand remains resilient for now. Properties remained on the market 14 days in June, the fewest in records going back to 2011. The inventory of homes for sale has increased but remains low with a three-month supply of unsold homes. Total inventory at the end of June stood at nearly 1.26 million units, a 9.6% increase from May.
But housing demand could fall in the months ahead. In a separate report Wednesday, the Mortgage Bankers Association said mortgage applications fell a seasonally adjusted 6.3% in the week ended July 15 from the prior week, the third straight drop.
Mortgage applications are now at their lowest level in 22 years.
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The average rate on a 30-year fixed-rate mortgage was 5.51% in the week ended last Thursday, up from 2.88% from a year earlier, according to housing-finance agency Freddie Mac.
Higher borrowing costs are partly due to the Federal Reserve’s aggressive path of interest-rate increases to cool demand in the economy and tame inflation, which hit 9.1% in June, the highest in more than four decades. Fed officials lifted rates by three-quarters of a percentage point in June, the largest increase since 1994. Officials will likely make a similar move at their meeting next week.
Higher home prices and mortgage rates have pushed up the monthly payment on a median-priced home by nearly $700, or 56%, according to Oxford Economics.
Rising consumer prices also are souring consumer sentiment and eating into their ability to save for a down payment, which could make people less likely to consider major investments such as a home purchase, said Kurt Rankin, senior economist at PNC Financial Services Group.
“Yes, homes are selling quickly but demand is clearly falling off,” he said. Price growth should slow in the coming months, he added.
The slowdown is making home builders increasingly cautious and weighing on new construction.
Housing starts fell 2% in June to a seasonally adjusted annual rate of 1.56 million, the Commerce Department said Tuesday, the second consecutive decline. Residential permits, which can be a bellwether for future home construction, fell 0.6% in June from the prior month.
Builders are now focused on selling the homes they have already completed rather than building more, analysts said.
An index of builder confidence has fallen for seven straight months and in July stood at the lowest level since May 2020, the National Association of Home Builders said Monday.
In response to rising rates, some buyers are opting for adjustable-rate mortgages, which offer a lower interest rate in the early years of the loan, or are paying more up front to reduce their interest rates.
Eddie Doyle, 26 years old, used an adjustable-rate mortgage when he bought his first house in Fort Dodge, Iowa, for $167,500 in June. His mortgage carries a 3.625% interest rate for the first 10 years.
“I paid a little more for the house than I wanted to,” Mr. Doyle said. But “in this town…if it’s reasonably priced, it’s not sitting on the market for longer than a week.”
Write to David Harrison at david.harrison@wsj.com and Nicole Friedman at nicole.friedman@wsj.com
Housing slowdown is only exacerbating the market’s biggest problem: There aren’t enough homes
Justin LahartJuly 20, 2022 1:26 pm ET
The National Association of Realtors on Wednesday said 5.12 million previously owned homes were sold in June, at a seasonally adjusted annual rate, down from May’s 5.41 million. It was both the lowest level since the early months of the pandemic and below the prepandemic trend. It reflects just how much the affordability problem, driven by the sharp rise in mortgage rates and sky-high home prices, is weighing on sales.
The existing-home-sales figure also was well short of what economists had estimated. This might reflect an uptick in cancelled home purchases because many economists base their forecasts on a pending sales figure that is based on sales going into contract, while existing home sales are based on closings. Indeed, real-estate company Redfin reported that about 60,000 existing-home contracts fell through in June—an amount equal to 14.9% of homes that went under contract last month. That was up from 12.7% in May and, with the exception of early in the pandemic, the highest level on record going back to 2017. John Burns Real Estate Consulting reported that home builders experienced a jump in cancellations for new homes last month as well.
The sales slowdown and increase in cancellations is translating into more homes on the market. Wednesday’s report showed 1.26 million existing homes were available for sale in June (unadjusted for seasonal swings), enough to cover three months of sales. That is the highest the months-supply figure has been in nearly two years, but it is still low historically speaking. The average June months-supply level in the five years preceding the pandemic was 4.5, and during that time the lack of housing inventory was deemed a problem.
A large number of homes are now under construction, but the worsening sales environment reduces home builders’ incentive to build more houses. On Monday the National Association of Home Builders said that its index of prospective buyer traffic for new homes hit its lowest level since 2015. On Tuesday the Commerce Department reported that both the number of homes started and newly issued building permits fell again in June. If anything, the housing supply problem could get worse.
What is needed is for housing to somehow become more affordable. One way for that to happen would be for prices to decline, but there is little evidence of that—the average price for an existing home last month was a record $416,000, up from $366,900 a year earlier. Another would be for mortgage rates to go lower. While there has been a tiny bit of relief on that front in recent weeks, it hasn’t added up to much.
It is hard to see the housing market making the transition to an environment where homes are affordable and available anytime soon.
Write to Justin Lahart at justin.lahart@wsj.com
In Denver, a program to reduce police involvement in nonviolent 911 calls also reduced minor crime.
By Thomas S. Dee and Jaymes Pyne July 8, 2022 5:45 pm ET
The police in St. Petersburg, Fla., knew well that Jeffrey Haarsma had mental-health issues. Officers had been to the 55-year-old’s home at least 25 times in the year prior to an emergency call on Aug. 7, 2020. But the lone responding officer shot and killed Haarsma, who was unarmed, as he attacked her during an attempted arrest over a minor offense. While Pinellas County officials later decided the shooting was justified, they also concluded the call should have been handled as a mental-health issue rather than a criminal investigation.
Since that day, there have been nearly 2,000 fatal shootings by police officers in the line of duty. Roughly 1 in 5 involved a police response to someone showing signs of mental illness. It doesn’t have to be this way.
Both the 2020 murder of George Floyd by a Minneapolis police officer responding to a 911 call over an alleged counterfeit bill and the school shooting in Uvalde, Texas, have drawn appropriate attention to police behavior. But what about when they are called to deal with nonviolent emergencies? How we design our first-response systems to deal with urgent events involving mental health and substance abuse merits similarly careful scrutiny.
At least a third of the emergency calls to which police respond could instead be safely directed to health-focused emergency responders such as mental-health professionals, paramedics and social workers. Doing so is clearly humane because it provides people in distress with appropriate healthcare rather than an arrest (or worse). Mental-health first responders can reduce the risk of tragic and violent escalation and attenuate the substantial financial costs of shunting mentally ill citizens into the criminal-justice system.
Redesigning first-responder systems to incorporate mental-health expertise should also have the enthusiastic support of a broad political coalition. Surveys of police officers indicate that they feel overwhelmed and frustrated by mental-illness calls, for which they have inadequate training. Similarly, voices for police reform don’t want armed officers responding to nonviolent calls for assistance. The reallocation of existing police resources to fund mental-health first responders will allow police departments to focus on their core mission of law enforcement.
A small but growing number of cities have introduced innovative programs that screen emergency calls by the type of incident or with the guidance of a specially trained dispatcher. The goal is to identify calls where trained healthcare professionals can support police or directly serve as first responders. Boston, Pittsburgh and Seattle have adopted “co-response” models that allow police officers to query mental-health specialists for guidance or to have their in-person collaboration on field calls.
More ambitious but less common “community response” models forgo police involvement altogether on carefully screened calls. The seminal program, which began in Eugene, Ore., more than 30 years ago, has 911 dispatchers direct nonviolent incidents involving behavioral health to a two-person team consisting of a medic and a mental-health crisis specialist. New York City and Washington began piloting similar community response initiatives last year and more recently have expanded the scale of these operations.
We know far too little about the effectiveness of these programs, the relevance of their design details, and how to meet the challenges of implementing these programs well. Nonetheless, our recent study of a community response initiative in Denver suggests their promise is compelling and extraordinary.
In June 2020, Denver piloted a community response program in the city’s central downtown neighborhoods, dispatching a mental-health clinician and a paramedic in an equipped van to nonviolent emergency calls related to mental health, substance abuse and homelessness. These teams responded most frequently to incidents involving trespassing, welfare checks and requests for assistance. Over its first six months, Denver’s community responders handled 748 calls for service, none of which resulted in an arrest.
Our independent analysis found that in the eight police precincts where the pilot was active, Denver’s initiative reduced targeted, lower-level crimes such as disorderly conduct, trespassing and substance abuse by 34%. These reductions also occurred during hours when the community responders were unavailable, a finding consistent with the evidence that people in untreated mental-health crises are likely to offend repeatedly. We also found the program’s corresponding reduction in police involvement didn’t lead to an unintended increase in more serious crimes.
These results illustrate that the direct cost savings of a community response program can be considerable. We estimate that Denver’s community response program cost only $151 per criminal offense avoided. That amount is only a quarter of the estimated cost of processing lower-level offenses through the criminal-justice system.
We’ll never know for sure whether Jeffrey Haarsma would still be alive if his serial engagements with the police had included mental-health supports. But the available evidence on the exceptional promise and simple common sense of community response programs is a strong argument for studying this innovation throughout the country.
Mr. Dee is a professor at Stanford University and the faculty director of the John W. Gardner Center for Youth and Their Communities, where Mr. Pyne is a research associate.