The shortage of subcontractors is a major cause of the new, and less affordable, home prices according to the Wells Fargo Housing Market Index and the National Association of Home Builders. The index asked builders about the shortages they are experiencing in 15 different occupations, as subcontractors account for 75% of the construction costs of a new home.
The shortage has caused builders to pay higher wages to subcontractors in order for projects to be completed in a timely manner, usually translating into higher home prices. The most serious shortages are framing crews, carpenters, masons, and concrete workers. However, shortages were also cited for plumbers, drywall installers, HVAC workers, electricians, roofers, painters, flooring installers, landscapers, and excavators.
With climate change expecting to increase the frequency and severity of storms, communities are looking for ways to avoid catastrophic damage. The National Climatic Data Center is an agency of the National Oceanic and Atmospheric Administration, and reports that since 1980 there has been over $1.7 trillion in damage. Of that amount, almost 75% has been since 2000.
The United States Senate is responding wit the Shelter Act, which would provide up to $5,000 in tax incentives for home improvements that might mitigate damage from fires, floods, wind, or hail. So... does mitigation work? According to a 2018 study of the Florida Building Code, for every $1 spent on mitigation you can save about $6 in post storm damage. In addition, an Auburn University and University of Alabama study shows that qualifying homes can sell for an almost 7% premium.
New homeowners eventually find themselves replacing appliances, buying furniture, or remodeling. A good credit score will continue to save you money after closing. When most people think about the middle class, they may correlate that status to a certain level of income or certain material possessions (like a house or car). However, here we will think about that status in terms of the ability to borrow money at affordable interest rates.
The new middle-class divider is access to credit,” said Jonathan Walker, the executive director of Elevate’s Center for the New Middle Class... When unexpected expenses pop up, they can become a crisis if you don’t have access to credit.
Jonathan Walker, Executive Director of Elevate’s Center for the New Middle Class
160 million Americans have subprime credit scores, which lie between 650 and 700 on the standard FICO scale (300-850). People in this score range may find it hard to borrow cash inexpensively, and may have to resort to borrowing at higher costs. About 30% of us are within 3 paychecks of needing to borrow money.
Anyone who has to pay 400% annual interest (for a payday-type loan) probably isn’t going to be able to pay it off quickly.
Mike Sullivan, Take Charge America Personal Finance Consultant
It seems to be the struggling middle class that often are unaware of the minimum qualifications of the various government subsidized programs. So what causes this? 55% of non-prime individuals say their work hours were reduced, while another 24% say medical bills are the biggest factor. A few common secondary factors include car repairs, moving, or college expenses. It was determined that, on average, $1,400 in new obligations ends up putting people into a financial dilemma.
Be sure to check out the July 2019 Newsletter on Experian's new credit boost program.