Best Beige Book Anecdotes: "It's No Longer Possible To Build A Starter Home For Under $200K In Cleveland," And More

Tyler Durden's picture

While many, and certainly the FOMC, tends to gloss over the periodic Beige Book report, it does provide a snapshot of the US economy, if not in quantiative terms, then in qualitative anecdotes, some of which can be rather amusing at times.

First, here are the big picture economic assessments of the Nov. 29 Beige Book, which was prepared by the St. Louis Fed based on information collected on or before Nov. 17, 2017. First, on overall economic activity, courtesy of Bloomberg:

  • Retail spending largely flat; outlook for holiday sales generally optimistic
  • Residential real estate activity remained constrained, with most districts reporting little growth in sales or construction
  • All districts reported that manufacturing activity expanded, with most describing growth as moderate
  • Some respondents concerned or uncertain about impact of potential changes to taxes and other policies

Employment and Wages:

  • Reports of tightness in the labor market widespread
  • Wage growth modest or moderate in most districts; increases most notable for professional, technical, and production positions that remain difficult to fill
  • Many districts reported that employers were raising wages and increasing their use of signing bonuses and other nonwage benefits to retain or attract employees

Prices:

  • Most districts reported modest to moderate growth in selling prices and moderate increases in non-labor input costs
  • Construction-material costs rose in most regions, with many districts reporting increased lumber costs and increases in demand for materials due to hurricane rebuilding efforts
  • Fuel prices rose, with multiple districts reporting upward pressure on oil and natural gas prices

And while the above is nothing that we didn't know, here are some of the more notable anecdotes from the various regional Feds:

  • Boston: Residential contacts expressed concern about the possible impact of the tax reform bill in Congress, which they feared could increase the cost of buying a home and disrupt the housing market
  • New York: Rents across New York City have edged down overall, led by the high end of the market, where landlord concessions have remained steady at high levels
  • Philadelphia: Retailers and banking contacts reported no signs of inflationary pressure, while homebuilders reported increases for various construction materials, including lumber and products containing petroleum
  • Cleveland: One homebuilder reported that he can no longer build a starter home for less than $200,000, given rising input costs
  • Richmond: An IT service provider noted that it was able to raise prices considerably in recent months without losing any customers
  • Atlanta: District contacts noted that Florida tourism activity bounced back after Hurricane Irma with the exception of the Florida Keys
  • Chicago: One contact indicated that machinery exports to Canada were artificially high as stricter regulations on emissions that begin in 2018 pulled sales into late 2017
  • St. Louis: Multiple contacts in Louisville reported rising construction costs, and a Memphis contact noted a significant increase in lumber prices
  • Minneapolis: A rural Wisconsin banker noted that tight labor was pushing up starting wages, but longer-term employees were seeing smaller increases similar to previous years
  • Kansas City: Respondents in the energy industry continued to focus on operating within cash flows, but said private equity capital remained readily available
  • Dallas: Some banks reported that labor was becoming a bigger issue than regulatory compliance; A clothing retailer noted that Houston-area stores benefited from the Astros playoff and World Series excitement, as well as some additional spending by flood victims
  • San Francisco: Contacts in Seattle noted continued strong demand for commercial office space, driven mainly by demand from large technology companies

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alexcojones's picture

Depends on the SIZE of the starter home.

Images for small houses
Sudden Debt's picture

:)

those are garden sheds :)

 

But I guess most Americans will be okay once the government sends them to "houses" like this:

http://i.dailymail.co.uk/i/pix/2013/07/02/article-2353514-1A9F4E55000005...

 

PT's picture

Comfy.  And you only have to memorize a THREE digit number!

 

 

errr, THAT WAS SARCASM GODDAMMIT!!!!!!!! <--  We both know I had to put that there.  We both know some gummint shitheads and bankster fuckwits will try to pretend they thought I meant it.

Kidbuck's picture

Hey Janet,
That 2% inflation sure compounds fast. You evil bitch.

PT's picture

You think you can get a cheap starter home just because it is small?  You underestimate both the parasites and the desperation they feed on.  Just wait.

Plus, like the other guy said, those are garden sheds.

SPQR 70AD's picture

I framed houses poured concrete did  roofing drywall etc.fir almost 50 years. builders back then were a lot better then now. today they are cheap fucks who never lifted a finger or did a days work and think they will get rich on other peoples backs. I built 5 houses over the years and did everything but the plumbing and half the electric

CRM114's picture

Built my own place too, and designed it. The only mistakes were made by the electricians I was forced to hire, and the inspector who missed their f#ck-ups. Twice.

 

Juggernaut x2's picture

Builders are gnashing their teeth over the lack of "skilled tradesman" - what do they expect when they pay $12-15 an hour- nobody but illegals will go bust ass for that kind of $. 25 years ago I made $23/hr+benis as a union concrete laborer- that kind of wage for that tough work is impossible to come by now.

GodEmperorNanner's picture

Hold whatever beliefs you may, but the fact that the cost of living has risen as much as it has in the past few decades and wages haven't kept up whatsoever is why we're in this mess.

Crazy Or Not's picture

After two tours in Construction in Gulf States, I cashed out of high rise construction and focused on more interesting engineering projects.

Small urban construction is finished, it just doesn't know it yet. The days of the individual hand built home are numbered for Serfs. Off-Site prefabrication is WAY more competitive per unit with material waste savings between 16-20%.  This if you haven't seen it. 
11 floors in under 25 days from breaking ground is typical. (with furniture fitted for rentals). 44 apartments.

Canukes are getting in on the action with Upcycled Cargo Containers

Australian version

You're much easier to control when you're in housing blocks....

SIP panel system for more afluent homebuilders

Kidbuck's picture

Maybe a mess for you but it is a well oiled machine spitting out golden eggs for the friends of Janet.

Sudden Debt's picture

In the past, a company did fine with a margin of 15 to 20%

Now a company needs 100% at least to survive.

 

I'm looking for a now software package for my order input and yesterday I invited a supplier to get a price quote for that...

YEAH SURE! BTW, IF I NEED TO MAKE YOU AN OFFER I'LL NEED TO CHARGE YOU 12 WORKING DAYS FOR 19K EURO'S!!!

THAT'S FOR THE OFFER ALONE!!!

AND I'M INVITING 3 SUPPLIERS!!

 

That crap didn't exist a decade ago either.

TheMexican's picture

I have seen these well build houses from
The golden era (1950-1960) in the beach communities is CA.
Sorry buddy, they are complete piles of shit.

Chupacabra-322's picture

Pretty soon, you’ll see “Tiny” homes going for 110k.

BarkingCat's picture

Oh please, please,. Just one good mudslide

Chupacabra-322's picture

Yep!

And, the Globalist will legitimize it under the guise of “Saving the environment.” The Pseudo environmentalists will eat it up all the while enslaving us in Agenda 21.

CRM114's picture

Let people build their own homes.

One look at the few places that still do shows you 90+% of home regulations, codes and inspections are unnecessary for safety.

The Government wants people dependent on them and the corporations. It's that simple.

And I can give you a list as long as your arm of stupid, counterproductive regulations, dangerous or unnecesary inspections, and major errors by big construction companies that go completely unpunished.

But people are going to have to turn up at the Town Hall with pitchforks before they'll get it.

Mazzy's picture

Standard 15A Homeline circuit breaker = $2.75.

15A Homeline ArcFault breaker now required by today's codes = $37.

That's the supply house prices. Add in upcharges by my company.  Add in upcharges by the builder.  And then multiply that by 15-30 breakers (sometimes more) depending on home size and it adds up quickly.

We simply cannot do panel work for under $5k now, though it should be more given the rapid increase in material costs due to code regulations.  I swear these manufacturers are buying off the local code people.  What's funny is that you can buy an electric panel with all the busbars, main breaker, lugs and a ground bar for under $100 now.  But just three ArcFault breakers cost more than your panel.  God forbid the inspector also wants some 20A circuits ArcFaulted, and pray to the Building Gods that you don't need any double pole arc fault breakers.  You're talking $80-100+ for 1 of those.

Dumpster Elite's picture

What the hell is the difference between an arcfault breaker and a regular breaker? I mean, an arc fault is between the black and white wires, correct? Doesn't a regular circuit breaker protect against that?

Mazzy's picture

It will fault between neutral and ground.

Honestly....it's the same shit.  Electricity just needs a path back to the source in order to complete a circuit.

A regular circuit breaker is fine under 99.9% of circumstances.  In any system, if done correctly by a responsible installer you will never have problems for a century.  The only things that may damage a wire are some really really really wacky settlement issues or if someone/something physically cuts or damages the wire in some way (usually a nail or a drywall screw, which ideally would be stopped by a nail plate, but it happens).  Weather is a possible means of damage, but that is moot inside of a structure.

Really it's just a money-making venture for the manufacturers.  They will cite fire statistics and whatnot, but what they don't tell you is that those fires were due to poor connections.  While an ArcFault breaker would indeed prevent an arc in this case the better solution would be to just install the damn thing properly.  I'll also point out that you should have plenty of warning before anything ever gets to the point of being able to start a fire. 

 

Stan Smith's picture

   As someone who does analytics of the RE industry for a major financial firm,  I can tell you Mazzy's on the ground view is apt -- and now extrapolate that over the dozens if not more of folks who's hands are in the cookie jar -- and that's just for one house.

   The 30,000 foot view isnt much prettier,  just less humanizing.    And this phenomena is even worse in the auto industry.    And well, almost any other industry.   And at every level folks are getting squeezed by it, including at the top.   Of course,  since they do the hiring and firing, they'll be sticking around most likely.  

   I've mentioned this before,  numerous times on here,  but part of this change is us.     A lot folks expect the "starter home" to be what I would have considered the 2nd/3rd, raise the kids in a good neighborhood home.   Folks want that NOW though.   And for builders,  the profit margins on building "less house" isnt worth it to a lot of them.    Why build 100 small homes when you can do 50 for twice the price - and less expense per square foot.

 

Mazzy's picture

Thank you Stan, and while I see it in my industry, I hear similar complaints from guys who work in any trade.  The codes are getting absolutely obnoxious in every arena, in practically every jurisdiction it seems.

Mazzy's picture

I'm curious as to what kind of analytics you do.  I think I'd be well suited for that type of work.

In what ways is the auto-industry being co-opted?  It ain't just airbags and carseats I'd imagine.

iadr's picture

I work in the auto industry.

 

The path for regulations is often this : invention or evolution of the art in R&D, ... then... management goes, "that could get us a competitive advantage, let's get a law passed!".   So regulation is a tit for tat  back channel abuse of your competitor. Raises the cost for the industry with no fear of collusion accusations.

Another is the abuse of recall regualtions. 90%+ of recall accusations that are passed into law (ie regulation) are FALSE. It's corrupt beyond belief. Manufacturers are OK with some recalls- firstly as they don't have much choice- because examples have been made of those who fight them, and secondarily the dealerships needed a mental conditoning program for their customers to convince them only the dealers can work on their cars. Besides, we sell tires, batteries, maintenence services to clients in for recall work. We did not otherwise have much of that business. Largely due to overhead. A modern dealership is a small mall.. with one tenent footing the bill. Think about that.

And BTW most dealerships run the actual sales department at a significant loss. Finance (yep) makes the most money, transfer payments from the manufacturer, and retail service work ( at $2.50 a minute rates) and parts sales (collision industry) contributing to keeping the company in the black. Last month subprime finance alone made more than parts & service combined... with 10% the staff, and no shop & equipment costs, no inventory costs, no floor space, no liabilities, just a phone and desk.

Another factor is the out of touch non-technical video game lifestyle buyer. He loves the fact that you can touch a button to put your park brake on, rather than pull up a lever with his limp wrist. Has no IDEA that requires several hundred dollars of unreliable crap under his car.  Have you seen the butchery they do with transmission shifters now? Safety regs- pfft... Do you really think it is good psychology to put people out on the road in tanks they can't see out of ... but are themselves protected from harm? Think about what human nature is going to do in that circumstance.

Those buyers who understand nothing get taught manias from the MSM- fuel economy, emissions. People are not  concerned about these things in a constructive informed way. They simply don't care except in a taught, irrational way. The two 'types' of concern are very distinctly different- understanding of costs, and the sharply diminishing returns 'achieved' by recent changes are utterly absent in the buyer.

Another is the warranty abuse. I would estimate due to warranty abuse (ie: single mother says replace my clutch for free because  last month's BF let my two sons "learn to drive" in it, and abuse the car for fun with their friends -tire treads spun off-, or else I'll shit all over your social media) that about 1 in 6 cars ends up being a money loser for the manufacturer. Guess who pays for that? The other five buyers.

 

 

Offthebeach's picture

I started framing, roofing, carpentry before......nail guns.  1970.

After they got a bit smaller, it was great.  You could really stitch a frame together, and throw in a pouch of 16pd for english.

It really helped lower the cost of a frame, by a lot.  But no, now most everything has to not only upsized the lumber, but Simpson tied at near every connection.   

So origionally cost per joining droped, but now add a $4-$15 galvanized tie, plus the pain in the ass fastener, and assembly at each joint has not gone down, but up 300%~1,000% .

Don't even make me go there with lags, bolts, spacing....COLOR!

More expensive house, more taxes, higher valuation on existing, more taxes, more code job featherbeding,  more money needed to borrow, more debt,.......

 

 

Dr. Richard Head's picture

The codes are bullshit.  I am finishing my basement for a music studio and I ripped out all of the arc fault circuit breakers.  Fucking things tripped constantly with barely any load on them.  But it's code I was told.  Fuck you I replied.  

ParkAveFlasher's picture

Make sure you use humbuckers, Dr Head!

Dr. Richard Head's picture

I have agood mix of humbucker and lace on my Les Paul standard.  Sounds so lovely...

https://itunes.apple.com/us/album/gingermon/1211424588

Mazzy's picture

Oh, and hey, lets put Sump Pumps on GFI outlets now!!!  DA FUCK!

You can't build a damn house without putting in 10-15 GFI outlets anymore.  Difference in cost is that a regular outlet is 69¢ and a GFI is a minimum of $11 if bought in bulk.  $20 is the likely amount with upcharge though.

Fight these code fuckers.  GFI's do more nowadays to cause floods than they do to prevent fires or prevent people from getting shocked.  Can't we just go back to protecting Bathrooms, Kitchens, and Outside stuff? 

Why the fuck are we requiring GFI's on a condensation pump?  Just wait until your AC unit in the attic trips without anyone knowing about it for a few weeks....bye bye several floors below!!!  Drip. Drip. Drip.

booboo's picture

"Let people build their own homes."

No municipality that I know of prevents anyone from doing their own work including building their own home.

Of course if you knew which end of a hammer was put to a nail head you would know this but from my experience as as a licensed home builder and a licensed home inspector of nearly 40 years 99.5% of the population do not have the skills to fill out a permit application much less build their own home.

As far as the cost of a home, the buyers set the cap on home prices in their repective markets, builders have to figure out how they can do it for that price. As far as home construction compared to yester year there is no camparison, Like I said, I have been inspecting homes for a long time and if you like asbestos in your pre 70's house you can keep your asbestos, same goes with wind loads and live loads, energy, electrical wiring (you may have aluminum wiring from the 70's and not know it, major fire hazard) todays homes far out perform older homes in major hurricanes. 

Now life safety, building energy effeciency, health departments and environmental have a huge impact on the cost which only drives home prices out of reach. Flame on boys

Offthebeach's picture

"licensed builder" Snicker.  Home Inspector, again.

Hey, check out lung cancer rates due to poor indoor air quality due to wrap, tape, foam, vinyl, ......

Your "modern house" is killing you.

Also, graft/plot code dictates vs economic growth over time.( Hint, Blue cities/states with most/oldest code bureaucracy have low to declining wealth. )

alexcojones's picture

BitCoin-sized houses - for what's in your wallet

Mazzy's picture

Why build new?  Plenty of junk around there for 30-50k...and that's in the White exurbs.  What are hood houses going for in Cleveland?  Probably the 8-20k like they do in Baltimore.

If you get bored with northeast Ohio you can just leave it and pick up a new life elsewhere.

jughead's picture

yep, real nice rural amish country within 60 miles of that shit hole. 

FreeShitter's picture

Yeah lets live it up in good old cleveland...

Dr. Richard Head's picture

Agreed.  I fucking hate it here.  Stuck for hte school system for my kids as I have full custody. 

Sonny Brakes's picture

Add to that, the fact that your home will need to be completely replaced in 25 years.

JBilyj's picture

FUCKING FALSE!

 

- from Cleveland...

jughead's picture

if you live in fucking Cleveland you are too fuckin stupid to have anything you say taken seriously.  Nobody with a lick of sense who was born and raised there is stupid enough to stay there...or go back.  

QQQBall's picture

I have never read Beige Book, but the annecdotal stuff seems a bit skinny?

 

QBz Baby Shit Brown Book. Low rates, easy credit and market distortions have kept good quality firms from being able to raise prices; marginal businesses are Fed-subsidized. Add in illegal aliens, and displaced and discouraged workers forces more experienced companies to compete at lower prices versus lower quality, marginal firms.

 

Thansk Mr. Yellen.

To Hell In A Handbasket's picture

Bullshit. If you can't build a 5 bedroom home, all materials, on an average piece of land for $200K, just reset the financial system now. I think the unthinkable has now arrived. It's time to tell the kids to think about emigrating. The country is fucked.

Sonny Brakes's picture

Where would you suggest they migrate?

jughead's picture

That socialist utopia called Venezuela of course!

83_vf_1100_c's picture

Niggas ain't be havin $200k.

Eyes Opened's picture

GOVERNMENT does only ONE thing ...it "legislates"... that means it makes rules for u to live by... day-in & day-out...it passes MORE & more rules...

When are the citizens gonna say "ENOUGH FUCKING RULES !!!! "

Until then,....  expect it to only get worse...

I find it funny u poor bastards can't even cross the fuckin road without government STIPULATING no "jaywalking" ???

'Murica is fucked... drowning in "legislation"....

MAGA ?? Hee Hee....

FreeNewEnergy's picture

Building codes are socialist tools to enslave everyone, like property taxes which, by and large, pay for schools, which are shit.

Lots of things have to change in this country, starting with Al Franken and John Conyers resigning.

If those two stay in office, expect more justifiable outrageous acts by deplorable types, like not paying taxes, not abiding by codes, ignoring he demands of elected officials.

Since the congress has proven itself to be largely a bunch of lawless miscreants, I suggest the American people begin to behave in much the same manner.

Trickle down morality. I coined the term in GW Bush's first term, circa 2003.