Fritz Pfister
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Things are seldom as they appear. It was reported this month in USA Today : “Spending on U.S. construction projects rose in July, led by strong gains in housing and nonresidential projects.”

Overall construction spending was up 0.6% in July from June, however that was compared to a June that was adjusted up to 0.0 from down 0.6%. Great news we increased 0.6% from zero. Where was the bulk of increased spending? Hotel and motel construction. The market is smokin!

USA Today accurately reports that ‘overall’ construction spending increased 0.6% but lump apartment construction with single family construction because after all they are both ‘residential’. It’s good news if you are looking to buy an apartment building, hotel, or motel I suppose.

As our friends at Political Calculations wrote at TownHall recently: The First Anniversary of the Second Housing Bubble, lays bare the fact that the cost of new construction rose $25 for every $1 in median income.

Contributing to the rising cost of construction are new EPA ‘green’ mandates, and new OSHA ’safety’ mandates adding, dependent on location, 8% to 12% to the cost of building.

These central planners at the EPA and Labor never calculate the human reaction to their mandates for ‘the common good’. Adding to the builder’s woes are the rising costs of land, of development, and building materials.

These factors combined have raised the price of a new home to about 25% more than a comparably sized and located existing home. What’s the human reaction here? Honey would you like the new home for $450,000 or the similar five year old home for $337,500? (Hint, the central planner will never get the right answer, let alone think of the question.)

Better yet the central planners commonly known as federal bank regulators have collaborated to adopt weaker lending guidelines again just as in the first housing bubble. Under pressure from those great bastions of economic wisdom:

 [The NAACP, National Community Reinvestment Coalition, Center for Responsible Lending, and Urban League, among others, all fought minimum down payments, and credit scores, arguing they "block" housing market access for minorities with weak credit.] (Investors Business Daily)

Now the regulators from the Fed, FDIC, SEC and the save stupid people (and you’re all stupid to the liberal central planner) from the greedy evil racist lender, the newly created leviathan Consumer Financial Protection Bureau is all on board with risking more bad loans to prevent even a hint of housing discrimination.

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Fritz Pfister

Fritz began his Real Estate career in 1987 and has been with RE/MAX since 1989.

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