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Housing cools but the shortage persists

The US Census Bureau reported that new residential housing units were started at an annual rate of 1.549 million in May, a whopping 14.4% decline from April and 3.5% below the rate of starts in May 2021. The sudden cooling off was attributed to both rapid price appreciation and a sharp spike in mortgage rates moving affordability beyond the reach of many buyers.

Single family home prices rose by nearly 20% in 2021 driven by strong demand and exacerbated by critical shortages of materials and labor in the wake of the pandemic. But the housing crunch is not merely an artifact of the Covid supply chain disruption or the improvement in consumer debt profile and savings rates. The shortage of US housing has been building for nearly four decades and the market is still suffering a major hangover from the 2006 financial collapse.

The fact is that American housing construction has simply not kept pace with population growth since the 1980s. The April housing starts of 1.8 million units at an annual rate only just got us back to the 1998 level of new home construction and lags well behind the 2.5 million annual rate of the early 1970s. Meanwhile, the US population has grown by over 50% during that same period. And even though the Fed’s ongoing rate hikes are dampening demand for now, the long-term imbalance will take many more years to abate.

While many remember the early 2000s as a period of excess in the residential real estate market, the fact is that construction of new dwelling units was just beginning to ramp up to meet population growth before the bottom fell out. It was not overbuilding per se but a confluence of factors relating to how the building expansion was financed that led to the catastrophic collapse that nearly took down the entire US economy. Persistent changes resulting from the crash have continued to hinder a full recovery in new construction ever since.

The factors leading to the 2006 crash are legion, including misguided government policy, the rise of nonbank lending, securitization of mortgage loans including subprime loans with lax underwriting, regulatory gaps, as well as greed and deceit by mortgage originators. It is estimated that $14 trillion in American wealth was destroyed, and that the average family suffered a 39% decline in net worth. Several reforms to mortgage lending and securitization were adopted in the aftermath of the carnage that made it more difficult to qualify for a home loan but also pushed some potential buyers out of the market.

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Perhaps the most significant factor in the underbuilding of residential units is the carnage suffered by homebuilders during the crash. Prior to the Great Recession, the direct and indirect impact of residential construction and sales accounted for 15%-20% of US GDP. As the result of the ensuing crash into 2007-2009, over half of all residential builders left the industry due to financial stress or bankruptcy. Nearly one quarter of all US mortgages went underwater, leading millions of homeowners to mail in their keys to the bank. Millions of skilled construction workers left their trade behind to seek other employment, creating a skills deficit that has yet to be supplanted. Many builders today attest that the pandemic merely accentuated an already acute shortage of skilled labor.

Complicating the general underbuilding of dwellings is the mix of new construction. New supply of entry-level homes is particularly constrained. The share of new single-family units under 1,400 square feet comprises only about 10% of all homes compared with about a third of all homes in the 1970s, leaving many first-time buyers shut out of the market.

Local zoning laws in many communities favor individual homes and severely limit permitting of multi-family units, even where local market demand prefers them over stand-alone houses. Meanwhile, the regulatory burden on contractors has increased exponentially over the past generation and according to the National Association of Homebuilders accounts for 25% of the cost of the average home. This makes construction of entry-level housing essentially unprofitable.

The magnitude of the construction shortfall can be seen in the accompanying chart which shows the ratio of new housing starts to the level of population going back to the early 1970s. The graph shows the general downtrend in homes started per 1,000 population and highlights how construction has yet to fully recover from the 2006 crash.

A report from the National Association of Realtors in 2021 notes that on average, new dwelling units per year since 2001 have averaged around 1.25 million compared with 1.5 million from 1968 through 2000, creating an estimated deficit of 5.5 to 6.8 million homes. The report states that “the scale of underbuilding and the existing demand-supply gap is enormous… and will require a major national commitment to build more housing of all types.”

The current cooling of demand may provide some relief to allow stressed supply chains to normalize and to train more skilled workers. But the broader issue is complex, involving governments at every level to rethink lending, zoning, and regulatory policy to allow the market to respond appropriately.

Christopher A. Hopkins, CFA

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6 injured in downtown Chattanooga shooting Saturday

(READ MORE: Chattanooga Mayor Tim Kelly says Saturday night shooting began with disagreement between kids)

Six people were injured, two suffering from life-threatening injuries, after a shooting in downtown Chattanooga Saturday night. 

Around 10:48 p.m., police officers heard gunshots in the area of 100 Cherry Street and then saw multiple people fleeing the area, according to police. Police began rendering aid to the gunshot victims who were then transported to the hospital. 

Police said they don’t believe all of the victims were an intended target, and officers were able to detain one person of interest in the incident. Chattanooga police said there is not an ongoing safety concern. 

“Last night, our city felt the terrible cost of gun violence,” Chattanooga Mayor Tim Kelly said in a statement on Twitter. “My heart is with the families whose lives have been upended by this horrific situation. This is unacceptable – our city and our community will act.”

Police spokesperson Jeremy Eames said he did not have ages or a status on the victims Sunday but most of them were teenagers or in their early 20s. 

“We had large groups of juveniles walking around the downtown area this date and we believe it’s from within that group that the shooting took place,” he said in an email. 

— Compiled by Allison Shirk 

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Alabama unemployment rate remains stable at 3.1%

MONTGOMERY, Ala. (AP) — Alabama’s monthly unemployment rate was unchanged at 3.1%, the state said Friday, holding steady for the fifth straight month.

The December rate was below the level of a year before, 4.7%, and better than the national jobless rate of 3.9%. Total weekly wages from private employers were $973.14 for the month, representing a yearly hike of $26.65.

Labor Secretary Fitzgerald Washington said most of the challenges facing the state workforce were related to the COVID-19 pandemic. An additional 7,000 people were employed compared to the month before, he said in a statement.

Wilcox County in western Alabama had the state’s highest unemployment rate at 10.3%, while Shelby County in suburban Birmingham and Cullman County in north Alabama were lowest at 1.8%.

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Breakthrough COVID-19 cases are becoming more common. Here’s what you need to know.

COVID-19 vaccines were never promised to be 100% effective, and experts are united in saying they remain the best way to combat the pandemic.

But a growing number of breakthrough cases — the term used to describe people who become infected by the coronavirus despite being fully vaccinated — is drawing attention to how much research is still needed to better understand the virus.

Breakthrough infections were thrust further into the spotlight this past week as more high-profile, fully vaccinated individuals across the nation — including Chattanooga Mayor Tim Kelly — announced they had tested positive for COVID-19. Kelly, 54, tweeted Wednesday that he had “mild, allergy-like symptoms” thanks to the vaccine preventing a more serious case.

“We knew we were going to see these breakthrough infections, but the important thing is to look at what’s happening to these people,” said Dr. Jensen Hyde, a hospitalist at Erlanger Medical Center who also holds a master’s degree in public health. “We have people who have breakthrough infections that are very, very high risk for hospitalization and death, and now they might get the sniffles or be asymptomatic.”

According to the Johns Hopkins Bloomberg School of Public Health, there’s a difference between “breakthrough infections,” which occur when a fully vaccinated person tests positive for the coronavirus and “breakthrough disease,” which occurs when a fully vaccinated person experiences symptoms of COVID-19.

That distinction is important when discussing the effectiveness of vaccines because Johnson & Johnson is currently the only drug company with a COVID-19 vaccine available in the United States to use a positive test result plus the presence of one symptom as its criteria for assessing vaccine efficacy. Both the trials for the Pfizer and Moderna vaccines, which boasted about 95% efficacy against the original coronavirus variant, studied whether the vaccines prevented COVID-19 symptoms, not infection.

Despite the growing prevalence of vaccinated people testing positive for the coronavirus, the vast majority of COVID-19 hospitalizations and deaths continue to be in the unvaccinated — a strong signal that the vaccines are doing a great job protecting against the most serious forms of disease, said Dr. Carlos Baleeiro, a pulmonologist and critical care specialist at CHI Memorial Hospital.

“Breakthrough doesn’t mean that the vaccine failed. It means the vaccine has a rate of success, and some people may still get a symptomatic infection,” Baleeiro said, adding that vaccine efficacy was expected to decline as the virus mutates into new variants, such as the now-predominant delta variant.

“If you look at total efficacy against delta, it goes down compared to the efficacy against earlier variants, but if you look at prevention of severe infections and death, it is still very, very good,” he said.

Data on breakthrough cases is limited, and tracking varies widely across states and localities, meaning much of the understanding of breakthrough infections comes from anecdotes.

The numbers fluctuate daily, but when Baleeiro checked the hospital’s COVID-19 patient makeup last week, it was about 80% unvaccinated and 20% vaccinated. There were also no vaccinated patients in the intensive care unit, he said.

The vast majority of vaccinated patients who are hospitalized are also older, have a chronic condition that makes them more vulnerable or a weakened immune system, rendering all vaccines — not just one for COVID-19 — less effective.

“They may still have a more significant breakthrough infection, but they would be much more likely to have a worse outcome without the vaccine,” Baleeiro said. “This is one small sample from one hospital, but the pattern is what we would expect.”

Hyde described similar trends at Erlanger.

“I can only speak to my personal experience, but I have yet to have a vaccinated person in the ICU. I’ve had a handful on the floor, and they have all gone home,” she said. “I have had a fully vaccinated 92-year-old I admitted that did better than an unvaccinated 30-year-old, so if that’s not evidence of efficacy, I’m not sure what is.”

Parkridge Health System declined to comment for this story.

Both Hyde and Baleeiro said there’s a perception issue when it comes to breakthrough cases, and a major reason why they’re becoming more common is because more than 170 million Americans are now fully vaccinated.

“As more people are vaccinated, everybody will know somebody who was vaccinated and has the disease, but that is not a failure of the vaccine. It’s just mathematics,” Baleeiro said. “Part of why people are posting or sharing, or why everybody knows a story of somebody who had the vaccine and who is now sick, is because that is less common When you see or hear of somebody who has breakthrough of the vaccine, that is something novel, and it attracts attention. It’s more memorable.”

Hyde said the high level of community spread combined with a low vaccination rate and a return to in-person activities without precautions are also contributing to the rise in breakthrough cases.

“Numerically, the number of COVID cases in the region is up thousands of percent from where it was in early June, so the number of COVID patients in the hospital, period, is exponentially higher than it was just a few weeks ago,” she said. “You could have a single layer approach — meaning I’m fully vaccinated — if community spread is very low. If the spread is very high, then a multi-layer approach is going to be more effective, but you’re still exponentially less likely to end up with COVID [when vaccinated].”

Elizabeth Forrester, technical director and co-founder at Athena Esoterix — formerly the Baylor Esoteric and Molecular Lab — said the lack of quality data on breakthrough infections is frustrating from a research standpoint.

On May 1, the U.S. Centers for Disease Control and Prevention stopped investigating breakthrough cases unless they resulted in hospitalization or death. That decision is now facing criticism from some experts who say scaling back those efforts is leaving researchers unable to answer important questions:

— When does immunity start waning for those who are vaccinated?

— Are new variants better able to evade vaccines?

— Are certain demographics more prone to breakthrough infections?

— Do breakthrough infections result in similar long-term effects as unvaccinated infections?

Identifying clusters of vaccine breakthroughs could also help identify manufacturing or storage and handling issues.

On the other hand, some say tracking an outcome that was expected is not the best use of finite public health resources.

The latest COVID-19 critical indicators report from the Tennessee Department of Health, dated Thursday, states that breakthrough cases account for 1.7% — or 16,296 of 977,230 — of the state’s total confirmed cases, but that number is likely a significant undercount. Many of those who become infected post-vaccination will not be sick enough to notice or seek testing, and until recently, the CDC didn’t recommend that vaccinated people be tested following exposure, according to Johns Hopkins.

Of Tennessee’s 23,889 hospitalizations, 368 (1.5%) have occurred in fully vaccinated people, according to the critical indicators report. Meanwhile, 108 (0.8%) out of 13,142 total deaths have occurred in fully vaccinated people.

From May to July, 90% of confirmed cases, 88% of hospitalizations and 94% of COVID-19 deaths in the state were among the unvaccinated, according to the report, which also notes that the department “currently conducts more robust active surveillance for hospitalized COVID-19 cases that are vaccinated than for those that are unvaccinated; therefore the data for hospitalizations among the unvaccinated may be incomplete.”

Early on in the vaccine rollout, Forrester’s lab was heavily focused on trying to “sequence” the genetic makeup of breakthrough cases from positive COVID-19 samples that the lab processes from area providers. Sequencing is the laboratory technique that detects variants of the virus.

“But we weren’t able to sequence them, which indicated that the viral load was so low that even though that one breakthrough for that individual happened, the chances of them transmitting the virus to others was really, really low, and all of that was tracking really well with what we expected to happen,” Forrester said, adding that there’s not a compelling reason to follow those cases.

Then the rapid rise of the delta variant threw a curveball. Forrester said test results for vaccine breakthroughs started to show viral loads as high as people who were unvaccinated. Similar findings in other areas of the country prompted the CDC to revise its face mask guidance to include vaccinated people again and begin advising people with certain immune-compromising conditions to seek booster shots. Starting in September, boosters will be recommended for fully vaccinated people who have gone at least eight months since their last dose.

(READ MORE: Hamilton County Health Department recommends face masks for everyone, including in schools)

“We need both masks and vaccines right now, and it’s really disheartening and sad that we can’t get that message across effectively,” Forrester said. “This is happening in real time to all of us. People are like, ‘The vaccines are failing.’ They’re not failing, the virus has changed. I think anyone that is in science and following this knew this was going to happen. It’s just the speed at which this has happened has caught a lot of people off guard.”

Hyde said transmission is complicated and viral load is just one of many contributing factors, and better data is needed before the medical community can fully understand a vaccinated person’s ability to spread the disease. Because vaccinated people’s immune systems know the virus, it will not be able to replicate as much in the body, she said.

“The period of infectiousness for somebody who’s vaccinated is going to be much shorter than somebody who’s unvaccinated, so saying vaccinated people are as likely to spread — even based off of that very limited data — is not an accurate statement,” Hyde said, adding that getting more people vaccinated remains “the biggest piece of the puzzle.”

“It’s just not an option to be complacent in this anymore, and we in a lot of ways missed our window to prevent this wave,” she said. “We are a very well-resourced country that has some of the most effective vaccines of the 21st century available, free of cost, and in our county 52% of people chose not to do that. And that’s a big reason why we are where we are.”

Contact Elizabeth Fite at efite@timesfreepress.com or follow her on Twitter @ecfite.

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