Builders are being forced to raise home prices and are having a more difficult time meeting project deadlines because of the ongoing labor shortage in the construction industry, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index. Eighty-four percent of builders say they have had to pay higher wages to subcontractor bids, 83 percent say they have had to raise home prices, and 73 percent say they can’t complete projects on time without more manpower. The number of single-family builders reporting labor and subcontractor shortages reached a record high in July.
“The steepest upward trend has been in the share of builders saying the labor/subcontractor shortages are causing higher home prices, which increased by 22 percentage points between 2015 and 2018—to the point where it is now nearly tied with higher wages/sub bids as the most widespread effect of the shortages,” NAHB reports on its Eye on Housing blog.
The survey also shows other effects of the labor shortage, such as builders saying that, in some cases, they’ve been forced to turn down projects. The share of builders who have slowed down on accepting incoming orders has doubled between 2015 and 2018, from 16 percent to 32 percent. The share of lost or canceled sales due to labor shortages also has been on the rise, up to 26 percent in July. “Shortages are having a significant impact on production levels,” according to the report.
“Working closely with property management companies for the last few decades, it was apparent to us that the prevalence of fraud was rising in the rental industry,” says Mike Doherty, senior vice president in TransUnion’s rental screening business. “In the last two years, virtually all of the property managers surveyed have experienced fraud, and the research highlights that this is a costly problem from both a fiscal and reputational standpoint.”
The growth of online rental applications may be making more property management companies’ vulnerable to fraud, the report notes.
The report highlights some of the most common forms of rental fraud, including:
Synthetic fraud: An “applicant” applies under a made-up identity and once approved, the fraudster has access to an address for the purpose of establishing credit. The scammer then runs up high balances or maxes out credit cards under the false identity. Property managers are then left with a resident who does not exist and who they are unable to collect rent from.
True name fraud: This is where a victim’s personal information is fraudulently used on an application. Scammers obtain information like name, date of birth, or social security number to get an application approved. If the property management company is unable to flag inaccuracies, the scammer may get approved as a tenant, while the stolen identity victim is then on the hook for an apartment they never applied for.
“In all of these cases of fraud, a property manager will find that the resident they may try to evict does not actually exist or is not the person in their rental unit,” Doherty says. “As a result, the property management company can lose thousands of dollars of potential income and impact their hard-earned reputation.”
Ninety-five percent of property managers surveyed say they have experienced difficulties identifying, mitigating, or preventing fraud. For those who are able to identify it, the insight often comes too late. Three out of four property managers identified fraud after move-in, with more than one-quarter discovering the fraud much later into their lease, like seven months or later, according to the survey.
The average eviction or skip balance owed can cost property managers about $4,215, according to TransUnion’s ResidentCredit. Further, it can take 90 to 150 days to evict a tenant, which adds on more expenses in lost rent, back rent, and leasing and marketing costs.
Conducting a background check is not sufficient to detecting fraud, researchers note.
“Many property managers do not realize that true fraud mitigation should take multiple factors into account for a comprehensive solution,” says Doherty. “Property managers are in need of better technology so they may flag fraud at the first warning sign. Once they are more effective in getting the right renters, they will reduce the involuntary turnover cost, impact to reputation and become more cost efficient. … With fraud proliferating in the rental industry, property owners and managers can only keep up by radically transforming their approach to preventing and managing rental fraud.”
As many as 10 million Americans are believed to have lost their homes because of the financial crisis that erupted a decade ago, according to the St. Louis Federal Reserve.
The crisis wiped out almost $8 trillion in household stock-related wealth and $6 trillion in home value after banks, mortgage lenders and financial companies provided loans to speculators, house flippers and people who couldn’t afford to pay, spinning the economy into the worst financial disaster since the Great Depression.
A decade later, how does the U.S. housing market look?
Homeownership is below pre-crisis levels
At the end of June, roughly 64 percent of homes were owner-occupied, according to statistics from the St. Louis Fed. That’s below the historic highs of 2004, four years before the bankruptcy of Lehman Brothers, widely used to mark the acceleration of the crisis.
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