From a small northwestern observatory…

Finance and economics generally focused on real estate

Archive for June 2019

Harvard Study Projects Remodeling Downtrend

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The good folks at the Joint Center for Housing Studies at Harvard (a well-respected old college near Boston) maintain, among other things, the Leading Indicator of Remodeling Activity.  Home remodeling is a pretty significant component of our nation’s economy, with about a third of a trillion dollars spent annually fixing up homes.  In recent years, remodeling has grown by 6% to 7% per year, fueling job growth and the bottom lines of many of our leading manufacturers and retailers.

However, remodeling is (and this may come as a surprise to the uninitiated) heavily tied to home purchases.  Lest we forget, most homes bought in America, in fact about 90%, are “used” homes.  Whether bought as an investment (rental property) or for owner-occupancy, the first thing most “used” home buyers do is some remodeling.  This may be as little as repainting some rooms all the way to a major kitchen or bath re-do, or even adding on rooms, re-habbing the heating and air system, or replacing a roof.  As home sales have soared in America in recent years, so have remodeling budgets.

However, tightening interest rates and increasing prices have led many forecasters to project declining home sales.  Indeed, my own research suggests that homeownership rates, having bottomed out at about 63% after the recession, are now approaching a more market-normal rate of about 65%.  Thus, any residual pent-up demand may have already been spent.

So, the folks at Harvard suggest that by the first quarter, 2020, the annualize average rate of growth in remodeling will decline precipitously, to about 2.6%.  Further, on an annulized basis, actual dollars spent on remodeling are projected to plateau in the fourth quarter of this year, with a seasonally adjusted decline in the 1st quarter, 2020.

LIRA2019-Q1-sm_0

Graphic courtesty Harvard JCHS

Of course, major components of the remodeling sector actually thrive during downturns.  Homeowners who otherwise might “move up” to a bigger house may spend those move-up dollars remodeling.  Further, houses need to be maintained, and stuff just wears out. Thus, any decline in remodeling spending may not be as severe as home sales downturns.  However, it’s worth noting.

 

 

Written by johnkilpatrick

June 13, 2019 at 6:41 am

Posted in Uncategorized

Robots — free from their cages?

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I’ve long posited that the principle threat to manufacturing jobs in the future will be the robot.  Indeed, in there are presently 84 robots for every 10,000 workers in America, and almost 200 for every 10,000 factory workers.  In Korea, there are over 500 robots for every 10,000 factory workers.  One of the big constraints holding back the proliferation of robotics is the danger of human-robot contact.  Robots are smart in some ways, but very dumb in a lot of others.  Add to that the fact that they are huge and powerful, and you can see why most — in fact nearly all — robots on a factory floor are kept in cages.  The fencing is there not to keep the robots in place (they’re usually bolted to the floor) but to keep people from wandering into one.

Roboics

Many of you may have seen Youtube videos of walking robots, and indeed the military is making use of mobile robots on the battlefield for a variety of purposes.  However, on the factory floor, mobile robots are usually limited in both size and scope.  This could all change, however, with new software and sensor technology which was just rolled out today by Veo Robotics.  These tools give the robots spatial awareness, and a monitoring system slows or even stops a robot if an unexpected human-size object is within a geofenced area.  When the obstruction leaves or passes, the robot can then continue as programmed, allowing work to proceed.

Four of the largest robot manufacturers have partnered with Veo on this project, which uses Microsoft’s Xbox Kinect depth cameras as a sensing device.  (Veo says they are working on their own technology to replace the Xbox tools.)

According to Patrick Sobalvarro, VEO’s CEO, “What we hear from every factory, every line manager … is that they can’t hire enough production workers. The production labor workforce is aging out, and one of the things we see as an advantage of our system is that physical strength will no longer be required for production workers.”  A recent study by McKinsey & Company suggest that almost half of human activities in the workplace have the potential to be automated.

Magdalena Petrova of CNBC has a great article on this, along with a video.  Click here to take a peek.  I can’t help but think that this is one of the more important issues facing the American workforce and productivity right now.

Written by johnkilpatrick

June 10, 2019 at 12:46 pm

Posted in Uncategorized

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