‘A lot of fear’: Rent hikes across the country mean eviction notices for many Americans
Claire Thornton, USA TODAY – July 5, 2023
A looming rent increase in New York City is poised to force the most vulnerable renters onto the streets at a time when eviction rates nationwide have been steadily rising, and the worst cities are seeing eviction filings increase by more than 60%.
In New York — one of the country’s most expensive housing markets — the panel that sets rent rates for rent stabilized apartments last month approved hikes of 3% for one-year contracts. Last year saw rent upped by a similar amount.
“Even 3% is going to hurt a substantial number of people,” he said.
Why is rent so high in so many cities?
In recent years, cities across the United States have seen dramatic rent hikes. As a result, eviction filing rates are surging, particularly in the South and Southwest, where the rent increases are among the biggest, according to data collected by the Eviction Lab.
The cost of shelter is increasing in part because of record inflation and the rise in evictions over the past 18 months coincides with the expiration of eviction moratoriums and COVID-19-related rental assistance.
Rent hikes happening across the country are most painful for working single moms, retirees and people receiving disability payments from the government, said Robert Desir, a staff attorney with New York’s Legal Aid Society who worked on the city’s rent stabilization law.
“People are going to be stuck with this extra cost that many are going to have a really hard time meeting. They are going to have to sacrifice other basics to pay for the rent,” Desir said. If people can’t cut corners, they will fall behind in rent, risking eviction, he said.
Why are landlords choosing evictions?
In big cities and small town across the country, a rent increase can be a “de-facto” eviction, said Desir.
“They can receive a notice from the owner that says, ‘I’m going to raise the rent by 25, 50, 75 or 100%’ — whatever the landlord thinks that the market can bear,” he said.
Telling a tenant they must pay that much more in rent each month “can be used as a weapon” if an owner wants a certain tenant out, he said. In New York, the recent vote to increase rents in stabilized units is completely lawful, but still, “it’s dire and really makes a difference,” he said.
Since January 2022, landlords in Las Vegas have been initiating 60% more evictions than they did in 2016 through 2018, data shows. So far in 2023, Phoenix has also had around a 40% spike in filings compared to the years before the COVID-19 pandemic, according to the Eviction Lab.
The rent hikes of 20% or more are happening because landlords expect to find tenants in the hot housing market who will pay the higher rents, which pushes more people out of their longtime homes that used to be affordable, Gershenson said.
In New York City, landlords have also pointed to inflation as a reason why they’re raising rents, citing increasing operational and maintenance costs.
Where are eviction rates the highest in the US?
Here are some of the cities with the sharpest increases in eviction filings:
In, Houston, the Lone Star State’s largest city, there has been a 50% increase in eviction filings compared to 2016 through 2018 averages.
Dallas-Fort Worth, Texas’ second-largest metro area, has seen above-average eviction rates, with some months reaching around 40% more than 2016-2018 averages.
InColumbus, Ohio, eviction filings have risen 20% higher compared with 2016 to 2018.
Some cities are helping renters avoid eviction
Rates of evictions in New York City shuttered during the first two years of the COVID-19 pandemic, when an eviction moratorium was in place. But rates popped up in January 2022 after the moratorium expired and they’ve been on the rise since then, according to data from the Eviction Lab.
One small piece of good news is that eviction rates in the city have decreased since 2016 through 2018, the next most recent time period for which the Eviction Lab has data, because New York City has some of the strongest tenant unions and protections in the country, Gershenson said.
Philadelphia is another city that’s had “quite a bit of success” reducing evictions, largely due to its eviction diversion program that launched in 2020, Gershenson said. The program has helped 75% of landlords and tenants who participate avoid eviction, the city says.
People gather outside of a New York City Marshall’s office calling for a stop to evictions in New York City.
‘A lot of fear out there’ over eviction threats
An hour outside of Nashville, in Columbia, Tennessee, tenants have been organizing after seeing their rents explode in the past several years, causing more people to become homeless.
Judy Schwartz-Naber, a Walgreen’s worker and organizer with Tennessee for Safe Homes has seen her rent double from $450 to $900 per month in the last seven years. She said there’s “a lot of fear out there” as people are facing more threats of eviction. Schwartz-Naber, 66, said she knows of one woman who was threatened with eviction because her granddaughter who was temporarily living with her was not on the lease.
“I’ve been told in Tennessee they can evict you if they don’t like the look of your face anymore,” she said. “I believe it’s true.”
She said landlords have too much power to kick people out of their homes, and that’s one reason why rents in the town of just over 40,000 have been increasing so quickly.
“They raise the rent and they raise it so high you can’t afford it,” she said.
In nearby Nashville, evictions have spiked since January 2022, sometimes exceeding 2016 to 2018 rates by more than 50%.
“Oh my God, I’m horrified because the human suffering that is connected to that is terrible. My god. It’s horrific there,” said Schwartz-Naber, who herself has experienced eviction. In 2003, the single mom and her daughter were kicked out of their home and the shock forced a cross-country move to Florida.
Major city announces ban on new homes due to concerning conditions: ‘We’re going to manage this situation’
Laurelle Stelle – July 5, 2023
Due to a lack of water, the state of Arizona has announced that it will not approve any more building permits for single-family homes that rely on wells in Maricopa County, CleanTechnica reported.
Like much of the western U.S., Arizona has been facing a huge drought for many years. A shortage of rainfall has led to residents relying on underground aquifers and the Colorado River for water.
As CleanTechnica explained, the state has been using far too much water. Homes, farms, businesses, and public programs have been drawing on water supplies at an increasing rate, totaling 2.2 billion gallons per day in Maricopa County alone.
Because of this overuse, the Colorado River and groundwater are both drying up. State officials that modeled Arizona’s future water use predict that in the next 100 years, the Phoenix area will need over 1.5 trillion more gallons than it has.
Much of this excess water use has been driven by the growth of towns and cities throughout Arizona, CleanTechnica reported. One of the worst offenders is Phoenix, the state capital, which is located in Maricopa County. The city is surrounded by ever-expanding suburbs that rely on well water.
That’s why Governor Katie Hobbs has put a stop to new building permits.
Unfortunately, the new ban won’t stop the 80,000 building permits for new homes that have already been approved. It also doesn’t cover building projects that rely on river water or source their water from nearby businesses and farms. According to Governor Hobbs, though, the situation is under control.
“We’re going to manage this situation,” Governor Hobbs said at a news conference on June 1, according to The Guardian. “We are not out of water and we will not be running out of water. It is also incredibly important to note that the model relates only to groundwater and does not concern surface water supplies which are a significant source of renewable water for our state. What the model ultimately shows is that our water future is secure.”
Conservatives go to red states and liberals go to blue as the country grows more polarized
Nicholas Riccardi – July 4, 2023
Jennifer and Tim Kohl poses for a photo in their front yard with the American flag and a thin blue line flag in Star, Idaho, on April 14, 2023. The couple recently moved to Idaho from the Los Angeles area. Americans are segregating by their politics at a rapid clip, helping fuel the greatest divide between the states in modern history. (AP Photo/Kyle Green)Kathleen Rickerson poses for a photo at her home Wednesday, May 24, 2023, in the west Denver suburb of Lakewood, Colo. Americans are segregating by their politics at a rapid clip, helping fuel the greatest divide between the states in modern history. (AP Photo/David Zalubowski)Aaron and Carrie Friesen feed chickens in the backyard of their home in Boise, Idaho, on April 12, 2023. The couple, who has three children, recently moved to Idaho from the Bluffton, S.C., area. Americans are segregating by their politics at a rapid clip, helping fuel the greatest divide between the states in modern history. (AP Photo/Kyle Green)Leah Dean, a native of the Texas Panhandle, poses outside her home Monday, July 3, 2023, in Denver. Americans are segregating by their politics at a rapid clip, helping fuel the greatest divide between the states in modern history. (AP Photo/David Zalubowski)
STAR, Idaho (AP) — Once he and his wife, Jennifer, moved to a Boise suburb last year, Tim Kohl could finally express himself.
Kohl did what the couple never dared at their previous house outside Los Angeles — the newly-retired Los Angeles police officer flew a U.S. flag and a Thin Blue Line banner representing law enforcement outside his house.
“We were scared to put it up,” Jennifer Kohl acknowledged. But the Kohls knew they had moved to the right place when neighbors complimented him on the display.
Leah Dean is on the opposite end of the political spectrum, but she knows how the Kohls feel. In Texas, Dean had been scared to fly an abortion rights banner outside her house. Around the time the Kohls were house-hunting in Idaho, she and her partner found a place in Denver, where their LGBTQ+ pride flag flies above the banner in front of their house that proclaims “Abortion access is a community responsibility.”
“One thing we have really found is a place to feel comfortable being ourselves,” Dean said.
Americans are segregating by their politics at a rapid clip, helping fuel the greatest divide between the states in modern history.
One party controls the entire legislature in all but two states. In 28 states, the party in control has a supermajority in at least one legislative chamber — which means the majority party has so many lawmakers that they can override a governor’s veto. Not that that would be necessary in most cases, as only 10 states have governors of different parties than the one that controls the legislature.
The split has sent states careening to the political left or right, adopting diametrically opposed laws on some of the hottest issues of the day. In Idaho, abortion is illegal once a heartbeat can be detected in a fetus — as early as five or six weeks — and a new law passed this year makes it a crime to help a minor travel out of state to obtain one. In Colorado, state law prevents any restrictions on abortion. In Idaho, a new law prevents minors from accessing gender-affirming care, while Colorado allows youths to come from other states to access the procedures.
Federalism — allowing each state to chart its own course within boundaries set by Congress and the Constitution — is at the core of the U.S. system. It lets the states, in the words of former Supreme Court Justice Louis Brandeis, be “laboratories of democracy.”
Now, some wonder whether that’s driving Americans apart.
“Does that work as well in a time when we are so politically divided, or does it just become an accelerant for people who want to re-segregate?” asked Rob Witwer, a former Republican Colorado state lawmaker.
Colorado and Idaho represent two poles of state-level political homogenization. Both are fast-growing Rocky Mountain states that have been transformed by an influx of like-minded residents. Life in the two states can be quite similar — conversations revolve around local ski areas, mountain bike trails, and how newcomers are making things too crowded. But, politically, they increasingly occupy two separate worlds.
Witwer watched Colorado steadily swing to the left as affluent, college-educated people fled the coasts for his home state starting in the late 1990s. For two decades, it was one of the nation’s fastest-growing states, and during the Trump era it swung sharply to the left. Democrats control all statewide offices and have their largest majorities in history in the legislature, including a supermajority in the lower house.
In contrast, Idaho has become one of the nation’s fastest-growing states during the past decade without losing its reputation as a conservative haven. It has moved even more sharply to the right during that time and become a beacon to those, like the Kohls, fleeing blue states where they no longer feel welcome.
The states’ swings aren’t simply due to transplants, of course. The increasing clustering of Americans into like-minded enclaves — dubbed “The Big Sort” — has many causes. Harvard professor Ryan Enos estimates that, at least before the pandemic, only 15% of the homogeneity was due to people moving. Other causes include political parties polarizing on hot-button issues that split neatly on demographic lines, such as guns and abortion, and voters adopting their neighbors’ partisanship.
“A lot of this is driven by other sorting that is going on,” Enos said.
When Americans move, politics is not typically the explicit reason. But the lifestyle choices they make place them in communities dominated by their preferred party.
“Democrats want to live in places with artistic culture and craft breweries, and Republicans want to move to places where they can have a big yard,” said Ryan Strickler, a political scientist at Colorado State University-Pueblo.
But something may have changed as the country has become even more polarized. Businesses catering to conservatives fleeing blue states have sprouted, such as Blue Line Moving, which markets to families fleeing from blue states to Florida. In Texas, a “rainbow underground railroad” run by a Dallas realtor helps LGBTQ+ families flee the state’s increased restrictions targeting that population.
The switch might have been flipped during the coronavirus pandemic in 2020, which created a class of mobile workers no longer bound to the states where their companies were based. Those who are now mobile are predominantly white-collar workers and retirees, the two most politically engaged parts of the national population.
Mike McCarter, who has spearheaded a quixotic campaign to have conservative eastern Oregon become part of Idaho, said most people didn’t pay much attention to state government until the pandemic.
“Then it was like ‘Oh, they can shut down any church and they can shut down my kids’ school?’” McCarter said. “If state-level government has that much power, you’d better be sure it reflects your values, and not someone else’s values that are forced on you.”
The pandemic helped push Aaron and Carrie Friesen to Idaho. When the pandemic hit, they realized they could take their marketing firm remote from its base near Hilton Head, South Carolina. They’d always planned to return to the West, but California, where Aaron, now 39, was born and raised, was disqualified because of its cost and progressive politics.
The Friesens and their three children settled on Boise. They loved the big skies, the mountains rearing up behind the town, the plethora of outdoor activities.
And they liked Idaho’s pandemic policies. When the Friesens visited, almost no one was wearing masks, which they took as a good sign — they were happy to mask up when sick, but found constant masking pointless.
“This was a place that had like-minded people,” Carrie Friesen said.
The Friesens are happy with the direction of their new state and the abortion and transgender restrictions out of the latest legislative session. But they don’t see themselves as part of what they called “the crazy right,” referring to the families displaying Trump yard signs in the less-politically-mixed Boise suburbs. They like living close to the center of Boise, one of the more liberal areas in the state.
They try not to make too many decisions based on politics — to a point.
“With the temperature of politics nowadays, if people choose to move somewhere, they are going to choose to move to a place with like-minded people,” Aaron Friesen said.
That’s apparently been happening in Idaho, said Mathew Hay, who oversees a regular survey of new arrivals for Boise State University. Historically, transplants mirrored the conservative population’s leanings, with about 45% describing themselves as “conservative,” and the rest evenly split between liberal and moderate.
But something changed last year — the share of newcomers that said they lived in Idaho for the politics jumped to 9%, compared to 5% for long-timers. The percentage describing themselves as “very conservative” also rose.
When Melissa Wintrow rode her motorcycle across the U.S. in 1996, she was captivated by Idaho.
“It was this grounded, commonsense, reasonable group,” Wintrow said. “Of course they were conservative, but they weren’t going to say openly racist and homophobic things.”
Now a Democratic state senator, Wintrow is aghast at how her adopted state has become more hardline.
“The state has just moved to a more extreme view,” she said. “It’s a certain group of people that is afraid their ‘way of life’ is diminishing in the world.”
In Colorado, the reverse may be happening.
Bret Weinstein, owner of a realty firm in Denver, said politics has become the top issue for people buying a home.
“It’s brought up in our initial conversations,” Weinstein said. “Three years ago, we didn’t have those conversations, ever.”
Now, many entering the state tell him they’re looking for a way to escape their red state — and homeowners leaving Colorado say they’re fed up with it turning blue. Even within Colorado, Weinstein said, homebuyers are picking based on politics, with some avoiding conservative areas where debates on mask mandates and curriculum has dominated school board meetings.
One of those politically motivated migrants is Kathleen Rickerson, who works in human resources for Weinstein’s firm. Rickerson, 35, lived in Minnesota for seven years, but during the pandemic grew weary of the blue state’s vocal anti-masking, anti-vaccine minority.
Rickerson’s parents and sister urged her to join them in Texas, but that was out of the question. Ready for a change, Rickerson instead zeroed in on Colorado. She moved to a Denver suburb in December 2021.
Cheered by the state’s strong stance to protect abortion rights, Rickerson wants Colorado Democrats to go further.
“Colorado isn’t as quick to take a stand on things, and I’d like to see that happen a bit more,” she said.
That was a sentiment shared by Colorado progressives, who were frustrated their party didn’t muscle through an assault weapons ban and other priorities of the left during the most recent legislative session.
“There is a point at which we need to stop acting like trying to get along with our enemies is going to preserve our institution,” progressive state Rep. Stephanie Vigil said at the end of the session, after the chamber’s Democratic leader said it was important that Republicans still feel like they have a voice.
The increasing political homogeneity in states makes it harder for both parties to feel invested, said Thad Kousser, a political scientist at the University of California, San Diego.
“It gives one party the ability to move a state further when they’re doing exactly what their constituency wants,” he said.
The system works as a sort of escape valve, Kousser said, letting the majority in the state feel in power regardless of what’s happening in Washington, D.C. But the local minority party gets shortchanged.
The Kohls felt shortchanged in California. They said they watched their native state deteriorate before their eyes, and no one was willing to fix the problems. Trash piled up with homeless encampments. Tax money seemed to go to immigrants who had entered the country illegally rather than U.S. citizens. Jennifer’s mother qualified for government assistance due to her low income, but was on dozens of wait lists that were seven years long. Tim’s police station, in a former hippie colony in the mountains running through West Los Angeles, was firebombed during the George Floyd protests in 2020.
The Kohls wanted to live in a red state, but Jennifer said they’re not just party-line voters. A nurse, she hasn’t registered with either party and has a wide range of beliefs, including that abortion is sometimes necessary.
“I believe so many different things,” she said.
On balance, they feel more comfortable in a more conservative place.
“Here, the tax dollars naturally goes to the citizens, not the immigrants,” said Tim Kohl, who can understand why Idaho is growing so fast. “Most of the people we’ve met here are from California originally.”
In Denver, Dean has found other people who fled red states. She and her partner, Cassidy Dean, discovered that their neighbors fled Florida after the state’s hard turn to the political right.
Leah Dean was a 19-year-old cosmetology college student in San Antonio in 2008 when she had an abortion. She chafed at the obstacles she faced — the state-mandated waiting period before the procedure, having to get a sonogram before the procedure — and became a committed Democratic activist. She met her partner at the Texas state party convention in 2016, and every year since then she’s felt the Republican state legislature and governor make the state less and less hospitable to people like her.
Now in Colorado, she and her partner both work from home, telecommuting to their old Texas jobs. They have limited social outlets, but took care of that by throwing themselves into politics again, with Leah Dean becoming vice chair of Denver Democrats.
“It’s also how we meet people,” she said. “We don’t have any other way to do that.
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The law, signed by Gov. Ron DeSantis (R) in May, makes it a third-degree felony for people to use a false identification to get hired for work. Any business that is found to knowingly employ those unauthorized workers could have its license revoked and face daily fines. Additionally, hospitals that accept Medicaid are now required to question a patient’s immigration status, driver’s licenses given to undocumented immigrants in other states are invalid, and it’s a third-degree felony to knowingly transport undocumented immigrants into the state.
An estimated 772,00 undocumented immigrants lived in Florida in 2019, with many working on construction sites, farms and packaging facilities. Migrant workers began leaving the state once DeSantis signed the new law in May, The Wall Street Journal reported, including those who are authorized to work but are married to someone who isn’t. A spokesperson for DeSantis defended the law, saying that businesses that hire undocumented immigrants “instead of Floridians will be held accountable.”
At multiple construction sites in Miami, workers shared with the Journal that they have lost about half of their crews; one man said he knows people who went to Indiana, where they could make $38 an hour instead of $25 and not have to worry about running afoul of the immigration law. Tom C. Murphy, co-president of Coastal Construction, told the Journal there was already a labor shortage before the law went into effect, and while “we fully support documentation of the immigrant workforce, the new law is aggravating an already trying situation.”
Immigration is usually a federal area of law, immigration lawyer Daniela Barshel told the Journal, and it will be difficult to give guidance to clients when there are differing state and federal rules. “It’s kind of extreme that Florida passed a law like this,” she said. Companies cannot be advised to stop hiring noncitizens, since that could be discrimination on the basis of race or national origin, leaving businesses with no easy path forward. “You don’t want to be fined by the government, and you also don’t want to be sued by someone because they were authorized to work and you didn’t hire them,” Barshel said.
HELOCs are back. Cash-strapped borrowers are tapping into a $33 trillion pile of home equity.
Joy Wiltermuth – June 26, 2023
Banks hold most HELOCs
Borrowers are increasingly tapping into a pile of home equity for liquidity. JUSTIN SULLIVAN/GETTY IMAGES
Goodbye pandemic refi cash-outs. Hello HELOCs?
Home-equity lines of credit (HELOCs) and second-lien mortgages have been staging a notable comeback as U.S. homeowners look for liquidity and ways to monetize the pandemic surge in home prices, according to BofA Global.
It used to be that borrowers sitting on an estimated $33 trillion pile of equity built up in their homes could simply refinance and pull out cash, until the Federal Reserve’s rapid rate hikes began squelching the option.
Now, with mortgage rates above 6%, and the Fed penciling in two more rate hikes in 2023, cash-strapped homeowners have been seeking out alternatives to extract cash from their properties.
While cash-out refinances tumbled 83% in the fourth quarter of 2022 from a year before, HELOCs rose 7% and home-equity loans grew 31%, according to the latest TransUnion data.
“Borrower demand remains high, particularly given household budgets have been pressured by rising food and energy costs,” a BofA Global credit strategy team led by Pratik Gupta’s, wrote in a weekly client note.
Risky loans to subprime borrowers and home equity products helped precipitate the 2007-2008 global financial crisis and the era’s wave of devastating home foreclosures.
At the time, households had more than $1.2 trillion of home equity revolving and available credit (see chart), whereas the figure was closer to $900 billion in the first quarter of this year.
Home equity products are making a big comeback as households seek liquidity BOFA GLOBAL, NEW YORK FED CONSUMER CREDIT PANEL/EQUIFAX
The pandemic saw home prices surge, giving a big boost to home equity levels. The Urban Institute pegged home equity in the U.S. at $33 trillion as of May, up from a post-2008 peak of about $15 trillion.
BofA analysts argued this time home equity products look different, with roughly $17 trillion of tappable equity across 117 million U.S. homeowners, and most borrowers having high credit scores and low rates.
“The vast majority of that — $14 trillion — is from the cohort of homeowners who own their homes free & clear,” Gupta’s team wrote.
Another $1.6 trillion of equity could be available from Freddie Mac and Fannie Mae borrowers, according to his team, which pegged an estimated 94% of all outstanding U.S. first-lien home mortgages now below 4% rates.
Major banks own the bulk of home equity balances (see chart), led by Bank of America Corp. BAC, +1.23%, PNC Bank PNC, +0.57%, Wells Fargo, WFC, -0.05%, JPMorgan Chase JPM, +0.24% and Citizens CFG, +0.35%, according to the team, which notes several other major banks appear to have hit pause on their programs.
A smaller portion of HELOCs and second-lien mortgages have been securitized, or packaged up and sold as bond deals, while nonbank lenders have been offering the products as well.
The US is now facing a third inflation wave, economist explains
‘Greedflation’ comes when companies use the excuse of higher input costs to hike prices, but are really profit-led, UBS’s Paul Donovan said.
Brad Smith – Anchor – June 15, 2023
Although US consumer prices provided further signs of relief for consumers in April, there are still factors keeping inflation elevated — and corporations may be reaping the benefits of that.
“We’ve had a really unfortunate situation where we’ve had three very, very different inflation waves caused by very different things,” UBS Global Wealth Management Chief Economist Paul Donovan told Yahoo Finance (video above). “And they’ve just come one after the other. So it looks like you’ve had this continuous period of inflation.”
The first wave, primarily in consumer durable goods, “was demand-led,” Donovan explained. “That’s over. Durable goods prices in the States are falling. You’ve got outright deflation.”
That was followed by a second wave of supply-led inflation, he added, “and that was the energy shock coming out of the war in Ukraine.” And then “the third wave of inflation — the one we’re getting now — is this unusual profit-led inflation story.”
Sometimes called “excuseflation” or “greedflation,” profit-led inflation occurs when consumer-facing companies toward the end of the supply chain persuade shoppers to accept price hikes by pointing to plausible explanations (such as historically-elevated inflation). However, Donovan said, the true reason for these elevated prices could have more to do with expanding margins and keeping investor sentiment high than with increased input costs.
“It’s using excuses,” Donovan said. “It’s using a cover.”
A shopper, who lamented that groceries have recently become much more expensive, holds the receipt from his purchase at a discount supermarket on June 15, 2022, in Berlin, Germany. (Photo by Sean Gallup/Getty Images)
Why inflation remains sticky
The main drivers of higher prices are the costs of goods sold — which includes both material and labor costs — and corporate profits.THE TAKEAWAY
As supply and demand shocks begin to wane, economists look to another potential culprit of sticky inflation: corporate profit margins.
Fortunately for consumers, prices for materials have slid tremendously. The World Bank expects a 21% decline in commodity prices in 2023 relative to 2022 — which, it noted, would be the sharpest drop since the COVID-19 pandemic.
However, prices still hover well above average levels from 2015-2019. During the first quarter of 2023, certain companies continued to institute price increases even as they witnessed flat or declining comparable sales volumes.
“I think what you see going on as much as anything is, one, obviously we’ve taken some pricing to cover the inflation that we’ve been dealing with,” PepsiCo (PEP) CFO Hugh Johnston told Yahoo Finance. “As consumers move to smaller size packages, it affects volume a little bit as well. But overall, the demand for our products continues to be quite high.”
Elevated labor costs may be the larger quandary for an inflation-fighting Federal Reserve — and a viable explanation for businesses pushing through price increases.
“What I think will be the bigger story this year for the broader economy, especially for the Fed, will be these stickier labor costs,” Charles Schwab Senior Investment Strategist Kevin Gordon told Yahoo Finance.
“Look at unit labor-cost growth — it is still way above trend, pre-COVID trend — and the fact that you’re not really seeing an easing in productivity growth or lack thereof because it’s still deeply negative,” he said.
“So that convergence, I think, will be really important because companies can only stomach those higher labor costs for so long, especially if you’re not getting that revenue back and that revenue surge.”
However, corporate profits have also played a large role in price increases since the disruptions from the coronavirus pandemic took hold.
According to an analysis published by the Economic Policy Institute, corporate profits replaced unit labor costs as the largest contributor to unit price growth in the nonfinancial corporate sector from the second quarter of 2020 to the fourth quarter of 2021, when compared with historical averages from 1979-2019.
“[Corporations] sneak in a margin increase,” Donovan said. “And you can see this with, for example, the rise in retail profits as a share of GDP. That’s one instance where we’re seeing this expansion of margin under the cover of, ‘Oh, it’s a general inflation problem. We can’t help it.’ But actually, they’re expanding margin and just basically persuading consumers to accept that.”
How long before companies rethink ‘excuseflation’?
Another reason companies may feel comfortable raising prices has been the continued strength of consumers.
During the first quarter of 2023, a host of company executives said US consumers were “healthy” and their spending remained “resilient“, while also detailing price increases and profit preservation efforts to investors and equity analysts.
“After slowing in the back half of 2022 a bit, we saw the pace of payments picked back up in quarter one, especially in the latter parts of the quarter,” Bank of America (BAC) CEO Brian Moynihan said during the company’s Q1 earnings call. “Consumers’ financial position remains generally healthy. They’re employed with generally higher wages, continue to have strong account balances, and have good access to credit.”
In June, however, Moynihan acknowledged that spending has “slowed down” following a succession of Federal Reserve interest rate increases. There’s also evidence that higher prices are weighing on consumer confidence.
For instance, consumer sentiment slid 7% in May, “erasing nearly half of the gains achieved after the all-time historic low from last June,” Joanne Hsu, director of the University of Michigan’s Surveys, said in its most recent report. “That said, consumer views over their personal finances are little changed from April, with stable income expectations supporting consumer spending for the time being.”
People shop at Lincoln Market on June 12, 2023, in the Prospect Lefferts Gardens neighborhood in the Brooklyn borough of New York City. (Photo by Michael M. Santiago/Getty Images)
While profit-led inflation can help preserve near-term profits for a company, it could also be detrimental to a brand’s image if consumers see the reasons for raising prices as disingenuous — particularly as social media provides a new outlet for consumers to push back.
Donovan said that a company’s brand can be damaged if it’s accused of “profiteering” at a time when people are suffering.
“Remember, we’ve had two years of negative real-wage growth across the developed world — people are feeling the pain,” he said. “So I think that social media can help inflame profit-led inflation by creating excuses that companies can use. But it can also work by threatening brand values to cause companies to rethink some of their pricing strategies.”
Because of that, profit-led inflation won’t last forever, Donovan said.
“At some point, either governments or consumers realize that this is going on, and they say, ‘Hold on, that’s not fair,’ and then you start to damage brand values,” he said. “You’re seen as cheating or unfairly treating the consumer. And that’s exactly the point that we’re now starting to get to.”
Two more property insurance companies scaling back coverage in Florida
Rich Jones – June 15, 2023
Florida homeowners have fewer options for property insurance. Just two weeks into hurricane season, The Farmers Group and AIG say they’re scaling back policy coverage.
Both companies point to their vulnerability to natural disasters like hurricanes and flood.
Over the past 18 months in Florida, 16 property insurance companies have decided to stop writing new business to new homeowners in one form or the other.
WOKV Consumer Warrior Clark Howard says insurers are pulling out of Florida and California because the risks have become incalculable.
“Florida and California will need to offer state-backed reinsurance so that insurers can issue actuarially sound policies.”, Clark said.
Clark suggests shopping for insurance through an independent agent and then get quotes for a high deductible, the highest your mortgage company will allow you take.
“You’re eliminating for the insurer what they refer to as nuisance claims. So you become a less risky, less costly person for them to insure.”, Clark said.
Clark says the Florida Legislature is going to need to step in and address Citizens Insurance, the insurer of last resort. He says the state will have to take over the role of reinsurance, eliminate Citizens, which could allow regular insurers to come back.
“That insurers would be liable for losses up to a ceiling, whatever that is. And then after that the Florida reinsurance would cover it.”, said Clark.
The Struggle for Food Sovereignty in Immokalee, Florida
Julia Knoerr – June 14, 2023
The majority of migrant farmworkers live below the federal poverty line, without easy access to healthy foods or affordable housing. To survive, many in this tight-knit community have found strategies for mutual aid and collaborative resilience.
People wait in line for food at the annual Thanksgiving in the Park gathering where residents of the farmworker community of Immokalee are provided with a free Thanksgiving meal. (Photo by Spencer Platt/Getty Images)
After leaving three children in Guatemala, Maria Vasquez spent 15 years working in the agricultural industry in Immokalee, Florida. She worked in the fields for three years picking jalapeños, watermelons, cucumbers, melons, tomatoes, and pumpkins before spending 12 years processing tomatoes in a warehouse.
Although Vasquez handled food every day for work, she couldn’t afford to buy groceries. Instead, she began exchanging food with friends and learning about Immokalee’s community-based resources through word of mouth.
Immokalee is known as the tomato capital of the United States, yet 28 percent of the town’s 24,500 residents—the majority migrant farmworkers from Central America, Mexico, and Haiti—live below the federal poverty line and without easy access to healthy foods. This poverty rate is more than double the statewide average, and it’s compounded by higher-than-average food prices, a housing crisis, and minimal public transportation options.
A volunteer distributes bags of free food at the Meals of Hope weekly Thursday distribution at Immokalee’s Farmworker Village. (Photo credit: Julia Knoerr)
To face these challenges, Vasquez connected with local organizations committed to mutual aid and self-reliance. She began attending meal distribution events at Misión Peniel, a ministry of Peace River Presbytery that supports the Immokalee farmworker community, and joined the mission’s women’s group to build connections.
When she gave birth to a son with Down syndrome in 2015, she gave up the demanding hours of agricultural work to care for him and began providing cleaning services for the mission. She volunteered at the community garden behind the building run by Cultivate Abundance, an organization that addresses food insecurity and livelihood challenges in low-income, migrant farmworker communities, until the group hired her on as a garden aid.
Like Vasquez, many in this tight-knit community have found strategies for collaborative resilience as the pandemic and Hurricane Ian have made food access even more challenging in recent years.
A combination of informal mutual aid networks, small-scale farms, foraging, and donated meals from local organizations such as Misión Peniel and Meals of Hope keep the community nourished. Additionally, Cultivate Abundance is growing crops such as amaranth, Haitian basket vine, and chaya (a nutritious shrub native to the Yucatan peninsula) to move beyond charity and equip community members with culturally relevant, locally recognized produce.
These efforts not only bolster food security, but they also support the community’s autonomy to grow their own food and engage in collective healing. While many Immokalee residents report that they practice grueling labor each day and have experienced xenophobia, sexual violence, and rent gouging in their recent pasts, the garden behind Misión Peniel offers a safe space for community members to speak their own languages, share memories from their home countries, practice meditation, and return to their ancestral cultural knowledge to grow their own food as stewards of the land.
One of Cultivate Abundance’s community gardens sits behind Misión Peniel and has helped the organization produce over 59 tons of produce since beginning operations in 2018. (Photo credit: Julia Knoerr)
Food and Housing Insecurity in Immokalee
Immokalee’s Main Street boasts a few blocks of small markets featuring products from the community’s predominant Mexican, Guatemalan, and Haitian diasporas, as well as money-transfer services for migrants to send money home. Old school buses transporting farmworkers to work pull into the parking lot of La Fiesta supermarket, a key intersection in town bordering on the land owned and occupied by Misión Peniel and the Coalition of Immokalee Workers (CIW), a high-profile farmworker advocacy group.
Here, wild chickens cluck at all hours of the day, their chorus mixing with broadcasting from Radio Conciencia 107.7, the CIW’s community radio station. Green space is scarce, and beyond the town’s center, sidewalks fade into neighborhoods of run-down trailers and busy roads lined with fast food restaurants.
Though Immokalee sits just 30 miles from Naples, one of the wealthiest cities in Florida, wages remain a primary barrier to residents’ adequate food access. The most recent Census found an average per-capita annual income of $16,380 in Immokalee between 2017-2021. Nearly 39 percent of the town’s population was born outside of the U.S., and the number of farmworkers varies based on the season; some sources estimate that as many as 15,000–20,000 migrant seasonal farmworkers typically live in the area.
In the winter months, the majority of those workers are there to pick tomatoes. From 1980 to 2009, farmworkers received 50 cents per bucket picked rather than a guaranteed minimum wage, meaning they had to harvest at least 150 buckets per day to make enough income.
Cultivate Abundance’s banana circle offers different varieties of banans and plaintains. (Photo credit: Julia Knoerr)
CIW’s Fair Food Program, which began in 2010 to create a fairer food industry for workers, farmers, buyers, and consumers, improved those conditions. The program is known nationally as a model for providing farmworkers with human rights, and requiring that growers selling to participating buyers (such as McDonalds, Walmart, Whole Foods, and Trader Joe’s) clock workers’ time and pay them minimum wage (currently $11 per hour in Florida), as required by federal law. Participating buyers also agree to pay at least a penny more per pound of tomatoes they buy, translating to a bonus that gets split among qualifying workers.
However, not all buyers participate in the Fair Food Program. The CIW continues to advocate for a consumer boycott of Publix, Kroger, and Wendy’s, which have all refused to join. Julia Perkins, education coordinator for the CIW, says even with these gains, many workers struggle to feed themselves. Agricultural work is inconsistent, and an individual’s income will vary greatly by season.
“When there is a lot of picking to be done, when it’s not raining a lot, [if] it’s the first pick, you can do pretty well for a number of weeks,” Perkins says. “[But] not well enough to feed you for the rest of the year.”
The pandemic exacerbated farmworkers’ struggle for adequate income. The market for wholesale crops declined because industries like cruises, hotels, and restaurants shut down, lowering the prices of commodities and increasing grocery store prices.
Farmworkers experienced the brunt of the economic downturn—lower demand for the crops they picked meant fewer jobs, and inflation limited their wages’ reach. If farmworkers fell sick with the virus and couldn’t go to work, they received no pay, and as they remained essential workers, they couldn’t shelter in place.
Furthermore, many Immokalee residents are undocumented, meaning they didn’t qualify for federal stimulus checks under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), nor have they received Supplemental Nutrition Assistance Program (SNAP) benefits to help them purchase food.
Beyond wages, housing often demands 60 percent of Immokalee residents’ income, according to Arol Buntzman, chairman of the Immokalee Fair Housing Coalition. The same five or six families have owned the majority of Immokalee properties for years and charge weekly rent for each individual, including small children, living in 50-year-old trailers. Multiple families and strangers often share rooms.
In September 2022, Hurricane Ian further increased the cost of rent. Intensifying the already severe housing shortage, Hurricane Ian destroyed housing in Naples and Fort Myers, leading some residents of those towns to move to Immokalee and outbid farmworkers, which Buntzman says in turn raised rents even more.
Feeding Farmworker Families
To address these growing needs, nonprofit and religious organizations have been providing fundamental support through basic health and food services.
Julyvette Pacheco, office manager at the food security organization Meals of Hope, saw need increase in the wake of Hurricane Ian, compounded by inflation. Her organization used to feed 200 families in Immokalee every week, but after the hurricane, that number rose to 350.
“Something we have been noticing since the hurricane,” Pachecho says, “is that people are not patient. When they come here, most of them are struggling. They need food, they have been waiting.”
Meanwhile, Cultivate Abundance addresses food insecurity by growing produce reflective of migrants’ foodways and empowering them with skills to grow their own. The main garden behind Misión Peniel is one-tenth of an acre and has produced more than 59 tons of fruit and vegetables since its start in 2018.
During the garden’s inception, members of the mission’s women’s group contributed to a participatory decision-making process about the type of produce they valued, and community members can now volunteer in the garden in exchange for produce to take home. Whether through their families or professional lives, staff members share connection to the agricultural industry and have built partnership with other local farms and gardens.
Lupita Vasquez-Reyes, Cultivate Abundance’s community garden and outreach manager, grew up in Immokalee as the daughter of migrant farmworkers from Mexico. After 20 years away, she returned in 2019, just one year after the garden started in collaboration with Misión Peniel. Vasquez-Reyes says the group has worked to build intentional solidarity with an intersectional approach to diversity in the garden. The beds now boast a wide variety of medicinal herbs and produce, including edible weeds like yerba mora that many would discard.
Lupita Vasquez-Reyes (left) showcases the garden’s offerings, including many plants requested by community members or grown from shared seed. Corn (right) is an essential crop for many community members, who dry corn daily to make masa and use the silk for its medicinal qualities. (Photo credit: Julia Knoerr)
Vasquez-Reyes points to plantains, bananas, corn, chaya, edible mesquite pods, Barbados cherries, tree tomatoes native to Guatemala, and a vertical garden of herbs and lettuces. Epazote is a bitter herb that Vasquez says is helpful to make beans and other legumes easier to digest. Cactus pads have been planted to support climate and storm resilience, and a compost pile ensures that nothing goes to waste.
Cilantro is the biggest hit. “People get so joyous about being able to have it fresh,” Vasquez-Reyes says. “If we didn’t have cilantro, we probably wouldn’t have the success we have here.”
Cultivate Abundance also functions as a garden center for residents, giving out seedlings, recycled soil, fertilizer, and extra materials. Vasquez-Reyes says container gardens are accessible and can easily move with community members with very limited living space or permanence.
Landlords often deter tenants from gardening due to water costs, so many people hand water and collect rain to decrease their dependence on grocery stores.
Thursday is the official harvest day at the Misión Peniel garden; all produce goes to the mission’s meal distributions that have a policy of turning no one away. Cultivate Abundance also maintains a small budget to purchase produce from other local organic farms to supplement their own harvests for meal distributions.
Collaborating for Survival
Vasquez-Reyes says that Haitian, Guatemalan, and Mexican migrants tend to share similar conditions in Immokalee, inspiring a cross-cultural exchange of knowledge and networking. That might look like sharing food, sharing food bank tips, and comparing grocery prices between stores.
Community members will also often forage for weeds with high nutritional content or medicinal uses, according to Vasquez-Reyes. Sometimes they will return to trailer camps where they lived previously to forage plants and will then exchange information with friends about where to find different food sources.
Herbs grow vertically at Cultivate Abundance, where cilantro is the most popular crop. (Photo credit: Julia Knoerr)
Maria Vasquez is one community member who has built a strong network of mutual care. Seven blocks over from Misión Peniel, Vasquez has a small garden at her trailer where she grows everything from amaranth to chile de árbol, mostaza [mustard plant], and epazote and shares it with people in great need. This invitation often leads them to try new foods.
“A little while back, there was an older woman who I came to help. I brought her amaranth; I brought her cilantro,” Vasquez says in Spanish.
Today’s food system is complex.
It took her some time to gain her neighbor’s trust, but now that neighbor, who has diabetes, checks in with Vasquez if she doesn’t see her every day. “She said she had never eaten amaranth; she knew of it, but it was only for the animals,” Vasquez says. Now, she’s started cooking it, as well as other vegetables Vasquez introduced her to.
This knowledge sharing has gone directly back into the garden. Vasquez brought taquitos made with yerba mora one day for Cultivate Abundance staff to sample, and now the herb grows in the garden.
To Vasquez-Reyes, these strategies move away from a fear-based, scarcity approach to poverty and hunger. “We’ve been functioning in food insecurity in this country from a very harmful place, and we’re not centering what people are living,” Vasquez-Reyes says. “That includes the violence, but it includes also the resilience and the self-reliance component of what people are already doing—the networks, the economic alternatives.”
Vasquez-Reyes hopes the garden can also provide space for community members to give voice to their stories in their own healing processes surrounding their experiences as immigrants and laborers fueling an industry of mass consumption. These reflections often emerge as core memories of working in the fields, talking freely about the places they are from, or sharing family members’ stories.
For Vasquez-Reyes, the goal is to reimagine a better world. The practice of growing chemical-free, slow food itself flips the narrative of agriculture as an industry rooted in commodity production. Rather, Vasquez-Reyes says, Cultivate Abundance’s intentional, small-scale approach allows community volunteers and staff to again grow food in partnership with the land.
When planting the milpa (corn, squash, and beans), community members will share blessings and even make video calls to family members in their home countries who are simultaneously preparing the same crops. Through these types of exchanges, the garden space nurtures the community’s nutritional needs, their identities, and their souls.
“It’s not survival of the fittest; it’s collaborative survival,” Vasquez-Reyes says. “That’s the real sustainability.”
This reporting was supported by the Pulitzer Center.
Read a Spanish-language version of the story on El Nuevo Herald.
98% of borrowers have a below-market mortgage rate—that’s keeping housing inventory tight
Alena Botros – June 12, 2023
Fortune· Getty Images
Johnas Street and his wife were living in a one-bedroom home in the Bay Area with their, at the time, three kids (they’ve got four now). Then the pandemic happened, and the couple started working from home. In April 2021 they closed on a six-bedroom, $650,000 home in Charlotte, where Street has family. They locked in a 30-year fixed rate at 2.62%, and it’s keeping them there.
“California is home for us, and eventually we’ll go back,” Street told Fortune. “I will say, I don’t know if stuck is the right word, but a 2.62% interest rate is hard to give up right now.”
The housing market has been on a wild ride over the last few years. Starting with the Pandemic Housing Boom, a short-lived era of low mortgage rates and a surge in demand as people shifted to remote work, and ending with a correction that’s lost steam. Still, 98% of outstanding borrowers have a below-market mortgage rate, according to an estimate from Goldman Sachs, and that’s constraining both sides of the market.
Look no further than Street and his wife, who in their mid-to-late thirties work in tech with remote roles that might not last forever. They know that, so they’re looking to move back as more positions in their field transition to hybrid work. But it would cost them a lot to sell their home with a rate below 3% and buy another in San Francisco (or anywhere in the Bay Area), with an average home value that’s much higher than Charlotte’s, coupled with rates that are pushing 7%.
“It’s really keeping us…that’s so much more money in our pockets,” Street said. “That’s so much more money for our kids, you know what I mean, so it’s kind of tough to leave that.”
Mortgage rates that were previously below 3% spiked to above 7%, and currently, the average 30-year fixed rate is hovering around 7%, with the latest reading at 6.94%. That’s of course down from a peak of 7.37% last year, but still much higher than the 3% people got used to during the pandemic. Let’s take a look at the difference that makes in Street’s monthly mortgage payment. On a $500,000 loan with a 30-year fixed rate at 2.62%, his monthly mortgage payment comes out to roughly $2,007 (without taxes and insurance). With the same circumstances but at a 7% rate, his monthly mortgage payment would be around $3,327. That’s a roughly $1,320 monthly difference and a $15,840 difference annually. That’s not taking into account the difference in home values between Charlotte and the Bay Area.
Outstanding borrowers like Street who have a below-market mortgage rate are fueling the so-called lock-in effect or the golden handcuffs of mortgage rates. To put it simply, would-be sellers are holding on to their homes in fear of losing their low rates. With Street’s case, in choosing not to move back to California and buy a home there, retaining their current home in North Carolina, the market lost both a buyer and a seller. Not to mention that Street told Fortune that he gets tons of messages from people wanting to buy their home, likely because of a lack of supply.
As of last month, there were 22.7% fewer newly listed homes for sale compared to last year, according to Realtor.com. All the while, new listings remained 29.4% below pre-pandemic levels. The difference primarily amounts to a segment of people that have almost disappeared from the market: move-up buyers and sellers.
It’s clear that selling a home with a rate below 3% and buying another with a rate over 6% doesn’t make financial sense because of that substantially larger monthly payment. That’s exactly why homeowners are holding on to their low rates and not selling. Some are even becoming “accidental landlords” to keep their low rates.
Take Josh Dudick, CEO and founder of wealth and investment website Top Dollar, who previously toldFortune he was thinking of selling his vacation home in the Hamptons with a 30-year fixed rate below 3%, but decided to rent it out instead. Dudick said he didn’t want to lose that “really low mortgage rate” he locked in. And Bob Wood, finance and economics professor at the University of South Alabama, previously toldFortune that despite wanting to downsize, “it just doesn’t make sense” to sell his home in Mobile with a 15-year fixed rate below 3%.
Even homeowners that want to move feel like they can’t because they’re trapped by their low mortgage rates that were once considered a financial win. This all translates into fewer homes coming into the market, which puts pressure on the supply side and the demand side because every homeowner that decides not to sell equates to one less buyer.
Housing has become so unaffordable that over 75% of homes on the market are too expensive for middle-income buyers
Jennifer Sor – June 12, 2023
Robert Galbraith/ Reuters
The housing affordability crisis has priced middle-income buyers from a majority of homes on the market.
Buyers earning up to $75,000 could only afford 23% of properties listed for sale in the US.
Affordability has been crimped by low inventory and mortgage rates at multi-decade highs.
The US housing market is so unaffordable, over 75% of homes on the market are too expensive for middle class buyers, according to a recent report from the National Association of Realtors and Realtor.com.
That’s largely due to the shortage of housing supply, which has hit middle income buyers the hardest. Thanks to elevated mortgage rates, the housing market is missing around 320,000 homes priced at or below $256,000 – the maximum price a middle-income buyer earning up to $75,000 can afford.
Of the 1.1 million listings on the market in April, middle-income buyers could only afford 23% of them, the report said. That’s less than half of what the group could afford five years ago, when around 50% of all listings on the market were considered affordable for that group.
The three metropolitan areas with the largest inventory of affordable homes are currently located in Ohio, the report added. Meanwhile, El Paso, Texas; Boise, Idaho; and Spokane, Washington have the fewest number of listing considered affordable.
“Even with the current level of listings, the housing affordability and shortage issues wouldn’t be so severe if there were enough homes for all price ranges,” NAR senior economist Nadia Evangelou said in a statement. “Our country needs to add at least two affordable homes for middle-income buyers for every home listed for upper-income buyers.”
The US housing market has slowed in 2023, with high mortgage rates sidelining both buyers and sellers. Existing homeowners are discouraged from listing their properties for sale, as many of their properties were financed in the last decade of ultra-low interest rates.
The result is an inventory shortage that could last for the next several years, industry experts say, which has pushed up home prices and made unaffordability even worse. Housing has never been so unaffordable for Americans, according to data from the Mortgage Bankers Association, with the group’s Purchase Applications Payment Index rising to a record high of 172.3 in April.
Affordability is also unlikely to improve until mortgage rates ease, which will incentivize more homeowners to list their properties for sale. But that’s an uncertain prospect, as the average 30-year fixed mortgage rate surpassed 7% in May, and has hovered around two-decade highs. Mortgage rates will likely pull back to just 6% by the end of the year, Redfin’s chief economist told Insider.
People wait in line for food at the annual Thanksgiving in the Park gathering where residents of the farmworker community of Immokalee are provided with a free Thanksgiving meal. (Photo by Spencer Platt/Getty Images)
