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Why Frame Walls When You Can Frack Wells?

by Rick Palacios Jr.

In late 2008, oil and gas pipeline construction workers earned $0.46 per hour more than new home framing contractors. Today, they earn $8.15 more per hour. It's no wonder labor is tight in the new home market, especially in Texas and Denver, the closest major markets to North Dakota. Since 2008, framing contractor wages have fallen 8%, while oil and gas pipeline construction wages have swelled by 20%.

by Rick Palacios Jr. and Ali Wolf

8% fewer homes will transact than normal in 2014, purely due to student debt.

This week, our clients received a 30-page paper that assesses the impact of student loans on home buying for households under the age of 40. Our conclusion is that 414,000 transactions will be lost in 2014 due to student debt. At a typical price of $200,000, that is $83 billion per year in lost volume.

Source: John Burns Real Estate Consulting, LLC

The analysis was quite complicated and involved a few assumptions, but we believe it is conservative, primarily because we looked only at those under the age of 40 with student debt.

At a high level, the math is as follows:

Written by Rick Palacios Jr. and Ali Wolf

Home builders captured market share in 2012 for the first time since 2005, accounting for just over 7% of all home sales, and we believe even more market share is in the cards for 2013. Over the last 20 years, new homes have constituted 13% of total home sales. At +20% y/y, the new home market more than doubled the +9% y/y growth achieved in the resale market last year. As shown below, this recovery is playing out very differently from that of the 2001-2005 upturn, where new and resale sales growth moved almost in lockstep.

New vs. Existing Home Sales
(Annual % Change)