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Experts: Zoning Changes Most Effective Path to Boosting Housing Supply

When asked what could be done to increase housing supply, a panel of experts surveyed by Zillow chose relaxing zoning rules as the most effective option.
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*Expectations for future home price growth among a panel of 100+ experts and economists is the most optimistic ever in a quarterly survey that dates to 2010.

*The panel expects new construction to slow in the coming years, with high costs as the main barrier. Last quarter, the same panel predicted total inventory would rise later this year thanks mainly to more existing homes being listed for sale. 

*Relaxing zoning rules would be most productive to increase new housing supply, according to panelists.

………………..

Relaxing zoning rules to allow for more and/or more-efficient new home construction would be the most effective way to increase supply in a housing market currently near historic inventory lows, according to the latest Zillow Home Price Expectations Survey.[1] On the current path, those experts anticipate new construction growth to stall and home prices to rise, resulting in fewer of today's 30-somethings owning homes.

High costs are expected to slow new construction momentum, a blow to home shoppers already facing an intensely competitive market with relatively few available homes when compared to the number of interested buyers. On average, the panel expects new housing starts to end the year 2.5% below December 2020 levels, and to fall an additional 2% by the end of 2022. Panelists cited the high costs of labor, materials and land as the biggest headwinds for home builders.[2] The Zillow Home Price Expectations Survey is a quarterly survey of more than 100 real estate experts and economists nationwide, sponsored by Zillow and conducted by Pulsenomics.

The results are somewhat surprising given builder confidence that has consistently stayed at very high levels since last summer, though it has fallen somewhat from highs reached towards the end of 2020. Builders seem to sense a golden opportunity to help address the shortage of available homes, especially as demand appears poised to stay high for years to come. But that optimism may not be enough on its own to make a meaningful dent in the massive shortfall in construction since the Great Recession. 

When asked what could be done to increase housing supply, relaxing zoning rules was the top choice — 56% of panelists chose it as one of up to three main factors to help increase housing supply, and it was scored as the most effective single strategy. Previous Zillow research has found even a modest amount of upzoning in large metro areas could add 3.3 million homes to the U.S. housing stock, creating room for more than half of the missing households since the Great Recession — a major reason for today's frenzied housing demand. A majority (57%) of homeowners previously surveyed by Zillow previously said they believe they and others should be able to add additional housing on their property, and 30% said they would be willing to invest money to create housing on their own property, if allowed.

Other panelist recommendations for increasing housing supply included easing the land subdivision process, relaxing local review regulations for projects of a certain size, accelerating the adoption of new construction technologies and increasing training to build up the construction workforce. 

Of course, new construction isn't the only path to more inventory — a majority of the same panel, when surveyed in Q1 2021, said they expect housing inventory to begin growing again this year, with an increase in existing homes being listed for sale being the most likely catalyst for inventory growth. Previous Zillow research has shown widespread coronavirus vaccine distribution could make some 14 million households newly comfortable moving that don't necessarily feel that way now. 

With housing demand showing no signs of slowing from a pandemic-fueled boom in the second half of 2020, the expert panel again adjusted their home price growth expectations upward. The panel's average home value growth prediction for 2021 is 8.7% — the highest for any year since the inception of the quarterly survey in 2010. That's up from 6.2% last quarter and more than double the expectation from the Q4 2020 survey (4.2%). Home value growth is expected to slow to 5.1% in 2022, according to the panel — still strong growth compared to a historical average of about 4%. 

"A profound shift in housing preferences, adoption of remote employment, low mortgage rates, and the recovering economy continue to stoke demand in the single-family market and drive prices higher," said Terry Loebs, founder of Pulsenomics. "Strict zoning regulations, an acute labor shortage, and record-high materials costs are constraining new construction, compounding disequilibrium, and reinforcing expectations that above-normal rates of home price growth will persist beyond the near-term."

Panelists were also asked for their expectations on the path of mortgage rates and the homeownership prospects for millennials over the next few years. Average rates for a fixed 30-year mortgage currently sit near 3%, and panelists said they  expect a small rise to 3.45% by the end of the year, continuing to 3.99% at the end of 2022. That would add $55 to a monthly payment on a typical home at the end of this year, and $124 at the end of 2022.[3] Still, this would represent a bargain historically. Average rates were near 5% as recently as 2018, and they started the 2000s above 8%. 

In large part due to affordability challenges from rising home prices, the panel on average expects homeownership among 35-44 year-olds will drop slightly over the next five years, when that group will be dominated by millennials. The majority (54%) of experts who expect homeownership to fall among this age group by 2026 cited worsening affordability — via higher mortgage rates and/or home prices — as the top cause. 

Of the more optimistic panelists who anticipate more homeowners in this age group in coming years, most (61%) said an increased preference to own instead of rent would be the primary driver. This could possibly be a result of how the pandemic and the rise of remote work options has changed what many say they want and need in a home

 

[1] This edition of the Zillow Home Price Expectations Survey surveyed 109 experts between May 11, 2021 and May 25, 2021. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc. The Zillow Home Price Expectations Survey and any related materials are available through Zillow and Pulsenomics.

[2] The verbatim answer options most often cited by panelists as headwinds were "high labor costs/shortage of skilled construction labor," "high/volatile materials costs," and "high land costs/lack of developable parcels in desirable areas."

[3] Assuming a 20% down payment on a home purchased for $280,370, the typical home value in April according to the Zillow Home Value Index.

The post Experts: Zoning Changes Most Effective Path to Boosting Housing Supply appeared first on Zillow Research.

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Economics

Extra Crunch roundup: TC Mobility recaps, Nubank EC-1, farewell to browser cookies

What, exactly, are investors looking for?

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What, exactly, are investors looking for?

Early-stage founders, usually first-timers, often tie themselves in knots as they try to project the qualities they hope investors are seeking. In reality, few entrepreneurs have the acting skills required to convince someone that they’re patient, dedicated or hard working.

Johan Brenner, general partner at Creandum, was an early backer of Klarna, Spotify and several other European startups. Over the last two decades, he’s identified five key traits shared by people who create billion-dollar companies.


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“A true unicorn founder doesn’t need to have all of those capabilities on day one,” says Brenner, “but they should already be thinking big while executing small and demonstrating that they understand how to scale a company.”

Drawing from observations gleaned from working with founders like Spotify’s Daniel Ek, Sebastian Siemiatkowski from Klarna, and iZettle’s Jacob de Geer and Magnus Nilsson, Brenner explains where “VC FOMO” comes from and how it drives deal-making.

We’re running a series of posts that recap conversations from last week’s virtual TC Mobility conference, including an interview with Refraction AI’s Matthew Johnson, a look at how autonomous delivery startups are navigating the regulatory and competitive landscape, and much more. There are many more recaps to come; click here to find them all.

Thanks very much for reading Extra Crunch!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

How contrarian hires and a pitch deck started Nubank’s $30 billion fintech empire

Image Credits: Nigel Sussman

Founded in 2013 and based in São Paulo, Brazil, Nubank serves more than 34 million customers, making it Latin America’s largest neobank.

Reporter Marcella McCarthy spoke to CEO David Velez to learn about his efforts to connect with consumers and overcome entrenched opposition from established players who were friendly with regulators.

In the first of a series of stories for Nubank’s EC-1, she interviewed Velez about his early fundraising efforts. For a balanced perspective, she also spoke to early Nubank investors at Sequoia and Kaszek Ventures, Latin America’s largest venture fund, to find out why they funded the startup while it was still pre-product.

“There are people you come across in life that within the first hour of meeting with them, you know you want to work with them,” said Doug Leone, a global managing partner at Sequoia who’d recruited Velez after he graduated from grad school at Stanford.

Marcella also interviewed members of Nubank’s founding team to better understand why they decided to take a chance on a startup that faced such long odds of success.

“I left banking to make a fifth of my salary, and back then, about $5,000 in equity,” said Vitor Olivier, Nubank’s VP of operations and platforms.

“Financially, it didn’t really make sense, so I really had to believe that it was really going to work, and that it would be big.”

Despite flat growth, ride-hailing colossus Didi’s US IPO could reach $70B

Image Credits: Didi

In his last dispatch before a week’s vacation, Alex Wilhelm waded through the numbers in Didi’s SEC filing. The big takeaways?

“While Didi managed an impressive GTV recovery in China, its aggregate numbers are flatter, and recent quarterly trends are not incredibly attractive,” he writes.

However, “Didi is not as unprofitable as we might have anticipated. That’s a nice surprise. But the company’s regular business has never made money, and it’s losing more lately than historically, which is also pretty rough.”

What’s driving the rise of robotaxis in China with AutoX, Momenta and WeRide

AutoX, Momenta and WeRide took the stage at TC Sessions: Mobility 2021 to discuss the state of robotaxi startups in China and their relationships with local governments in the country.

They also talked about overseas expansion — a common trajectory for China’s top autonomous vehicle startups — and shed light on the challenges and opportunities for foreign AV companies eyeing the massive Chinese market.

The air taxi market prepares to take flight

Image Credits: Bryce Durbin

“As in any disruptive industry, the forecast may be cloudier than the rosy picture painted by passionate founders and investors,” Aria Alamalhodaei writes. “A quick peek at comments and posts on LinkedIn reveals squabbles among industry insiders and analysts about when this emerging technology will truly take off and which companies will come out ahead.”

But while some electric vertical take-off and landing (eVTOL) companies have no revenue yet to speak of — and may not for the foreseeable future — valuations are skyrocketing.

“Electric air mobility is gaining elevation,” she writes. “But there’s going to be some turbulence ahead.”

The demise of browser cookies could create a Golden Age of digital marketing

Though some may say the doomsday clock is ticking toward catastrophe for digital marketing, Apple’s iOS 14.5 update, which does away with automatic opt-ins for data collection, and Google’s plan to phase out third-party cookies do not signal a death knell for digital advertisers.

“With a few changes to short-term strategy — and a longer-term plan that takes into account the fact that people are awakening to the value of their online data — advertisers can form a new type of relationship with consumers,” Permission.io CTO Hunter Jensen writes in a guest column. “It can be built upon trust and open exchange of value.”

If offered the right incentives, Jensen predicts, “consumers will happily consent to data collection because advertisers will be offering them something they value in return.”

How autonomous delivery startups are navigating policy, partnerships and post-pandemic operations

Nuro second gen R2 delivery vehicle

Image Credits: Nuro

We kicked off this year’s TC Sessions: Mobility with a talk featuring three leading players in the field of autonomous delivery. Gatik co-founder and chief engineer Apeksha Kumavat, Nuro head of operations Amy Jones Satrom, and Starship Technologies co-founder and CTO Ahti Heinla joined us to discuss their companies’ unique approaches to the category.

The trio discussed government regulation on autonomous driving, partnerships with big corporations like Walmart and Domino’s, and the ongoing impact the pandemic has had on interest in the space.

Waabi’s Raquel Urtasun explains why it was the right time to launch an AV technology startup

Image Credits: Waabi via Natalia Dola

Raquel Urtasun, the former chief scientist at Uber ATG, is the founder and CEO of Waabi, an autonomous vehicle startup that came out of stealth mode last week. The Toronto-based company, which will focus on trucking, raised an impressive $83.5 million in a Series A round led by Khosla Ventures.

Urtasun joined Mobility 2021 to talk about her new venture, the challenges facing the self-driving vehicle industry and how her approach to AI can be used to advance the commercialization of AVs.

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Spread & Containment

How to create effective, engaged workplace teams after the COVID-19 pandemic

Post-pandemic, the world of work will probably never be the same again. And that’s probably a good thing. We now have an opportunity to make it better.

For workplace teams returning to the office post-pandemic, it will still be important to protect the benefits of remote work: uninterrupted time for strategically important projects, and respect for personal preferences. (Pixabay)

Well into the pandemic’s second year, we are beginning to see light on the horizon. We’re not out of the woods here in Canada. As some areas of the country continue to struggle to contain the virus, others are optimistic due to lowering case counts thanks to restrictions and lockdown measures.

Ontario — the country’s largest province by population — is now in the first step of its reopening, and officials have said the majority of those who want to receive a vaccine could be fully immunized by the end of the summer.

The rolling lockdowns and public health restrictions of the pandemic response meant a massive shift to remote and virtual work for many workplaces. As we look towards and plan for the post-pandemic future, businesses and organizations need to thoughtfully consider what the future of work looks like for them.

They will need to reflect on their operations pre-pandemic, consider what they learned from the disruption of the crisis, and ask themselves: How can we build back better?

Structure shift

Recent decades have seen a shift in the structure of businesses and organizations, away from hierarchical models in favour of cross-functional and, at times, self-managing networks of teams. In fact, a 2016 survey found the majority of large corporations rely on interdisciplinary and cross-functional teams. In 2019, 31 per cent of respondents said that most or almost all work is performed in teams.

For many of these organizations, the pandemic saw these teams transition from in-person work to remote interactions via video-conferencing services like Zoom, Microsoft Teams and Skype.

Many appreciated the comfort and autonomy inherent in working from home, but the erosion of work-life balance and social interaction has caused challenges.

As we come out of the pandemic, workplace teams will need an environment that retains the experience of autonomy while also providing a sense of belonging. Employees should be free to decide where they want to work and when they want to work whenever possible. But we must also address the negative impact of isolation — loneliness, fatigue or even depression, all of which have been frequently reported during the pandemic.

Five women at a desk have a conversation.
Effective workplace teams will be critical to building back better. (Piqsels)

Research on workplace teams finds that autonomy can in fact co-exist with a sense of belonging and cohesion. For this to be achieved, organizations need to find a balance, and need to organize teams according to these structural considerations:

• Teams have a strong leader, or they can feature shared leadership.

• Teams have clearly defined task interdependencies and interfaces among team members, or team members can perform their work largely in isolation.

• Teams have the same goals and rewards for all members, or they can offer individualized goals and rewards.

• Teams communicate virtually, or they can communicate so face-to-face.

• Teams have a shared history and aspirations, or they operate for a limited time, after which they disband.

A strong leader, alongside clearly defined task interdependencies, focuses on the team as a whole, whereas virtual teamwork and individual rewards emphasize the individual team member.

Combining features of teamwork that promote autonomy with other features that foster cohesiveness and a sense of belonging is likely the best path forward.

Emphasize shared goals

As long as employees continue to operate in a virtual setting, it’s important for leaders to define shared goals and rewards. Teams must share a vision of the future that complements the larger degree of autonomy they’ve experienced through virtual teamwork.

Focusing on elements of teamwork that bring team members closer together should not be left to chance. As some organizations learned during the pandemic, scheduling social hours can replace the spontaneous conversations at the water cooler. A book club can replace the informal learning over a lunch chat. A fireside Zoom chat on company values and goals can replace an in-person town hall.

But post-pandemic, few organizations will maintain an all-virtual presence. Many will move towards a hybrid model. For those teams returning to the office, it will still be important to protect the benefits of remote work: uninterrupted time for strategically important projects, and respect for personal preferences.

The pandemic has also almost eliminated a troublesome feature of organizational life: presenteeism, or showing up to work when sick. We must not go backwards in this regard. Workers must protect themselves and their team members from the consequences of illness.

Post-pandemic, the world of work will probably never be the same again. And that’s probably a good thing. We now have an opportunity to make it better.

Matthias Spitzmuller does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Economics

Slowly At First… Then All At Once

Slowly At First… Then All At Once

Authored by Lance Roberts via RealInvestmentAdvice.com,

Bull markets always seem to end the same – slowly at first, then all at once.

My recent discussion on why March 2020 was a “correction” and…

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Slowly At First... Then All At Once

Authored by Lance Roberts via RealInvestmentAdvice.com,

Bull markets always seem to end the same – slowly at first, then all at once.

My recent discussion on why March 2020 was a “correction” and not a “bear market” sparked much debate over the somewhat arbitrary 20% rule.

“Price is nothing more than a reflection of the ‘psychology’ of market participants. A potential mistake in evaluating ‘bull’ or ‘bear’ markets is using a ‘20% advance or decline’ to distinguish between them.”

Wall Street loves to label stuff.  When markets are rising, it’s a “bull market.” Conversely, falling prices are a “bear market.” 

Interestingly, while there are some “rules of thumb” for falling prices such as:

  • A “correction” gets defined as a decline of more than 10% in the market.

  • A “bear market” is a decline of more than 20%.

There are no such definitions for rising prices. Instead, rising prices are always “bullish.”

It’s all a bit arbitrary and rather pointless.

The Reason We Invest

It is essential to understand what a “bull” or “bear” market is as investors.

  • “bull market” is when prices are generally rising over an extended period.

  • “bear market” is when prices are generally falling over an extended period.

Here is another significant definition for you.

Investing is the process of placing “savings” at “risk” with the expectation of a future return greater than the rate of inflation over a given time frame.

Read that again.

Investing is NOT about beating some random benchmark index that requires taking on an excessive amount of capital risk to achieve. Instead, our goal should be to grow our hard-earned savings at a rate sufficient to protect the purchasing power of those savings in the future as “safely” as possible.

As pension funds have found out, counting on 7% annualized returns to make up for a shortfall in savings leaves individuals in a vastly underfunded retirement situation. Moreover, making up lost savings is not the same as increasing savings towards a future required goal.

Nonetheless, when it comes to investing, Bob Farrell’s Rule #10 is the most relevant:

“Bull markets are more fun than bear markets.” 

Of this, there is no argument.

However, understanding the difference between a “bull” and a “bear” market is critical to capital preservation and appreciation when the change occurs.

Defining Bull & Bear Markets

So, what defines a “bull” versus a “bear” market.

Let’s start by looking at the S&P 500.

Bull and bear markets are evident with the benefit of hindsight.

The problem, for individuals, always comes back to “psychology” concerning our investing practices. During rising or “bullish,” markets, the psychology of “greed” keeps individuals invested longer and entices them into taking on substantially more risk than realized. “Bearish,” or declining, markets do precisely the opposite as “fear” overtakes the investment process.

Most importantly, it is difficult to know “when” the markets have changed from bullish to bearish. Over the last decade, several significant corrections have certainly looked like the beginning of turning from a “bull” to a “bear” market. Yet, after a short-term corrective process, the upward trend of the market resumed.

So, while it is evident that missing a bear market is incredibly important to long-term investing success, it is impossible to know when the markets have changed.

Or is it?

The next couple of charts will build off of the weekly price chart above.

Identifying The Trend

“In the short run, the market is a voting machine but in the long run it is a weighing machine” – Benjamin Graham

In the short term, which is from a few weeks to a couple of years, the market is simply a “voting machine” as investors scramble to chase what is “popular.” Then, as prices rise, they “panic buy” everything due to the “Fear Of Missing Out or F.O.M.O.” Then, they “panic sell” everything when prices fall. However, these are just the wiggles along the longer-term path.

In the long-term, the markets “weigh” the substance of the underlying cash flows and value. Thus, during bull market trends, investors become overly optimistic about the future bid-up prices beyond the practical aspects of the underlying value. The opposite is also true, as “nothing has value” during bear markets. Such is why markets “trend” over time. Eventually, excesses in valuations, in both directions, get reverted to, and beyond, the long-term means.

While the long-term picture is relatively straightforward, valuations still don’t do much in terms of telling us “when” the change is occurring.

Change Starts Slowly, Then All At Once

“Tops are a process and bottoms are an event” – Doug Kass

During a bull market, prices trade above the long-term moving average. However, when the trend changes to a bear market, prices trade below that moving average.

The keyword is TREND. 

The chart below which compares the market to the 75-week moving average. During “bullish trends,” the market tends to trade above the long-term moving average and below it during “bearish trends.”

Since 2009, there are four occasions where the long-term moving average was violated but did not lead to a longer-term change in the trend.

  • The first was in 2011, as the U.S. was dealing with a potential debt-ceiling default and a downgrade of the U.S. debt rating. Fed Chairman Ben Bernanke started the second round of quantitative easing (QE), flooding the markets with liquidity.

  • The second came in late-2015 and early-2016 as the Federal Reserve started lifting interest rates combined with the threat of Britain leaving the European Union (Brexit). Given the U.S. Federal Reserve had already committed to tightening monetary policy, the ECB stepped in with their version of QE.

  • The third came at the end of 2018 as the Fed again tapered its balance sheet and hiked rates. The market decline quickly reversed the Fed’s stance.

  • Finally, the “pandemic shut-down” of the economy led to a price reversion in the market. The Fed intervened with massive liquidity injections and the start of QE-4.

Each of these declines only gets classified as “corrections.” The market did not sustain the break of the long-term trend, valuations did not revert, and psychology remained bullish.

Still A Bull Market

Today, Central Banks globally continue their monetary injection programs, rate policies remain at zero, and global economic growth is weak. Moreover, with stock valuations at historically extreme levels, the value currently ascribed to future earnings growth almost guarantees low future returns.

As discussed previously:

Like a rubber band stretched too far – it must get relaxed in order to stretch again. The same applies to stock prices that are anchored to their moving averages. Trends that get overextended in one direction, or the other, always return to their long-term average. Even during a strong uptrend or strong downtrend, prices often move back (revert) to a long-term moving average.”

The chart below shows the deviation in the market price above and below the 75-week moving average. Historically, as prices approach 200-points above the long-term moving average, corrections ensued. Thus, the difference between a “bull market” and a “bear market” is when the deviations occur BELOW the long-term moving average consistently. 

Since 2017, with the globally coordinated interventions of Central Banks, those deviations have started exceeding levels not seen previously. As of the end of May, the index was nearly 800 points above the long-term average or 4x the normal warning level. 

We can see the magnitude of the current deviation by switching to percentage deviations. Historically, 10% deviations have preceded corrections and bear markets. Currently, that deviation is 22.5% above the long-term mean.

Notably, the decline below the long-term average reversed quickly, keeping the “bull market” trend intact.

Conclusion

Understanding that change is occurring is what is essential. But, unfortunately, the reason investors “get trapped” in bear markets is that when they realize what is happening, it is far too late to do anything about it.

Bull markets are lure investors into believing “this time is different.” When the topping process begins, that slow, arduous affair gets met with continued reasons why the “bull market will continue.”  The problem comes when it eventually doesn’t. As noted, “bear markets” are swift and brutal attacks on investor capital.

As Ben Graham wrote in 1959:

“‘The more it changes, the more it’s the same thing.’ I have always thought this motto applied to the stock market better than anywhere else. Now the really important part of the proverb is the phrase, ‘the more it changes.’

The economic world has changed radically and will change even more. Most people think now that the essential nature of the stock market has been undergoing a corresponding change. But if my cliché is sound, then the stock market will continue to be essentially what it always was in the past, a place where a big bull market is inevitably followed by a big bear market.

In other words, a place where today’s free lunches are paid for doubly tomorrow. In the light of recent experience, I think the present level of the stock market is an extremely dangerous one.”

Pay attention to the market. The action this year is very reminiscent of previous market topping processes. Tops are hard to identify during the process as “change happens slowly.” The mainstream media, economists, and Wall Street will dismiss pickup in volatility as simply a corrective process. But when the topping process completes, it will seem as if the change occurred “all at once.”

Tyler Durden Tue, 06/15/2021 - 10:10

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