Infrastructure Framework and Housing Prices

SAS Financial Advisors, LLC | Jul 2, 2021

In the News

Two major issues in the news this week and they are related. The collapse of the Florida shoreline condo building and a tentative agreement on an infrastructure bill by a group of Democratic and Republican Senators and the Biden administration.

With the unclear source of the collapse but much speculation, there is a significant possibility that construction that was up to code in 1980 did not consider the impact of climate change. From the preliminary indications there was deterioration of the building infrastructure caused by increasing amounts of saltwater washing through. Climate change could have an impact on higher tides and an increase in frequency and severity of hurricanes causing more salt water to enter the condo infrastructure.

The original infrastructure plan proposed by Democrats contained substantial funding for climate change related infrastructure including ½ million electric charging stations and incentive funding for the purchase of electric cars. The proposal also included large investments in alternative energy production.

There is no doubt that climate change has an economic impact, although when the media reports on the topic, climate deniers always get acknowledgement even though the overwhelming scientific consensus is that human behavior is accelerating and aggravating global warming. Whether global warming in whole or in part is the result of our own pollution isn’t the point. The point is that our world and our climate is changing and it's important to think about how that will motivate our behaviors differently.

As the investigation proceeds there is speculation that many condos along the coast in Florida built during the same period of explosive growth might have similar risks. Today, in the news, the repairs recommended in the 2018 analysis would mean an assessment to condo owners of $15M. This assessment was never collected and work was not done. Salt water infiltrating the foundation and pool area was attributed to higher tides than what a 1980s planner could have foreseen. Science tells us this is related to global warming.

In San Francisco, we have escaped the current heat wave, but we are certainly in the middle of a very severe drought. The Pacific Northwest is being brutalized by the heat, setting records each day. The economic impact and threat to life is happening as energy use increases and resident’s lives are under threat as well as roads buckling. Working at home might not be so attractive as offices have air conditioning.

Housing

Talk about bubbles, home prices increased, setting a record in April at a growth rate that hadn’t been reached since 30 years ago. Many first time home buyers are already priced out of the market as well as buy-up homebuyers, though with proper planning it is still possible to peg your shopping price point with enough room to make your offer competitive. Proceed cautiously as this increase is unsustainable.

The saying goes with buying your first home to “be prepared to fall in love with a home more than once,” alluding especially to competitive markets that you may end up making several offers, “falling in love” repeatedly before the “one” comes along. It’s true with more than just homebuying. It’s true in our pursuit to find a life partner, a dream job, defining happiness for ourselves, etc.

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Infrastructure Framework and Housing Prices