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National Association of Home Builders Chief Economist Robert Dietz recently provided this housing industry overview.

For the first time since the early 1980s, the United States economy is experiencing a period of elevated inflation. Because of supply-chain issues attributable to the pandemic and a significant rise in government spending, the consumer price index (CPI) measure of consumer inflation recorded a 7% year-over-year gain in December 2021—the highest in nearly 40 years.

In contrast, during the 2010s, the CPI averaged an annual growth rate of just 1.8%. The Federal Reserve, having retired the call that these inflationary pressures would be “transitory,” is now clearly signaling tighter monetary policy ahead.

The NAHB forecast sees the Fed raising the federal funds rate three times in 2022 and accelerating the pace of the taper of asset-backed security purchases. These moves will continue to cause interest rates to rise over the course of 2022.

The 10-year Treasury rate already rose from 1.4% at the start of December 2021 to higher than 1.7% during the second week of January, and the average 30-year fixed-rate mortgage is expected to increase to 4% near the end of the year. Combined with ongoing home price appreciation, higher rates will place additional pressure on housing affordability.

Clearly, these increases highlight the importance of taming building material costs, including lumber prices that are rising yet again and have expanded beyond $1,100 per thousand board feet. New NAHB analysis finds that a key cause behind this price growth is insufficient production. For example, during the third quarter of 2021, domestic sawmill output was 1.3% lower than the third quarter of 2020.

Additional signs of inflation include a tighter labor market and growing wages. According to Bureau of Labor Statistics estimates, job growth in December 2021 disappointed: The economy added only 199,000 jobs. Although the unemployment rate fell back to 3.9%, there is some evidence that labor market data are not fully accounting for the growing gig economy.

Nonetheless, reports of ongoing labor shortages throughout the economy present challenges for businesses. For the construction sector, there are now 345,000 open positions needing to be filled, compared to 261,000 a year ago. Wages in the residential construction sector are up 8% year over year, and without productivity gains, this level of wage growth represents an additional inflation risk in the housing sector.

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The benefits of smart home technology discussed at Realtors® Expo.

Smart homes and smart connected technology was discussed and thoroughly explained at the National Association of Realtors® 2021 REALTORS® Conference & Expo in San Diego, California.

The session—led by Craig Grant, CEO of The Real Estate Technology Institute & RETI.us and Brandon Doyle, a Realtor® from Maple Grove, Minnesota—offered a wealth of insight into how beneficial smart homes are to their businesses.

“A Realtor® doesn’t have to invest a lot of money into making a house a smart home,” said Grant. “Just having a few devices in specific categories, such as certain lighting, security cameras, or appliances, qualifies a home to be a smart home.”

If a property has a reliable internet connection and “smart” items in at least three categories, it is considered a smart home. Realtors® can then market the home as such, making it a more attractive commodity for both buyers and sellers.

“These homes were once only for the ultra rich, but we’ve gone from only super-wealthy people like Bill Gates having these products to every home now having at least one or two smart items,” said Doyle, who is a best-selling author, and host of the YouTube channel, Home Tech Decisions.

“Amazon basically lets you have a lot of these for free because they know it’s like a gateway drug and they’ll get you to buy other devices,” he joked.

Both Grant and Doyle noted that 33% of homes already meet the requirements to be called a smart home and that number is expected to climb to 54% by 2023. Currently, 26% of baby boomers have smart home technology within their residences, 49% of Generation Xers, and 77% of millennials, according to their presentation.

The popularity of smart home products, like lighting systems, carbon monoxide detectors and digital thermostats, have grown in popularity in part because they are now being built with ease of use in mind. So, complexities and difficulties to access products like a smart refrigerator for example, have largely been eliminated.

“Smart home technology can now be used by seniors and those with disabilities to assist them in day-to-day activities,” said Grant.

The wish to age in place is a popular concept among buyers and sellers. Grant noted that Realtors® can educate older buyers or their family members regarding how smart products can help make life easier for the elderly. Given the item, smart home devices can help users remember to eat or take medications, allow family or caregivers to interact remotely or receive notifications in case of a fall or injury, and even offer voice-activated assistance with curtains or shades, or offer visual assistance for the blind or hearing impaired.

While smart home technologies and advancements provide a number of conveniences, Grant stressed there are concerns and risks to these luxuries.

“Some of these come with a default password and if that password isn’t changed, you open yourself to a hacker having access,” he cautioned. “In other cases, some smart devices are always listening or recording.”

Grant says users should go to the devices’ settings and disable these features in order to safeguard privacy.

Both speakers expressed that Realtors® have an obligation to know the rules and requirements in regard to selling a smart home. They added that Realtors® should explain all hazards and possibilities to clients—whether they are buyers or sellers—such as violating privacy laws or failing to disclose whether or not a product is included after a home sale.

On the whole, Grant and Doyle said smart home technologies should impart security, convenience, energy efficiency, a cost savings and a home’s comfort, and stressed that while there are some risks, the positives overwhelmingly outweigh the negatives.

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