A housing reality check

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One word, three syllables, something you are probably sick and tired of hearing about.

From American Public Media, this is Marketplace.

In Los Angeles, I'm Kai Rizdahl. It is Tuesday, today, the 25th of February.
Good as always to have you along, everybody. Had you been thinking somehow that as we sit here five years after the onset of the pandemic, with supply chains mostly back to normal, consumer demand in line with what it was in the before times, and the Federal Reserve having cranked up interest rates.
If you had been thinking that maybe you could be done with hearing stories about inflation, well, then this program today maybe isn't for you. Because, man, let me explain.
We got the February Consumer Confidence Index from the conference board today, and it wasn't great. The Consumer Expectations Index, what we all think about income and business conditions in the job market, dropped significantly.
Also, and to the point of what I was saying, consumers also believe inflation is going to get worse in the next 12 months. And those inflation expectations can be a dangerous thing, as Marketplace's Sabree Beneshaw reports to get us going.

Consumers are starting to get a little freaked out by all the talk about tariffs. Tariffs on Mexico, tariffs on Canada, reciprocal tariffs across the board.
Alan Detmeister is an economist at UBS. There were even tariffs floated on, you know, Panama and Denmark and Greenland.
And all this is a concern because it could get into the inflation psychology. And people are hearing this and are like, oh, tariffs are coming.
They're going to push up inflation a lot. In surveys, Republicans are less or not concerned about inflation.
Democrats much more concerned. But the numbers aren't totally partisan.
Independents are also worried. You can see it in the market as well.
Omar Sharif is president of Inflation Insights. He says certain treasury bonds have started to price in higher inflation.
And expectations can be dangerous, at least in theory, because they can become a self-fulfilling prophecy. If you think prices are going to rise, it might drive you to sort of make those purchases today instead of waiting for those higher prices, which causes a jump in demand, which itself can lead to higher prices.
That does not appear to be happening, Sharif says, and it's debatable whether this theory is reality right now. I would be a lot more worried about inflation expectations rising on the back of high actual inflation.
David Miracle is chief U.S. economist at Goldman Sachs.
He says the most dangerous kinds of inflation expectations are the ones created by living with actual inflation. If inflation is high enough for long enough and it becomes part of your daily experience, that you get used to it and it becomes self-perpetuating.
The tariffs haven't hit prices for most goods yet, so Merkel is less worried about psychology for now. But our brains may be soaking in tariff inflation talk for a while.
Again, Omer Sharif. Quite honestly, this could very much linger into the fall because you will get these constant updates on what's happening with these investigations and individual nations.
And of course, psychology aside, the potential for tariffs to raise actual prices is very real. In New York, I'm Sabri Beneshore for Marketplace.
Real indeed. Wall Street today, the math kind of goes like this.
A lot of money moved out of stocks, so equity indexes generally went down. A lot of that money went into bonds, which means bond prices went up.
And that means bond yields went which way now?

Anyone? Anyone?

Down.

We'll have the details when we do the numbers. We're going to do a little homes segment here, a little real estate.
First, the all-important update that we got from the benchmark Case-Shiller Home Price Index, which was out this morning, nationally up 3.9% in December. A lot, yes, but if I might paraphrase Alan Greenspan, there is some regional froth in the American real estate market.
Marketplace's Samantha Fields has that one. This time three years ago, home prices had risen almost 19 percent year over year.
Compared to that, Sam Chandon at NYU Stern School of Business says 3.9 percent is more manageable. But even these relatively small increases are on the top of generationally high levels of prices.
In some sunbelt markets that saw big spikes early in the pandemic, there's been a lot of new construction. And Chandon says that has helped balance supply and demand and slow price growth.
In addition, there's anecdotal evidence that some homebuyers in Florida and elsewhere may be thinking also about the impact of climate change. Not necessarily worrying about the next major hurricane, he says, but about rising insurance costs.
Part of the competitive advantage for

some of these markets historically has been that they're much more affordable than the Northeast,

than California. But as home prices and insurance costs have gone up in Florida,

he says some of that affordability advantage has disappeared. Brian Luke at S&P Dow Jones says

home prices are now rising fastest in the Northeast, a switch from early in the pandemic.

Thank you. advantage has disappeared.
Brian Luke at S&P Dow Jones says home prices are now rising fastest in the Northeast, a switch from early in the pandemic. Less volatility in those markets, more of a slow plotting upward.
The Northeast has long been expensive with consistently high demand. Allie Wolf at Zonda says one reason prices keep rising there is there's not much new inventory.
There's not much developable land. It's expensive.
There's a lot of regulation. And so you're not finding that home builders can come into the market, increase supply and help with home price appreciation.
And nationally, Sam Chandon at NYU says there are other structural factors keeping prices high. The cost of construction labor, of softwood lumber, the potential for disputes with our trading partners to inflate the cost of some of the materials that we use in home building.
These are all features of the housing market that he says aren't going away anytime soon. I'm Samantha Fields for Marketplace.
So let's say you've been able to buy a house and you want to do some work on it. Where are you going to go? One of those big home supply stores, probably.
Home Depot, for our purposes today, which last quarter posted gains in same-store sales for the first time in two years, so we learned in their earnings report this morning. HD, as the stock ticker has it, is a bellwether for the home renovation and construction business, which, like the housing market, has been chilled by inflation and interest rates.
That upswing in sales I mentioned, well, they did beat expectations. But the outlook is not all positive, as Marketplace's Megan McCarty Carino reports.
The renovation market has been on a roller coaster since the pandemic, from stay-at-home spending sprees to high interest rate retrenchment. Home Depot sales grew by about 1% last quarter, which seems to show things are normalizing, says Greg Portel, a retail consultant with Carney.
I think it is important not to confuse normalization with all of a sudden an uptick. Normalization just allows consumers to have some certainty.
Nick Spector, the owner of Allaire Homes in Houston, has noticed a change in his customers as the shock of inflation and higher interest rates has receded. We're seeing a lot of people interested in moving forward with projects that they've been thinking about for months or even years in a lot of cases.
Generally, there's been an uptick in smaller-scale renovations. Spector says many homeowners decided to stay put instead of looking for a new house.
High prices and mortgage rates have slowed down home sales nationwide, which puts a dent in large-scale remodels. When somebody moves into a new home, there's typically something that they want to do, whether it's we need to blow out these walls and do some major changes.
A slow housing market will likely keep growth in home renovations low, says Michael Baker, managing director at D.A. Davidson.
I don't think we're out of the woods yet as it relates to the housing market, but it doesn't seem to be getting worse. And in fact, bouncing along the bottom and maybe even getting a little bit better.
He says even if the Fed doesn't cut interest rates as quickly as once hoped, rates are unlikely to go up anytime soon. Though the new administration has introduced some uncertainty, says Carney's Greg Portell.
The challenge for consumers is going to be how do you interpret the headlines on things like tariffs,

on things like trade,

on things like immigration?

If costs for construction labor

and raw materials are unpredictable,

normalization gets a whole lot harder.

I'm Megan McCarty Carino for Marketplace. You know, when you go to an actual bookstore, this happens on Amazon, too.
Those quotes on the back cover, or if you scroll down on a book page on Amazon, those blurbs that say something nice about the pages within, quotes like, revelatory or I couldn't put it down, attributed to various celebrities and big names. Well, that whole book blurb business is getting some attention.
Constance Grady wrote about it for Vox the other day. Constance, welcome to the program.
Thanks so much for having me. For those unfamiliar with the blurb economy, and first of all, there is a blurb economy, right? How does it work? Where do these things come from? Yeah, absolutely.
So blurbs are those little testimonials that you see on a book's cover, usually from another author saying, you know, luminous masterpiece, the best I've read in a while.

Those little testimonials are at the middle of a big controversy right now. Well, discuss what kind of controversy.
Yeah. So the way blurbs work is that some combination of an author, an editor, a publicist will reach out while the book is getting copyed and kind of making its way down the production line to try to get some blurbs from famous authors, make it have a big splashy entree when it comes out.
And what that means is if you're a successful author, you get tons and tons of requests for blurbs every single day. Most authors want to pay it forward.
They've

received good blurbs when they were starting out. They want to help out.
But this is an enormous amount of blurbs that you're being asked to write. And on the end of the author who's trying to get their book published, it's a lot of famous people to try to reach out to and most likely hear a no from.
So there's been a bunch of authors and publishers lately saying, hey, this is hugely time consuming. It's an incredibly emotional process.
What would happen if we stopped doing all this? Yeah, well, wait. So yes, what would happen? I don't know that there's a single...
That's probably not true. There are probably readers who flip...
I personally, as a reader, I look at the back cover of a book. I don't read the blurbs.
I look to see who did the blurbing and I go, huh, interesting. But it has no effect on whether or not I buy the book.
So do you know whether, sorry, I'm a little agitated about this. Do you know whether readers actually use these things? So I have never seen any studies showing that readers care about these things or anything like that.
I know that before I became a book critic and started having to read professionally, I found blurbs a little annoying.

I was kind of like, I just want to know what the book's about.

Why are you using up this real estate?

I think blurbs are really handy for people like me now who have to read professionally because there are so many books coming out every year that you simply just don't have time to carefully evaluate each book before you decide how much attention you're going to give

it. We are basically the end audience of these blurbs.
They exist for us to figure out what to

do. So authors are annoyed by it.
Authors who write the books. Authors who are asked to be

blurbing are annoyed by it. Publishers are annoyed by it.
But you need them. Is that where we are? I mean, I would make do without them.
Right, right, right. As a reader, I would certainly much rather that authors spend their time writing good books than having to deal with this whole sort of emotional labyrinth of reaching out and making requests and saying no and read and reading books that you probably aren't that interested in and scraping together a few lines like that's not really serving anyone except me, but I will live without it.
Fair enough. Yeah, you'll pay that price.
There's no requirement that people actually have read the book, right? When they blurb. Basically, no, it's kind of an honor system situation.
And a lot of authors will admit, I don't read everything I blurb. I maybe read, you know, the first and last chapter and kind of hope for the best from there.
Totally. So what happens, do you think? The blurbs eventually go the way of the dodo or what? Well, the main thing that blurbs do for the authors who do want them to stick around is blurbs can be kind of an equalizer.
The way publishing is set up right now, most of the resources in marketing and publicity end up getting saved for just a few books who publishers hope will do really, really well. And the rest of the books kind of have to scrounge for what's left.
And blurbs are one of the things that if you're an author, it's one of those things that you can kind of use like it's a magic shield and be like,

I can't control anything else about my book's debut, but I can control this.

And so I think for that reason, a lot of authors are going to want to keep trying

to get blurbs and hope that they will make a difference.

Fair enough. Constance Grady at Vox.
Constance, thanks so much for your time.

I appreciate it.

Thank you.

We'll see you next time. coming up cut down a tree inoculate it and then you could grow mushrooms in your backyard boom you're in business but first let's do the numbers down dust rolls up 159 today four tenths 43,621.
The Nasdaq went the other way, down 260 points, 1 and a third percent, 19,026 there. The S&P 500 off 28 points, a half percent, 59 and 55.
Zoom plunged 8.5 percent today after projecting slower than expected revenue growth. Microsoft down 1 and a half percent.
Home Depot surged 2.8%. Today, Lowe's gained about 2.2%.

Fabric and Craft supply chain Joanne's said it's going to close all of its 800-odd stores.

It couldn't find a buyer to keep them open.

The company had about 19,000 employees, most of them part-time workers.

Went to fall for Chapter 11 protection back in January.

Bond prices, as I mentioned, up the yield on the 10-year T-note, down 4.30%. You're listening to Marketplace.
This Marketplace podcast is supported by the University of Illinois' Geese College of Business. Earn a world-class MBA degree completely online at your own pace.
Through our engaging online MBA program, you learn from esteemed faculty and network with classmates on a global scale without having to put your career on hold. Take your career to the next level by applying what you learn in real time.
Get started at onlinemba.illinoisDeck.com for more information. Depending on certain loan attributes, your business loan may be issued by OnDeck or Celtic Bank.
OnDeck does not lend in North Dakota. All loans and amounts subject to lender approval.
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I'm Kai Rizdahl. With the caveat that actual details of the tariffs that President Trump has been promising are scant, One thing he did roll out and then delayed earlier this month was a 10 percent tax on energy coming from Canada.
That is obviously going to make energy more expensive for some, including people throughout New England and New York, because some of their gas, oil and electricity does come from north of the border. And on the electricity front in particular, it's interesting to note that utilities and public officials have spent years working to bring more power down from north, as Marketplace's Henry App reports.
In the dimly lit control room of Vermont Electric Co-op in the town of Johnson, six monitors display a diagram of the small utility's system. Blue, orange, and white lines crisscross the display's black background.
They represent the power lines that deliver electricity to 40,000 customers. Manager Isaac Gillen points to one of the monitors.
So this has pretty much all the high-level switches and breakers and stuff that we can control. You can see at the top, we have a Hydro-Quebec tie there.
Meaning a power connection to the grid of Hydro-Quebec,

the utility on the other side of the Canadian border.

Gillen's pointing to a connection in the town of Highgate, Vermont,

which sends power to the whole New England grid.

But there are others on the U.S. side of the border,

in Derby, Norton, and Canaan.

Back in the day when we actually used to have to go out and read meters physically,

if you're up in that Derby area,

there's times where if you're not paying attention,

you just, you could slip right into Canada.

Another display shows the total amount of power

Vermont Electric Co-op is getting from Canada,

says CEO Rebecca Town.

Right now, it's almost 19 megawatts

coming through, flowing through our ties

to Hydro-Quebec right now.

That was about 40% of the utility's total needs at that moment. Pretty average, Towne says.
According to Hydro-Quebec, it supplied 14 percent of New England's electricity in a particularly cold January. Back in the 1980s, utilities in the region built two major transmission lines to bring that power down from Canada.
Mark Montalvo is CEO of Daymark Energy Advisors, a consultant group based in Worcester, Massachusetts. You know, we were coming out of an energy crisis, right? There was a lot of concern about diversification of fuel supply.
Quebec had a very rich water resource. Meaning lots of hydroelectric dams in the north of the province, which for years have produced surplus cheap power.
For the last decade or so, New England and New York have been trying to get more of it. After many delays, two new connections to the Hydro-Quebec grid are set to be completed by early next year, says the utility's Serge Abergel.
Each of them will bring enough energy to supply a million homes, one for essentially New England and Massachusetts, and the other one for New York City. The lines will also be able to send power north, says Pierre-Olivier Pino, a professor at the business school HEC Montreal.
So as New England and New York add more solar and wind, which can also produce surplus power at times. Quebec can basically import electricity, keep the water in the dams, and then that saved water can be used later on.
To generate power when solar and wind aren't. In other words, Quebec can basically store power behind its dams for whenever New England needs it.
The Northeast states shouldn't see Quebec as a net exporter of electricity, but as a big battery to help balance their own market. And that big battery is already built.
Tariffs could make fossil fuels in the region more expensive too. Right now, fuel oil for homes, gasoline and aviation fuel refined in New Brunswick, and some natural gas all cross the border.
Vermont Gas takes nearly all of its physical gas supply from a connection at the Canadian border, at Phillipsburg, Quebec. Neil Lunderville is head of Vermont Gas Systems, which serves 56,000 customers in the northern part of the state, including, full disclosure, me.
He says there's no doubt about who would foot the bill for natural gas tariffs.

We pass the cost of gas directly to our customers.

A 10% tariff on Canadian energy will mean a direct rate impact for our customers.

In the meantime, he's been looking at ways to mitigate that impact,

but he's not particularly hopeful.

In Burlington, Vermont, I'm Henry App just telling us. Also not entirely transparent is what's happening with various federal programs, most specifically the funding of those programs.
Last we heard, which was last week, the Department of Agriculture is still planning to release about $20 million in grants, money that'll go to individual farmers. That is out of a total, by the way, of nearly $20 billion over 10 years that was in the Inflation Reduction Act.
And as you might imagine, given all of that, farmers are a bit anxious. Here's today's installment of our series, My Economy.

My name is Howard Burke.

I'm the president and co-founder of our amazing mushroom company, L.A.J. Mushrooms.

We're in L.A.J., Georgia, where we grow shiitake oyster, golden oysters, lion's mane,

and we're growing about 5,000 plus pounds a week.

It wasn't until college that I really took it seriously in mushrooms. I was eating healthy during that time and I started to do mushroom logs.
And that's where you would cut down a tree, inoculate it, and then you could grow mushrooms in your backyard. I would start with about five to ten of them and then then over the years, I ended up with thousands of them.

And then I found out that there was actually an audience for these. Around 2017, 2018, my new business partners found me, and we created Elegy Mushrooms.
And that's kind of how we just started to grind and do it. Pricing, not knowing the business, that has been a challenge.
Each place is different in value. So there's a retail price, there's a wholesale price, and they're all over the place.
And one of the things that was a challenge was like, oh, you have to add in a delivery fee. Or there's a lumper fee, meaning that if you deliver to XYZ Warehouse, they're going to charge you $50 to $100 to unload it.
So at the beginning on some of our accounts, we were losing money because I didn't know that you had to add into those fees. This year, we just hit profitability.
We just got it over the line. But now, since we have to build three more greenhouses, it will go back down to that valley.
We're just trying to find funding for it. Currently, we are working with a grant writer for the Value Add Producer Grant, which just got released.
And if that's totally off the table, that means we have to go a whole other route. It means that we have to put up more equity, could be more debt.
There are more challenges with, I'd say overall, more risk if we don't have those USDA funds and loans. We're just going to move forward with it and know that we're going to make it happen.
up here in L.A.J., we're pretty rural and we wanted to make sure that the employees that lived here, we could give them a living, healthy wage that they could stay here with their families. It's very rewarding.
Howard Burke, president and co-founder of L J. Mushrooms in Ella J., Georgia.

No matter where you are, no matter what you do, we cannot do this series without you.

So let us know what's going on, would you?

Marketplace.org apologize in advance. tariffs.
We direct your attention now to Section 232 of the Trade Expansion Act of 1962, which, among other things, gives the president virtually unfettered authority to impose tariffs on the grounds of national security. The many times mentioned steel and aluminum tariffs are Section 232 tariffs.
And the president signed an order today directing the Commerce Department to investigate whether copper tariffs might be warranted. 25 percent steel, 25 percent aluminum, supposed to be in March, as you know.
No indication of when or how big tariffs might be on copper. Our digital and on-demand team includes Carrie Barber, Jordan Mangy, Dylan Mietanen, Janet Nguyen,

Olga Oxman, Ellen Rolfes,

Virginia K. Smith, and Tony McFarland.
Our digital and on-demand team includes Carrie Barber, Jordan Mangy,

Phil Miettinen, Janet Wynn,

Olga Oxman, Ellen Rolfes,

Virginia K. Smith, and Tony Wagner.

Francesca Levy is the executive director of digital and on-demand.

And I'm Kyle Rizdahl.

We will see you tomorrow, everybody. This is APM.
OnDeck small business loans can help keep you afloat. With lines of credit up to $100,000 and term loans up to $250,000,

OnDeck lets you choose the loan that's right for your business.

As a top-rated online small business lender,

OnDeck's team of loan advisors can help you find the right business loan to fit your needs.

Visit OnDeck.com for more information.

Depending on certain loan attributes, your business loan may be issued by OnDeck or Celtic Bank.

OnDeck does not lend in North Dakota.

All loans and amounts subject to lender approval.