Home Construction: Running to Stand Still

New home construction rose over 23 percent in Virginia between 2012 and 2013, according to building permit data collected by the Census Bureau and the Weldon Cooper Center. In suburban counties, the number of new homes built during the past year increased much more than in urban localities, but construction levels still remain a fraction of those seen during the early 2000s housing boom.

 Homes Built Annually in the Mid Atlantic

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Much Ado About Canada

According to a recent study, the average Canadian household’s net worth (total assets minus total liabilities) is, for the first time in recent history, higher than the average American household’s net worth; more than $40,000 higher, in fact. Is this a triumph of “hardheaded Canadian socialism”? Is it Barack Obama’s fault? (or George Bush’s, depending on the internet commenter’s political persuasion)? Does this even mean anything? Let’s consider a few things before jumping to conclusions…

Portfolio Composition Matters

Talking about net worth is inherently tricky because net worth alone does not tell us much about the relative financial position of a household. We also want to know about the underlying portfolio composition: is their wealth easy to access (liquid) or is it tied up in housing? What type of debts do they have? Take, for example, two households with the same net worth of $25,000. Household A owns a home valued at $100,000 and owes a mortgage of $75,000 on that home. Household B has $5,000 in a checking account; $15,000 in a retirement account; and owes $5,000 on a car that they could sell for $10,000. While A and B technically have the same net worth, A’s net worth is  more vulnerable to external market changes as it is entirely tied to the housing market, and they are less able than household B to tap into wealth in the face of unexpected financial emergencies such as job loss, medical crisis, or home repairs.

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