Rising Costs Put Pressure on Builders

So far, the month of April has brought about increasing costs for building materials. Home builders have already been facing a shortage of developed lots and skilled laborers, which  has caused builders' confidence to register lower that usual in the market for newly built, single-family homes. The Housing Market Index has suffered a two-point drop to 42.

This index measures the perceptions of builders regarding home sales and sales expectations for the next six months. They rate it as either "good," "fair," or "poor." Builders also rate the traffic of potential buyers as "high to very high," "average," or "low to very low." As long as the tallied scores for each of these categories are calculated anywhere above 50, more builders view conditions as good than poor.

"Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values," said Rick Judson, NAHB chairman and a home builder from Charlotte, N.C. "While sales conditions are generally improving, these challenges are holding back new building and job creation."

Currently, the score of 42 is not very promising, but there continues to be a high demand for new homes, as well as skilled laborers to build them. If the high cost of materials could go down soon, builders' confidence would likely rise. Perhaps May will be a better month!

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Impact of Labor Shortages on Housing Recovery

Lately, home prices have been increasing. Part of the reason for this is that there is a shortage of housing laborers. In a recent survey by the National Association of Home Builders, more than half of the builders reported that these labor shortages have lead to paying higher wages or bids in order to secure a project, thus the increase in home prices. This lack of laborers in all facets of residential construction has been impeding the housing and economic recovery.

"The survey of our members shows that since June of 2012, residential construction firms are reporting an increasing number of shortages in all aspects of the industry - from carpenters, excavators, framers, roofers and plumbers, to bricklayers, HVAC, building maintenance managers and weatherization workers. The same holds true for subcontractors," said NAHB Chief Economist David Crowe.

This lack of laborers can be attributed to the fact that many skilled residential construction workers were forced to find other types of jobs during the recession and they are no longer available now.  As a result, many current homes are experiencing delays in completion. Some projects are even being turned down and cancelled altogether because there aren't enough workers to complete the task.

"What used to be high-paying, skilled jobs vanished as builders across the nation went out of business or were forced to let workers go," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C.

Other problems consist of a lack of buildable lots, and an increase in the cost for materials and labor.  To help meet the growing demand for skilled labor , the Home Builders Institute (HBI) along with NAHB, are working to provide career training and job placement opportunities in the building industry. HBI offers many pre-apprenticeship training programs in a variety of skilled trades that can hopefully help meet the needs of communities across the nation. They have a success rate of 80% of their students being placed into jobs after graduation.

"We are ramping up our efforts to train diverse populations and place them in jobs to meet the growing demand of the building sector," said HBI President and CEO John Courson.

"Even in a period of relatively high unemployment, we still need to complement our job training efforts by bringing in foreign workers to meet the needs of home builders and home buyers," added Judson.

All of this training is very important for the economy. Currently, the labor shortages are slowing down the housing recovery and hurting job and economic growth overall. However, as the economy heals and grows, the demand for housing will continue to grow. This is will also be good for the mortgage industry as more and more people will need to fund their new homes.

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Housing Starts take a dip in January

According to HUD and the Census Bureau, housing starts took a nationwide dip in January with a decline of 8.5% which is 890,000 units. This was based on a seasonally adjusted annual rate.

Specifically, single-family housing starts were little changed, registering a 0.8% gain to 613,000 units.  The pace of these starts have been improving; this was the strongest production pace for single-family housing since July 2008.

However, multi-family housing starts were the biggest contributor to the nationwide decline. These tend to have significant month-to-month volatility. In January, they declined 24.1% to a mere 277,000 units.

Bad news for housing starts doesn't necessarily mean bad news in the rest of the market.

Issuance of permits for new-home construction has increased by 1.8% to 925,000 units which is the quickest pace since mid-2008.

"Steady demand for new homes is prompting builders to put more construction crews back to work in order to replenish thin supplies of completed product," said Rick Judson, chairman of the National Association of Home Builders (NAHB) and a home builder from Charlotte, N.C. "We expect this progress to continue through the spring buying season and beyond, with credit availability and poor appraisals being the primary limiting factors."

Permit issuance can be an indicator of future building activity. Single-family permits rose 1.9% to a seasonally adjusted annual pace of 584,000 units. The multi-family permits increased by 1.5% which is a 341,000 unit pace. Both of these are at their strongest paces since 2008.

"Today's report is quite positive in that it shows continued upward movement in single-family housing production and permitting activity for both single- and multi-family units," noted NAHB Chief Economist David Crowe. "Meanwhile, the decline in multifamily starts reflects an adjustment from an unsustainably large gain in December, and is consistent with the up-and-down swings that are often associated with that sector."

As always, the housing market has its ups and downs, but overall, the economy is recovering. As these reports continue to come out, we receive more and more data that points to overall improvement!

If you are ready to purchase a home, call us at 888-883-5252. We can answer all your questions.

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80 Metros Show Economic Improvement

According to the National Association of Home Builders and the First American Improving Markets Index (IMI) for August, there have been vast improvements in the housing markets of 80 metropolitan areas. Statistics are taken in these cities across 32 states plus the District of Columbia. The index identifies metropolitan areas that improved in areas such as housing permits, employment, and housing prices for at least six consecutive months. 75 of the metros remained in their respective places on the list from the previous report. There were five new ones that were added and nine that fell from the list because of changes in housing prices. Keep in mind that all of these different metro areas have different characteristics in terms of the condition of their economy and their employment situations. The one thing that most of the markets have in common, though, is the newly enforced strict lending practices that is slightly hindering both builders and buyers. The IMI tracks the markets by measuring employment growth, house price appreciation and housing permit growth. They use the latest available data and measure it on three different occasions to get an accurate overview. In order for a metropolitan area to show improvement, all three of those measurements must improve statistically for at least six months. The index has confirmed that metros are growing increasingly stronger and the economy is stabilizing.

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NAHB Housing Index Reaches 4 1/2 Year High

The National Association of Home Builders (NAHB) Housing Market Index (HMI) rises in January to a reading of 25. This is up 4 points from the previous December reading of 21 and marks the 4th consecutive month of increases. The last time the HMI had a reading of 25 or more was in June of 2007. Though moving in an encouraging direction, readings over 50 are considered positive, a level last reached in April of 2006. 

The NAHB Housing Market Index is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next 6 months as well as the traffic of prospective buyers of new homes.

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