Are Building Material Prices Still Up?

The overall building material prices are down from summer prices except for the prices of ready-mix concrete.  In fact, the price of ready-mix concrete is rapidly rising.  The largest decline seen was in softwood lumber and steel mill prices.  Gypsum prices are still high over 20% from the same time last year.

Prices of building materials saw a 0.3% decrease in September according to the Producer Price Index (PPI). There was also a decline in the PPI for goods input to residential construction (including energy) for the third consecutive month in September.

Gypsum, which is used in drywall, is also an ingredient used in ready-mix concrete.  High demand for cement combined with lower imports of aggregate due to a large quarry shutdown in Mexico have spread thin the supply of domestically produced ready-mix concrete as well as gypsum.   Even though single-family house building is has slowed a little, concrete prices are still rising because it is used for many other applications outside of residential construction. Ready-mix saw a PPI increase of 1.4% this fall which marks the sixth consecutive increase.  This is the largest year-to-date increase in the index’s 34-year history.

Softwood lumber’s  PPI declined 2.9% this fall but the prices are still 14.5% higher than a year ago.  Steel Mill products saw a decrease of 6.7% this fall and have dropped 16.1% over the past four months.  In fact, the index is the lowest it has been since June 2021 which is still double the price that the steel mill was before COVID-19.

Home prices have decreased since last June 2021 2.3% which was reported to be the largest three-month drop since April 2020.  The small decline has happened during high prices on materials though.  In the South, there is a 2.6% increase, a 0.7% decrease in the Northeast, a 0.3% increase in the West and prices stayed the same in the Midwest.

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Will Home Prices Still Increase in 2022?

Home appreciation has been busy this year. According to many leaders in the industry, home prices have been skyrocketing all year and are still on the rise. Data shows all over the market that the percentages are still rising year-over-year.

The latest percentages of the year-over-year increase in home price appreciation are all-around 18%. The House Price Index (HPI) that is part of the Federal Housing Finance Agency (FHFA) reported 18.8%, the S. National Home Price Index from S&P Case-Shiller 18.6% and the Home Price Insights Report from CoreLogic is 18%.

The increases are found across the board at every price point. CoreLogic's HPI sees almost a 19% increase year-over-year in all price points. The low price point saw a 22.1% increase, the low-to-middle saw a 20% increase, the middle-to-moderate saw a 19.9% increase and the high price point saw a 19.1% increase.

The FHFA reported an increase across the country. The highest increase year-over-year in the second quarter in 2021 was in the mountain region is 22.9% and the lowest was seen in West North Central with a 14.9% increase. The remainder includes New England at 20.4%, Pacific at 20.1%, South Atlantic at 17.3%, Middle Atlantic at 17.1%, East South Central at 16.4%, East North Central at 15.7%, West South Central at 15% and West North Central at 14.9%. Overall the United States saw an average of a 17.4% increase.

Prices in 2022 should also increase. The future still sees a low housing inventory with high demands. Home appreciation will still be going on in 2022 but more moderate.

“Given the widespread demand and considering the number of standalone homes built during the past decade, the single-family market is estimated to be undersupplied by 4.35 million units by 2022,” reported CoreLogic.

If you are in the market for a home, contact your local Realtor who can help you along the way. The next year 2022 will hopefully see a great boost in the housing market.

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Housing's Growth According to NAHB's Eye on the Economy

 

June 2020 saw a small decline in single-family new home sales to around 6.6% according to the National Association of Home Builders Eye on the Economy. The annualized rate fell to 676,000. Although the past several months have seen a small monthly decline, the new home sale is still 13.5% higher on a year-to-year basis from 2020.

The small decline according to some industry professionals is from the lack of inventory and the higher construction costs while other industry leaders believe it is caused due to the higher new home prices. New home prices have risen 10% since January 2020.

The new home inventory is down by 44% which is a little over 34,000 homes over the last year. Supply factors including the material, labor and lots are holding builders back. The survey also indicated that today's buyers are not happy with housing affordability. In fact, the share of buyers who can afford less than half the homes available for sale worsened from 63% at the end of 2020 to 71% by midyear.

Although the market is still going strong, those who did not purchase during the second quarter of 2021 was due to pricing. The higher construction cost and development costs have hindered housing prices. The GDP growth for the second quarter was at a low of 6.5%. The good news is that NAHB is predicting an overall growth rate of just under 7% for the whole year. This will be the best rate seen since 1984.

This is still a good time to buy as mortgage rates are still reasonable. If you are in the market for a home, contact your local Realtor.

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Another Gain In Single Family and Multifamily Permits

 

The U.S. housing market is still going strong. According to the National Association of Home Builders, the total number of single-family permits issued year-to-date nationwide reached 276,110 in March, up 25.3% over the March 2020 level of 220,416 and total number of multifamily permits issued year-to-date nationwide reached 131,227 in March, up 20.4% over the March 2020 level of 108,977.

Single-family permits were high in all four regions. The Midwest reported a 40% increase, next the Northeast with a 27.3% increase, followed by the West with a 23.9% increase and the South saw a 23.1% increase. There was also an increase in 49 states and the District of Columbia.

The highest growth rate was 300% from 20 to 80 in the District of Columbia between March 2020 YTD and March 2021 YTD. The top 10 states on the list accounted for a total of 62.8% of the total single-family permits issued. The top 10 metropolitan areas with the highest number of single-family home permits were Dallas-Fort Worth-Arlington (13,094), Houston-The Woodlands-Sugarland (12,745) and Austin-Round Rock (6,189), and two were in Florida; Tampa-St. Petersburg-Clearwater (5,219) and Jacksonville (3,391).

All four regions also saw a gain in multifamily permits in March 2021. The South reported the highest at 22.1%, the Northeast 21.3%, the West 20.3% and the Midwest 13.5% increase. During the time between March 2020 YTD and March 2021 YTD 36 states saw an increase in multifamily permits.

The highest was seen in New Mexico with an increase of 1,267.7%. The top 10 metropolitan areas with the highest number of multifamily home permits were New York-Newark-Jersey City, NY-NJ-PA (9,222), Austin-Round Rock, TX (7,359), Los Angeles-Long Beach-Anaheim, CA (6,661), Dallas-Fort Worth-Arlington,TX (5.594), Seattle-Tacoma-Bellevue, WA (5,555), Washington-Arlington-Alexandria, DC-VA-MD-WV (5,183), Philadelphia-Camden-Wilmington, PA-NJ-DE-ME (3,881), Phoenix-Mesa-Scottsdale, AZ (3,095) and Nashville-Davidson-Murfreesboro-Franklin, TN (2,888).

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A Rise In Home Building In Rural Markets

The National Home Builders Association (NAHB) has seen a new housing trend with the COVID-19 pandemic. The latest quarterly NAHB Home Building Geography Index (HBGI) found that residential construction is growing faster in lower density markets.

“We expect the virus could affect future housing preferences for those currently living in the hardest-hit, high-density environments like central cities and that housing demand will continue to increase in medium- and low-density communities,” said NAHB Chairman Dean Mon.

“The first quarter HBGI data reveals that construction growth expanded over the last year more quickly in low population density areas than high-density regions,” said NAHB Chief Economist

Robert Dietz. “This trend will continue as households seek out single-family homes further from urban cores, particularly as telecommuting continues in greater numbers.”

The report reveals that proximity and affordability were two of the biggest catalyst in the shift. People are now second-guessing living in metropolitan areas after the public health crisis hit. During the COVID-19 pandemic, metro residents were more vulnerable because of the crowded living conditions, mass transit, insufficient health and public sector infrastructure. Builders are starting to look outside of metropolitan areas where the land is cheaper and there are more building opportunities.

“The HBGI data is consistent with the fact that housing costs are increasing fastest in large metro suburban counties and smaller metro areas with populations under 1 million where demand for housing is high but supply constraints are tight,” said NAHB Chief Economist Robert Dietz.

“Supply-side issues that are hurting affordability and raising costs for builders include excessive regulations, labor shortages, rising material costs and a dearth of buildable lots in mid- to high population centers.”

All national economic geographies in the country showed a 9.1% growth increase in the suburbs over a one-year moving average. In the education and health services sector (EHS), 4% made up the total single construction and made up close to twice the growth rate in the multifamily construction over the past year. The HBGI also found that the education and health services sector was the top quartile of counties and totaled 25.7% above the total employment sectors.

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Home Buying Still Supports the Current Local Economy

The country is still trying to get comfortable with the new norm. Life all around is ever-changing with the current pandemic. The real estate market is no different – agents, lenders and customers are connecting and transacting virtually. One thing that has remand constant in this uncertain day in age is purchasing a home.

The National Association of Realtors‘ current report stresses the full economic impact of home sales, “The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real

estate brokerage, mortgage lending and title insurance.”

To see how this works, we will breakdown the average economic impact of just one home sale in the United States. A home that sold for $84,724 will give the real estate industries $23,544 (27.8%), home purchase expenses $4,243 (5%), multiplier of house related expenditures $25,932 (15.1%) and new home construction $91,433 (53.3%).

As you can see when a home is purchased it makes a big impact on the economy. It is a win-win situation where you have a place to live, and you are initiating jobs and income for everyone involved in the transaction. In a nutshell, purchasing a home is making the home buyer an “economic driver.”

Even with the current times, there are many things you can do to keep your home search going. If you have decided to go ahead with your dream of owning a home you need to get pre-approved for a mortgage. Getting pre-approved not only helps you understand how much you can afford but also lets others know you are a serious buyer. Since there is a stay-at-home order, it is important to connect virtually with a Realtor or talk directly to a builder to build a new home or fully custom home. A Realtor is someone you can trust and knows the ever-changing dynamics in the current market. Builders have tons of resources including floorplan design, financing, pricing and selections recommendations, and all businesses involved in the closing of your new home.

Also, you can still do real estate research online.  Even before the pandemic, online searches for real estate were well over 90% with home buyers starting on the Internet to find a home to buy. Shop mortgage lenders and see if there are any down payment assistance programs that would work for you.

You do not have to put your dream of owning your own home on hold, you can view do most of the preliminary footwork for finding and making an offer on a home for sale online. Virtual tours and online sites can help you navigate the housing market, and Ron Lee Homes is also here to help with a toolbox of virtual services for your home buying or home building needs.  Contact Us Today at 985-626-7619 or email Info@RonLeeHomes.com.

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Private Residential Construction Spending Still on the Rise

Decreasing mortgage rates along with solid growth of spending on single-family construction and remodeling have kept the private residential construction up for the sixth consecutive month. According to the National Association of Home Builders, the Census Constructions Spending data reveal a 1.4% increase to a seasonally adjusted annual rate of $540.7 billion for total private residential construction spending this last December.

The National Association of Home Builders provides a monthly estimate of the total dollar value of construction work done called The Value of Construction Put in Place Survey (VIP). On the first day of each month data collection and estimation activities begin for the month. The data that is recorded includes the cost of labor and materials, cost of architectural and engineering work, overhead costs,

interest and taxes paid during construction, and contractor’s profits. The survey is based on construction work that is done each month on improvements to existing structures or new structures for private and public sectors.

The growth in spending on single-family construction and remodeling has been great for the housing industry. Single-family spending was up 2.7% in December 2019 at an annual pace of $289.3 billion. This was 5.2% higher compared to the figures reported in December 2018. The figures included in the private residential improvements were based on spending on remodeling, major replacements, and additions to owner-occupied housing units. In December the figures rose to a seasonally adjusted annual rate of $193.7 billion.

In the second half of 2019, as seen in the graph, there has been solid growth in single-family construction and home improvement. Also shown is new multifamily construction spending which slowed down since last summer but did see solid growth from 2010 to 2016 and a growth spurt from late 2018 to early 2019.

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Single-Family Home Sales Increase in 2nd Quarter

Single-family home sales increased by almost 24% compared to new home sales in 2015 in April.  Compared to March, 2016’s home sales, single-family home sales increased by almost 17%.  Finally, sales went up to 619,000, an eight-year high during the month of April as well.
Home buyers are taking advantage of the availability of new homes because the inventory of new homes for sale on the market has decreased to a 4.7 month’s supply – a total of 243,000 new homes for sale with only 56,000 completed, move-in ready homes available. Demand will require that builders increase their production of new homes for sale in order to keep up with the buyers.

Single-Family Home Builders

April’s sales numbers go hand-in-hand with the reported new, single-family home starts which increased by 3.3% at the beginning of April.  Builder confidence held steady for the 4th month in a row since February, 2016, which contributed to new construction starts and inventory on the ground.  Single-family home permits in the beginning of April were already up year-over-year by 8.4%, so construction of new homes should continue to escalate over the next few months.

While first-time home buyers are finding it difficult to find new homes for sale in their price range, the sales of homes priced from $150,000 – $200,000 increased to 10,000 sales in April.  For existing home sales, the first-time home buyer sales accounted for 32% of these sales, opening up the market, once again for homes priced affordably.

Good News for Resale Market

Existing home sale closings increased by 6% year-over-year and by 1.7% compared to March’s sales.  It is definitely a seller’s market right now as existing home inventory also stands at a 4.7 month supply like single-family new homes.

The 2nd quarter of 2016 shows good news for the housing market after a slow 1st quarter start.  New, single-family home starts and permits indicate an increase in new home inventory moving forward in the 3rd quarter.  Sellers should be able to “take their pick” of home buyers as supply currently is lagging behind demand.

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Open Floorplans Are Popular in Today’s Real Estate Industry

The buzz word in the real estate industry today for new homes being built and existing home remodeling is an open floorplan.  What exactly does that mean?  The open floorplan refers mainly to the entire living area and possibly even the sunroom, screened-in porch, or patio area on the bottom or single floor of the home.  Open floorplans typically include the Family Room / Living Room, Dining Room, Kitchen, Sunroom, Keeping Room, Breakfast Room, and/or Porch / Patio.

Open floorplans discourage compartmentalization by encouraging each room or area to flow into the next.  Kitchens in an open floorplan can be expansive with a full working island in the middle as well as an additional breakfast bar that can have extra space for family social gatherings.  The kitchen island may have an additional sink, icemaker, dishwasher, trash compactor, or even a wine cooler. The island can also include cabinet space and drawers for additional kitchen storage of utensils, dishes and appliances.

Most of the time, the kitchen will overlook the Family Room with a view of the floor to ceiling fireplace for a vaulted ceiling floorplan and the television, letting the cook enjoy shows and games while have to cook, clean, and entertain.  The kitchen may have additional bench seating against the wall of what typically would be a Breakfast Room or Keeping Room in order to create a place for people to talk if they are not watching television.

Family Room space flows into what would have been the formal Dining Room, so homeowners have the option of buying a bigger living room set or adding built-in bookshelves, an informal office, or even a kids play area.  If there is enough room in the open floorplan, a screened-in or glassed-in porch may be easily accessible from the Family Room, or custom home buyers may choose to insulate a sunroom for a greenhouse effect for those that are plant lovers.

The obvious point here is that the days of separating out the “Formal Dining Room, Formal Living Room, Family Room, and Kitchen” are pretty much over – much like the disappearance of the “Parlor” in the ’50’s.  Home buyers and homeowners love their sprawl and space and having access to everything in the main living area of their home.

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The Cost of Building a Custom New Homes

Ron Lee Homes in St. Tammany Parish is one of the elite builders in Covington, Louisiana, which builds fully custom new homes with spectacular finishes.  Inside or out, these new homes are built with intense attention to detail to make sure that every minute finish is construction with as much perfection as possible.  Many of the interior amenities of custom homes built by Ron Lee Homes are imported materials or custom built materials that are installed by specialty contractors.

According to the National Association of Home Builders (NAHB), this type of new home construction actually trends with national averages in that 29.6% of the cost of construction is spent on interior finishes.  The rest of the breakdown in construction costs are as follows: framing (18.0 percent), exterior finishes (15.0 percent), major system rough-ins (13.1 percent), foundations (11.6 percent), final steps (6.8 percent), site work (5.6 percent), and other costs (0.5 percent).

When calculating the cost to build a new, single-family home, the NAHB surveyed builders with its Cost of Construction Survey and found that new homes built on approximately 1/2-acre lots with 2,802 square feet had a sales price of $468,318.  61.8% of that sales price encompassed the cost of the construction of building the new home which is only .1% higher than the costs reported in 2013.
Interestingly, the cost of the lot and the cost of finishing the lot made up a large chunk of the expense of building in the total percentages spent of the sale.  Land in St. Tammany Parish has a premium price compared to more northern and western parishes in Louisiana as well.

At the same time as this data has been released by the NAHB, another analysis of construction spending says that total private residential construction spending for September increased 1.3% over August spending and 13% year-over-year.  The reason for this increase may also be the increase in the cost of materials as well. However, single-family home permits and starts are up as well, so the money put back into the economy in the form of materials purchases as well as employment is up across the board nationwide – a good sign for the real estate market.

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New Home Buyers Have More Selection in New Homes

Even though the housing market has been making incredible strides in its recovery since its low in 2008, one of the major obstacles that has been holding the sale of real estate back is the lack of supply for the growing demand of home buyers.  New home buyers especially have been stymied by a lack of inventory from local builders.  Builders themselves have been frustrated by the tightened funding requirements for construction loans from banks and lenders, so there is been a “stalemate” of sorts going on in the new home industry.

However, good news is on the horizon for real estate because single-family home starts have been on the rise and holding steady over most of the months of 2015.  Single-family home starts remained steady from August to September with 740,000 starts nationwide for both months.  Overall, housing starts (including multi-family housing) increased by 6.5% and reached the 1.2 million mark – the highest its been since October, 2007.

From a yearly perspective, quarter-over-quarter, single-family home starts are up 5.7% 3rd quarter from second quarter with a total of 746,000 home starts.  The numbers year-over-year show that single-family home starts are up 11% compared to 2014.

Another strong sign of new home real estate recovering is the number of housing permits for single-family home starts.  The number of permits for single-family homes went up 9.4% year-over-year and also remained unchanged compared to the previous month of August from September, 2015. Trends also show that money of the new home purchases are coming from “contingency sales” where a home buyer has a house to sell and wants to build or buy new which is excellent news for new home builders.

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