Single-Family Housing Contraction Continues
Elevated mortgage rates, high construction costs for concrete and other building materials and weakening demand stemming from worsening affordability conditions continue to act as a drag on single-family housing production.
Overall housing starts decreased 4.2% to a seasonally adjusted annual rate of 1.43 million units in October, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
The October reading of 1.43 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 6.1% to an 855,000 seasonally adjusted annual rate.
Year-to-date, single-family starts are down 7.1%. The multifamily sector, which includes apartment buildings and condos, decreased 1.2% to an annualized 570,000 pace.
“This will be the first year since 2011 to post a calendar year decline for single-family starts,” said NAHB Chief Economist Robert Dietz. “We are forecasting additional declines for single-family construction in 2023, which means economic slowing will expand from the residential construction market into the rest of the economy.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 2.9% higher in the Northeast, 1.5% lower in the Midwest, 2.6% higher in the South and 5.1% lower in the West.
Midterms and the Housing Agenda
Republicans flipped the House in the recent mid-term elections while Democrats maintained control of the Senate. What does the divided Congress mean for housing? With narrow margins in both chambers, any legislation with a prayer of being signed into law by President Biden must be bipartisan. NAHB will work with the new Congress to propose bipartisan solutions to create more affordable and attainable housing. Read NAHB’s election analysis for an in-depth look at how the outcomes will affect residential construction.
ICE Extends I-9 Compliance Flexibility
The Department of Homeland Security (DHS) and U.S. Immigration and Customs Enforcement (ICE) announced an extension until July 31, 2023, of flexibility in complying with requirements related to Form I-9, Employment Eligibility Verification when a workforce is working exclusively in a re- mote setting due to COVID-19-related precautions. This temporary guidance was set to expire on Oct. 31, 2022.
NAHB Offers Cybersecurity Resources
An overwhelming amount of confidential information and business data is stored on servers all over the world. But the loss of client and contractor data can lead to lawsuits and badly damaged business relationships. A cyber or ransomware attack can hit a company’s bottom line hard. NAHB offers resources to help members protect their data and that of clients, contractors and partners from theft or catastrophic loss. Check out a recent podcast by attorney Philip R. Stein on data security and responding to ransomware threats.
Register for NAHB’s Virtual Townhall Meetings
NAHB’s Senior Officers will host a series of Virtual Townhall Meetings at various times on Thursday, Jan. 12, 2023.
The meetings are an important opportunity for members to provide feedback to NAHB leadership on emerging issues in their local communities. These conversations will help craft the agendas for the leadership meetings at the 2023 International Builders’ Show. Register now for this opportunity to help shape discussions at the industry’s premier event in Las Vegas.
Don’t Miss the 2023 IBS Show
Home Despite the significant delays earlier this year, The New American Home (TNAH) 2023 is on track for completion this December. The home boasts 7,575 total square feet of living space, with four bedrooms and six and one-half bathrooms. It also will feature a spa, game room, outdoor kitchen and rooftop deck. Registered IBS attendees can tour TNAH between 9 a.m. and 5 p.m., Jan. 31 – Feb. 2. Free shuttle buses will depart every half hour from the Las Vegas Convention Center (LVCC). Shuttle bus tickets will be available at the TNAH booth in LVCC’s Central Hall. Visit BuildersShow.com to register for IBS.
Housing Affordability Falls to 10-Year Low
Housing affordability fell to its lowest level since the National Association of Home Builders (NAHB) began tracking it on a consistent basis in 2012 as rising mortgage rates, ongoing building material supply chain disruptions, high inflation and elevated home prices pushed the housing market into a recession.
With mortgage rates moving even higher in the fall, affordability conditions are expected to further deteriorate through the end of the year.
According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), just 42.2% of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $90,000. This marks the second consecutive quarterly record low for housing affordability since the Great Recession.
Patios Preferred Over Decks
The share of new homes with patios increased for the sixth year in a row in 2021 to a post-2004 high of 63%. At the same time, the share with decks was trending in the opposite direction, declining for the fifth year in a row to a post-2004 low. Of the roughly 1.1 million single-family homes started in 2021, only 17.5 percent included decks, according to NAHB tabulation of data from the Survey of Construction (SOC), conducted by the U.S. Census Bureau and partially funded by HUD. This is the lowest point for new home decks since the 2005 re-design of the SOC.
Multifamily Index Sees Decline
Prospects for continued high levels of multifamily development declined significantly in the third quarter, as did the prospects for continued high occupancy rates, according to results from the Multifamily Market Survey (MMS) released recently by NAHB. The MMS produces two separate indices: The Multifamily Production Index decreased 10 points to 32 compared to the previous quarter while the Multifamily Occupancy Index fell 15 points to 45. Both indices are now below the break-even point of 50, but multifamily construction levels and occupancy rates remain high compared to historic norms.
Six Steps to Reset Building Materials Costs
Rising interest rates and high inflation are dampening the residential construction market as more consumers are priced out. To manage costs in this environment, many home builders are working with vendors in their supply chain to lower material costs. Some will send off letters to suppliers mandating cost. They’ll bid out the various categories and swap vendors wherever they can save money.
But that may not be the best way to treat trade and supply partners that held cost increases at bay, prioritized your orders, and worked like crazy to take care of you during the boom market. The following is a six-point guide to making a more collaborative strategy work for you.
- Start with data analytics.
- Set up meetings with members of your supply chain.
- Put everything on the table.
- Review your specification levels.
- Involve your internal team.
- Avoid laying off purchasing professionals.
For more detail, read the full article, which originally appeared in the September/October 2022 issue of Pro Builder.
