Home Builders Are Freaking Out

Amid mortgage rates nearing 7% according to Freddie Mac, the confidence of home builders is waning. In August, the National Association of Home Builders/Wells Fargo Housing Market Index reported a six-point drop to 50 in builder confidence for the newly constructed single-family housing market. This decline was attributed to rising rates and elevated construction costs. Additionally, shelter inflation persists at 7.7%, impacting both affordability and demand. To counter these challenges, an increasing number of builders are turning to incentives, with 25% offering price reductions in August. Despite this, demand for new construction remains supported due to limited resale inventory as homeowners stay put due to low mortgage rates. The survey found that 55% of builders used incentives to boost sales, indicating a continued effort to stimulate the market. The chief economist of NAHB, Robert Dietz, noted that addressing the affordability crisis and underlying inflation requires government intervention and policy enactment to increase housing production and alleviate the nationwide housing shortage of around 1.5 million units. Regionally, the Northeast index improved to 56, while the Midwest and South held steady at 45 and 58 respectively, and the West saw a one-point decline to 50. The NAHB/Wells Fargo HMI, a gauge of builder perceptions, draws from a longstanding monthly survey and considers any index value above 50 as predominantly positive.

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Kristina Smallhorn
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eXp Realty LLC,2900 Westfork Dr. Suite 401, Baton Rouge LA 70817
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Kristina Smallhorn is a licensed REALTOR® with the state of Louisiana, License number 0912122918
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[scottcoleman]

Both my grandsons went to VOC school #1 is a plumber doing great # 2 going to be an electrician and already working part time 👍

[JNoMooreNumbers]

People still need repairs, garages, outbuildings. Buy up or rebuild Hawaii before the government takes it. Nothing like taking advantage of people's tragedies. 700 for each person is an insult.

[eckankar]

We don't have the skilled craftsmen today that we had 20 years ago, they retired and who was around to learn from them? Workmanship, no mater what the cost is lacking in recent builds that I've seen locally. Absolutely would be wonderful to have 'shop' classes again in high school, as home ec to teach students how to prepare a home cooked meal..

[JEMyers-jtdk]

Thank you for talking about bringing the trades back to high schools. I'm a firm believer that this would also help students stay in high school if they know they will have a job when they graduate. My brother was a welder when he graduated from high school in the 70's and made more than our parents did in a year. There is a solution, but of course, the higher educational systems ( trade schools and junior colleges) would lose money.

[johnmackey]

In the 1970s, high school counselors didn't encourage the trades except if a student pushed it. The work was being down graded for a college education. Could have learned a trade, ended up in clerical work, and civil servant with benefits, but think "what if." The better a school district, less likely trades are encouraged.

[ConstructionKronies]

Until we start churning out blue collar workers again by putting shop classes back into highschool nothing will get better. In fact, the efforts to "fix" the situation will only make it worse. We need workers at all levels in the supply chain and boots on the ground building. If the government would start limiting what types of buildings can be built and start putting penalties on those companies that apply for permits that don't build that could help. This is not a complicated issue. For the past 3 decades we have been pushing our kids into university, now we have an inflated and over priced management core that is directly paid by the actual boots on the ground who build. We most definitely can get rid of half the office staff and expenses and put those resources toward training and paying workers fair wages. We also need the governement to support companies that hire and train apprentices, as 80-90% of what they learn is hands on site. I don't see this happening any time soon, it took 3 to 4 decades to break, it will take that to fix and meanwhile home prices will continue to rise.

[wayneashley]

So the builder knows that demand is for smaller footprint homes, but can't respond to the demand because it 'doesn't pencil out right'? That's a true shame, because then that potential business will go elsewhere. No wonder the Tiny Home movement is forced to be so DIY... I've often wondered why builders seem so uninterested.

[fredrickvonstien]

People will not get into the trades and construction and destroy their bodies while healthcare costs are through the roof so while they suffer the whole rest of their lives in pain after destroying their bodies. People will not get in the trades while someone in the office can make 200k-400k a year. You need to raise federal ninimum wage to $50 an hour to make these 'less prestigious' jobs more attractive.

[randyhilton]

My son-in-law has been working in the home mortgage industry for at least a decade and he says wall street firms and venture capitalists have been buying up existing homes for years now. Funding trades classes has been lacking for decades. Funding for school districts usually comes from property taxes and lots of people don't want any increases.

[susanschremser]

Trades have been disappearing for years, even before the pandemic. We built a house in 1998 and it took us 6 months. Our daughter built a house in 2018 and it took them a year! Trying to get various trades, throughout the home build, was the delay. That is the main problem in the Pacific Northwest.

[fallbrkgrl]

Your example of Louisiana reminded me of what happened to the city of Plumb Grove, Liberty County, TX...
Basically the same thing happened to this area as it has been developed.
Subdivisions where built, the proper drainage was not put in place, in fact retention pounds where removed, then came hurricane Harvey...
The family that I follow in this area, and many other properties were destroyed, as a result of the new developments.
People in this town have been fighting, and when possible, suing, because of the developers not taking proper action to fix the drainage problems.
Unfortunately, these people don't stand a chance because they are up against people with a lot of money, and that money buys a lot of influence with the county officals.
It's very sad.

[maryann]

So sad. I was waiting for something to get better before purchasing a home. Now maybe I should just purchase it in the hopes I can still afford something

[eattherich]

It is madness that building smaller, more afforadable homes is harder than a wasteful 3, 000 sq ft monster.

[lindal]

I so agree with! Will always need people doing building and fixing industries. As well as service industries. Bring it back to the high schools and summer school as well. Kids have too much wasted time in and out of school.

[earnthis]

What makes you think home builders want to increase the housing supply by any effective amount? They need the market to be tight and pricey. Why would you believe a builder who says he can't make small houses profitable? He means not profitable enough for him or his investors. Whatever THAT means.

[lynnbetts]

I live just north of Houston, in a rapidly developing area. One of the fastest growing in the state. In the spring, a 5000 acre development, with 7000 homes was announced. I need to drive over to the eastern edge to see if they have started the infrastructure on that side, but they haven't on the western side (my side). A 1000 acre development of custom acreage homes (over $700, 000) is also underway, with infrastructure rapidly going in. Any tract over 100 acres in my vicinity is being looked at for development, including a 150 acre landlocked tract at the end of the private lane I am on. The owners of the other 5 tracts leading to it have banded together and have decided not to sell unless we are all bought out. I wanted to build a new barndominium to replace my DW on my 13 acres, but have put all plans on hold for 4 years. As far as building supplies. When I recently had my pastures cleared and remaining pine timber sold to the mill, we got $40/ton. Barely worth the time and effort to haul to the mill.

[drayne]

Tell your builders friends to pay carpenters better and we might actually want to do the trade again

[noreenn]

What about building duplexes instead of smaller homes, can a builder make that work?

[jonijohnson]

BREAKING NEWS 👍 We can always count on you for updates and accurate information 👏👏 Thank you Kristina👏👏👏

[pawfan]

Remember the bureaucracy formula..."If it makes sense, it will not happen!"
"If makes non-sense, it'll happen multiple times!"