It's a good time to be a home builder. Taylor breaks down why the economy is improving, homeownership is going up, and why more women are buying homes than ever before. Listen below for the latest news from the week on the latest episode of The Construction Cut.
- Things are looking up for home builders- builder confidence has reached a high-point
- Home ownership is at its highest in 6 years- what does this mean for the construction industry?
- More Women are buying homes than ever before
- A construction video goes viral
- And more!
Listen to the entire episode below on SoundCloud.
Full Episode Transcription
Welcome back to The Construction Cut! I'm your host Taylor Rennick, and I've been busy rounding up the latest news in the construction industry for you this week. If you've been enjoying the show so far, I'd love for you to sign up for The Construction Cut newsletter. It's a weekly email that will go out with a recap of the week's show, the stories we've covered, and why they are relevant to you and your business. The link to sign up is in the show notes! It's that easy. Without further ado, let's get to it:
It's Monday, February 3rd, 2020. Let's dive in:
The economy is looking up for builders. According to the NAHB, builder confidence for new, single-family homes has reached its highest point since June of 1999. This new level of high builder confidence is based on the strength of the economy, namely a low supply of existing homes (remember last week we discussed that there is a 4 million home deficit), low mortgage rates, (more on that later in the show), and a strong labor market. Despite high-builder confidence, the NAHB is reporting that the industry is still not able to keep up with demand due to "supply-side constraints like labor and land availability. Higher development costs are hurting affordability and dampening more robust construction growth". There does, however, seem to be some small relief coming in the form of a new housing boom. According to Fannie Mae and their team of economists, builders are expected to expand their production by 10% in 2020, the highest increase of new home starts since the beginning of the housing crisis in 2007. Fannie Mae's forecast for 2021 is an estimated one million new homes, less than what we need to fill that four million home gap, but a considerable improvement over the housing shortage problem in recent years.
It's worth noting here that many of the million+ homes slated to be built are single-family homes. Despite increasing demand for mixed-use, multi-family structures, multi-family construction is slated to rise just 1% in 2020. According to a presentation by NAHB's chief economist at IBS last week, "Multi-family housing starts have leveled off due to lack of skilled labor, rising material prices, and expensive regulatory costs. To offset these factors, developers are building more luxury communities — which rent for more money — and fewer affordable housing options". If you're a builder here in the US, I'd love to hear your thoughts on this- I'm inquisitive- since lack of affordable housing in our country is such an issue, what do you think the biggest barriers are on the builder side? Can builders be profitable while simultaneously building low-income or multi-family structures? Feel free to shoot me a message on LinkedIn or over on the Builder Funnel website. I'll include a link in the show notes.
Let's continue with the strength of the economy for our next story. According to Bloomberg, the homeownership rate here in the United States has risen to a six-year high. Led by an increase of younger and low-income homeowners, the nationwide rate of homeownership is now 65.1%. It's also worth noting that African-American homeownership is at its highest since 2012, and rates for Americans under aged 35 is at its highest in nearly nine years. Homeownership for minority populations is one of the most reliable paths to building wealth and equity over time and is linked to a decrease in child poverty and often provides better educational opportunities, and a more stable home life compared to the children of low-income renters.
One of the biggest factors for the increase in American homeownership is the continuation of better and better mortgage rates. 30-year fixed mortgages have fallen to the second-lowest level in 3 years. Now sitting at 3.51%, the average mortgage rate fell nearly an entire point from this week in January 2019. 15-year fixed mortgages are sitting at 3%. Lower mortgage rates mean better cash flow for homeowners, allowing them to purchase property that may have been out of their reach a decade ago. Historically low mortgage rates also allow first-time homebuyers, which as of 2019, make up a whopping 45% of all homes purchased, enter the housing market. As I just mentioned, owning a home is one of the biggest pathways to wealth. After all, the bulk of most American's wealth is tied up in their home's equity. The longer you stay in your home, the more equity you build up and the stronger your place in society.
Speaking of building equity- I wanted to include this next story in the show today because its important and indicative of where we're headed as a nation. Along with minorities and those from lower-income brackets, more women are buying homes than ever before. According to SmartAsset, women, on their own, are making up more and more of homebuyers. SmartAsset analyzed date from over 400 metro areas here in the US and found that out of 1.25 million mortgages approved in 2018, 500,000 were approved for women without cosigners, and 750,000 were approved to men. While the homeownership in this study isn't quite on-par with the population demographics, it is a huge increase compared to years past. According to the study, women were more likely to purchase a home independent of a cosigner in Ithaca, NY, Charlottesville, VA, The Village in Florida, Santa Fe, NM, Durham-Chapel Hill, Gainsville, FL, and Philadelphia. Rounding out the list was Napa, California. Those grapes must be paying out good this year. My hope is that the pay gap will eventually close, and women can bridge that 19% gap in the workplace, buy homes independently of their partner if that’s what they want, and live where they want, with who they want.
For our latest story on this week's edition of The Construction Cut, I wanted to give a shoutout to the team at UP Companies in St. Louis. They have created a super hilarious video to bring attention to the different trades. It's really funny. Set to "Old Town Road" by Nas X, which I am NOT going to sing for you, it's called "Old Construction Road" and was created to generate interest from young people in the construction trades. As we all know, the shortage of skilled labor in the construction industry is a huge problem. The owner of "UPCO" said, "Speakers and job fairs aren't getting it done, so we are trying to think outside of the box and be creative to project the fun and creative industry we have." And he's right. Despite a slew of well-paying positions and a low-barrier to entry for the necessary education, young people just aren't aware of the benefits of working in this industry can provide. Hopefully, this video will go viral and get people interested. I'll link this video in the show notes so you can check it out for yourself, it really is quite catchy.
We've come to the end of the show, are you sad yet? I've had a great time keeping up with the news this week and hope you have, too. If there is a specific topic you'd like me to cover on next week's show, or just want to say hi, feel free to find me on LinkedIn, just search for Taylor Rennick, or leave a comment on the Builder Funnel Facebook or Instagram pages. I'd love to hear from you.
- The Homeownership Experience of Low-Income and Minority Families: https://www.huduser.gov/portal/Publications/PDF/hisp_homeown9.pdf