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The Construction Cut with Taylor Rennick- 03/02/20

This week on The Construction Cut, the DOW has crashed to it's lowest levels since 2008- despite the fact that new home sales are higher than they've been in 13 years. Plus, the best places in the US for home improvement, and why the biggest distraction on the job site may not be what you think.

  • The DOW crashed for four straight days last week- what economists are saying about the Coronavirus’s impact on the economy
  • New home sales have soared to their highest since 2007
  • The best places in the US for home improvement and home investment

Listen to the entire episode below on SoundCloud. 

 

Full Episode Transcription

Welcome back guys, and thank you for tuning into The Construction Cut. I’m your host, Taylor. This week, we’re discussing the DOW, the seemingly endless news about the housing market, and stay tuned to the end for the best places to invest in a home remodel.

It’s Monday, March 2nd, 2020. Let’s dive in:

The DOW Jones crashed for four straight days last week. The Dow plunged 692.55 points, the S&P 500 dropped 2.43%, and the Nasdaq slipped 2.62%. These numbers have in no doubt been fueled by fears over the Coronavirus. The stock market has taken a massive tumble- despite the fact that new home sales are at a record high. In fact, new home sales have soared. They’ve soared to their highest since 2007. Oh, that’s right, that 2007. But I digress.

Where did these new home sales come from in particular? Month by month- sales increased the most in the midwest (up 30%), and in the west (23%). Sales increased year over year everywhere except the south- where they dropped 4.4%. The total available homes on the market have dropped to 324,000-- the lowest number of available homes on the market since 2017. As I mentioned last week- new home build permits are on the up and up. Which should help ease that burden. According to the New York Times, the median new home price has surged to 14% to a record-high $348,000 last month. Most of those sales were focused on the $200,000-$749,000 range- and two-thirds of those homes were either under construction or had yet to be built. As for homes priced for less than 200k? The most sought after? The most needed? Those homes accounted for less than 10% of sales.

Those sales are stemming from extremely low-interest rates. As of last Friday, February 28th, mortgage rates have dropped to an eight-year low. As I mentioned at the top of the show, fears over the Coronavirus have made many, many investors nervous. Stocks have gone down, bonds have gone up, and now it’s affecting mortgage rates. As of Friday afternoon, the average rate on a 30-year fixed mortgage is 3.34%. Mortgage rates take their cue from US Treasury yields, which fluctuate when investors pull their investments and put them into secure bonds. Experts are generally referring to these massive drops as a positive thing. As long as the Coronavirus doesn’t actually... You know.. have a horrendously detrimental effect on the rest of the economy...

I mentioned at the top of the show that the DOW took a serious nosedive last week due to fears over the Coronavirus. The virus has now spread to 53 countries, and more than 830,000 people have been infected. Many experts say we are on the precipice of a pandemic. So, short of me telling you to cough into your elbow, and wash your hands..let’s bring it back to how the effects of the Coronavirus will impact the construction industry. We’ve already discussed how mortgage rates are affected, but more specifically, how does a global event impact the commercial building industry here in the United States? We’ve got tariffs and an election year, and a shortage of skilled laborers, so some unpredictability in the industry was expected. But the fallout from this virus is just one more wrench to throw into the equation. As we all know, a large majority of items we use every day in the US come from China. Our smartphones, our cars, our coffee mugs, you name it. Since the outbreak of the virus, the Chinese government has severely limited factory operations or even shut them down altogether. This had led to lower production of the materials that we rely on every day. Commercial and residential builders that rely on those materials from China could see higher costs for materials and potentially slower project completions. Construction Dive has a great article on this that really gets into the weeds if you want to read the entire thing- but in that article, they quote an economist who estimates that nearly 30% of all US building imports do in fact, come from China. Since the manufacturing of many materials that are integral to the building supply chain originate from a country that’s essentially shut down, it’s more likely than not, that costs will in fact rise.

Commodities that builders need the most are things like steel and aluminum. And according to that Construction dive article, items like copper and casework are already affected, and price increases are being seen across the country. When the virus does begin to slow down, there are no guarantees that factories will be fully staffed, or when these factories will be back up to full speed after working through a backlog of orders. This a big story I’ll be keeping an eye on in the coming weeks and months as more information continues to unfold.

Jobsites can be scary places. But their most universal hazard? It may not be what you think. It’s our cell phone. Now, cell phones are obviously more than just portable telephones. They are our gateway to the world. Music, podcasts, our next date… but they are also a huge hazard when it comes to job sites. Which, honestly, are hazardous enough already. Apart from workers being continually distracted by the buzz of their next notifications, headphones are becoming more and more of an issue as well. While there is no formal regulation from OSHA on headphone usage- industry leaders are urging managers to prohibit cellphone use and headphone use of any kind on active construction sites. Construction Dive released an article on this and solicited responses from contractors- and the response was not at all surprising: the majority of responses confirmed that cell phone use on job sites was a massive problem. One business owner even shared a scary story about a worker walking right off a roof as he was talking on his phone. Business owners said that cell phones are “a distraction that comprises safety and production”, that its the “number one factor in falling productivity and costs”, and it’s a “huge safety liability that is becoming more obvious and hard to police”.

Let’s end on a good note. Good news for you remodelers in Texas and the Carolinas- an article came out last week from Curbed that touts the best cities for home investment and home improvement. The top of that list? San Antonio, Texas. San Antonio has a population of 1.5 million and the median home price? $184,000. Woah. So you’re telling me that there is a major city (with an NBA team!) that has homes for less than 200 thousand dollars? That seems like a solid bet for home improvement. I would imagine, though, that it simply won’t last. According to Cindi Bulla, the chairman of Texas realtors- "There is no doubt that the Texas housing market continues to shine, as detailed in this report boasting sustained demand and price appreciation," however, two of every three homes being sold are now more than $200,000, which puts homeownership out of reach for many Texans”. In case you were curious, the Dallas metroplex, Charlotte, North Carolina, Raleigh, North Carolina, and Charleston, South Carolina round out the top five.

That’s all I’ve got for you this week. I wanted to say a quick thank you to the reporters at the Construction Dive who have done really great work covering the Coronavirus. For links these articles and more for more information about what you’ve heard on today’s show, simply swipe over the cover art (if you’re listening on your phone) and check out the links included in the show notes.
 
From there you can find more resources, a full episode transcript, and more. If you’re enjoying the podcast, feel free to leave us a review. I’m always interested in hearing your feedback. Or, feel free to shoot me an email. It’s trennick@builderfunnel.com. See you next week.

 

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