You are viewing our site as an Agent, Switch Your View:

Agent | Broker     Reset Filters to Default
Why Builders Can't Keep Up with Home Sales
Once upon a time, the key words in real estate were "location, location, location." Then, the infamous three Ls, at least in the new construction sector, became "land, lots and labor." Those Ls remain important, to be sure. But now, as far as builders are considered, the Ls refer solely to "lumber, lumber, lumber." Softwood is used in structural framing such as beams, joists, and trusses as well as sheathing, flooring and underlayment, interior wall and ceiling finishing. Softwoods also are used in certain manufactured products, particularly cabinets, windows and doors. Since April 2020, the cost of softwood lumber has risen more than 300%, adding nearly $36,000 to the price of a typical house, according to the National Association of Home Builders. The Factors Behind Surging Lumber Costs The primary reason for this price surge is insufficient production at mills across the country. Like most other businesses, pandemic stay-at-home orders greatly impacted the ability to produce products in sufficient quantities to satisfy demand. And even though operations around the country have increasingly opened back up, many mills are still not back to pre-pandemic capacities. Another factor is the import duties placed on Canadian lumber during the previous administration. And now, in a step that has brought a strong rebuke from NAHB President Chuck Fowke, the current administration is proposing to double the tariffs on Canadian lumber shipments. What Else is Stifling Builders' Production? While the cost of lumber is builders' most pressing problem, it is hardly the only one. Here's a brief rundown of the other issues that are keeping them from erecting all the houses needed to take some of the heat out of the blistering housing market: Availability Builders rarely have trouble securing appliances, which they must have to obtain occupancy permits. But now, 95% of those polled by NAHB reported shortages of refrigerators, stoves and the like. Shortages are now more widespread than at anytime sine the 1990s when the NAHB first started tracking. Skyrocketing lumber prices have rightfully dominated the headlines, but prices for steel, concrete and gypsum products also continue to climb at record pace. In a recent survey by marketing and advisory firm Zonda, which monitors some 18,000 active communities nationwide, 86% of builders reported significant supply disruptions resulting in significant construction delays. Among the components that are tough to obtain are interior doors, windows, siding, plumbing fixtures, shingles, insulation and cabinets. About the only item builders aren't having a hard time finding are kitchen sinks — as in, "everything but…" Practically everything else is in short supply; again because production was severely curtailed during the height of the pandemic. And as a result, the costs to builders for many of the products they need have also rocketed. Regulation Another NAHB study found that regulations imposed by all levels of government account for $93,870, or 23.8% of the average sales price of a new house, which is currently $397,300. Of that, $41,330 is attributable to regulation during development, and $52,540 is due to rules that must be followed during construction. Because of the pandemic, builders and their customers aren't getting all they are paying for, though. At least not lately. Local building departments are so short staffed that it is taking longer to get plans approved and the required inspections made. There are other regulatory issues that builders must contend with, too. The most recent was a change in the National Electrical Code, a change that caused HVAC systems to fail. The new rule, the NAHB contends, was hastened unnecessarily during a process that was manipulated by special interests, perhaps trying to sell a particular product. Land "Builders are paying stupid land prices," Zonda's Tim Sullivan told his clients recently. But they almost have to if they want to remain in business. Why? Because the supply of home sites is dwindling rapidly. Zonda says roadwork has commenced on just 165,000 lots nationwide. Considering that some 500,000 new homes are sold annually, that's not a lot. Builders tend to believe the lot pipeline will be most constrained for the rest of the year, but about a third of those polled said finding buildable sites will be an issue next year as well. "The under supply isn't going to go away," said Sullivan. Location Remember the original three Ls? Forgetaboutit. A community's relationship to downtown used to be much more important, but it hardly matters these days in the new home market. Zonda research shows that 70% of the best-selling communities are 30 miles or more from their central business districts as builders move farther and farther out to hold the line on prices as best they can. In Houston, for example, properties within 10 miles of downtown are notching 1.1 sales per month while those 30-35 miles out are grabbing 4.3 deals monthly, up 118%. (READ MORE: Which Markets Will See New Home Builds Ease Inventories?) Higher Prices Zonda's research shows 97% of builders have raised prices, half of those by $10,000 or more. But, said the company's chief economist, Ali Wolf, "There's virtually no sticker shock." Even as builders restrict supply, prices continue to march higher. One reason: The market is supported in large measure by out-of-towners moving from places where housing prices are out of this world. For example, a 2,500-square-foot house that costs $1.16 million in San Francisco or $1.14 million in Los Angeles runs a mere $450,000 in Austin. That's why locals are buying farther and farther out, where the prices are the less expensive. Labor Experienced carpenters, plumbers, electricians and other tradespeople are in short supply. But only 49% of builders said that's a big deal right now, probably because they're beset by other, more pressing problems and because they're not erecting houses as fast as they'd like. Slowing Down To protect against getting too far ahead of themselves, a majority of builders are "by design" now taking only a specific number of contracts per month. While 9% said it's still business as usual, 17% said they are accepting offers only as new lots come online, and 13% said they are "pausing" sales or reservations. As a result, new home production slid in April and is likely to continue slowing. Supply constraints, labor scarcity and a lack of buildable lots "are weighing meaningfully" on builders' ability to keep up with housing demand, says Doug Duncan, chief economist at Fannie Mae. Builders, he adds, have little choice but to slow the pace of construction. Syndicated newspaper columnist, Lew Sichelman has been covering the housing market and all it entails for more than 50 years. He is an award-winning journalist who worked at two major Washington, D.C. newspapers and is a past president of the National Association of Real Estate Editors. To view the original article, visit the Homes.com blog.
MORE >
Following the Money: Is Proptech the Pied Piper or the Savior of Commercial Real Estate?
Proptech is advancing all areas of commercial real estate from developments in building innovations and blockchain technology to smart homes and green tech. If you are a commercial real estate agent, you are noticing the change. Globally, real estate is the biggest industry and depending on where the data comes from, its value ranges from billions of dollars to trillions of dollars. That is a lot of money coming from one sector with investors throwing more into proptech innovations daily. So are all these changes in technology making the road to success easier or are they leading you down the wrong path? Tech investors are flocking to the real estate industry because they envision a future that allows you to better share information, control energy consumption, and improve construction workflow. Precise Information Change is good. Without the use of current technology, it would be virtually impossible to do business in today's commercial real estate market. Technology has allowed you to precisely measure square footage calculations, visit properties through 3D tours and submit all legal documents necessary through online methods. Simply put, proptech and CRE go hand in hand and incorporating them into your daily routine is essential. You cannot afford to fall far behind in your use and understanding of proptech, or you stand to lose your way. Data Commercial real estate deals with a huge amount of data. Everything from contracts and legal documents to building information and management operations. There is a need to provide easier and faster ways to source and transmit data. Enter the technology sector. Tech investors are jumping into the billion-dollar real estate industry to satisfy the need. According to Prescriptive Data in 2019, there were over $31 billion VC proptech investments. Companies are investing in ways to supply better and more accurate ways to deal with all the data through a variety of innovative methods. Blockchain Blockchain technology is not just for cryptocurrencies, it takes on a whole new meaning when delivering information in the commercial real estate industry. This developing proptech helps to easily maintain and control transactions in a very transparent way. Future audits of facts and figures are simplified through the use of blockchain technology benefiting you as a real estate agent by allowing verification of transactions quickly and easily. Reducing risk and streamlining processes are just some of the perks you can look forward to. Construction Management It's no simple task to construct a multi-level building from the ground up. Proptech building information modelling (BMI) will help in the planning, construction and management of a building's infrastructure for the entire lifespan of the property. You will be able to see real estate floor plans in 3D transformed entirely from hand-drawn sketches in a matter of a few seconds. Not only does this technology help everyone involved from architects and engineers to construction companies, but it will help provide current information to any prospective purchaser. Investments and Operations In a commercial real estate transaction, you need ways to accurately supply information to assist in your real estate marketing plan. Current proptech trends are developing ways to supply real-time data allowing management to make better-informed decisions. Up to the minute statistics on a property's history, neighborhood details and current ownership costs will provide for better ways to estimate the value and future value for decision making. Smart technologies will be able to monitor various algorithms and adjust for safer and greener environments. Monitoring airflow and energy consumption are just a few benefits of proptech innovations. All this translates into buildings being more attractive in rental markets for both the purchasers and end-user. Benefits for Real Estate Transactions Critical data for both commercial and residential properties will be available to include geo-location technology for planning and development purposes. Details on topography, flood zones, and soil stability will speed up the process necessary for construction and redevelopment sites. For real estate agents and lawyers, property transactions will be verified instantly for legal documents, land titles and transfer of ownership. Through advancements in technology, all of a building's information can be digitally transferred in a matter of minutes. Waiting for week-long responses to register a sale will soon be a thing of the past. Technology and CRE have travelled on different roads for a long time. But the future is clear, following the money trail could lead you on a path to success.
MORE >
6 Ways to Construct the Perfect Builder/Realtor Relationship
MORE >
How to Boost Your Business When You Partner with a Builder
You Can Grow Your Revenue Stream by Creating a Relationship with New Home Builders Many would-be buyers begin their house hunt from existing housing inventory while others turn their homeownership dreams into reality with a custom-built home in their local communities. When you partner with custom home builders, you open the door to a whole new revenue stream for your real estate business. Creating a working relationship with custom home builders is a win-win-win for you, the builder, and the home buyer. At the same time, you add more value for buyers who've purchased land—streamlining their journey to the new home they want. It also works in reverse: Your builder partner can refer their clients to you to help them acquire the land they need. Either way, you can earn a commission as clients go forward. On top of a boost in revenue, you'll raise visibility for your land listings among buyers who urgently need them. Selling sales associates can also acquire more leads since builders often work with clients who need to sell an existing home to finance new construction. What Can Sales Associates Offer That Builders Need? You might wonder – what motivates a builder to partner with one sales associate over another? Many builders minimize uncertainty by working with the same title company and lender for every transaction. That helps ensure closing takes place on schedule and prevents them from absorbing carrying costs for completed stock. The builder-sales associate relationship can be just as vital for sales associates willing to commit to one or more specific builders. In any partnership, there needs to be a mutual commitment to promoting and benefiting the other party. Luckily, there are lots of ways sales associates can be indispensable to a chosen builder. Sales associates are experts at "translating," so builders and buyers don't end up talking past each other. They ensure that buyers understand the terms of sale, then work with the builder to ensure everything is delivered as agreed. Buyers love the chance to participate in the design and select finishes, but the fun stops if they feel misled. A sales associate orchestrates the process so all expectations are met. The sales associate's role is even more visible in new home communities. Actively promoting a builder's community fosters rapport. That feeling of reciprocity can make it easier for your future clients to get special requests incorporated into their new builds. First Steps for Creating a Builder Partnership Buyers of custom construction homes are often on their second or third property. You can maximize the value you offer by providing sales support for their existing home. This streamlines the transaction and benefits everyone involved by getting buyers to closing faster. To make the biggest splash with a builder, get to know their offerings inside and out––literally. Ask to visit recently-constructed homes, and those homes still in progress to get a sense of the process. Find out what the builder considers their key selling points so you can communicate them in ways that are truly meaningful for buyers. Familiarize yourself with all the available floor plans and add-ons so you can match options to each buyer's needs. Last but not least, interview builder representatives and find out the kinds of questions buyers have asked them in the past. Builders often look for partnerships with sales associates when they have been burned by unqualified buyers. By putting in face-time and doing your research, you will demonstrate to a prospective partner you're in this for the long haul. New construction is a lucrative area where you can expect cycles of strong growth. Not only that, but it's also exciting and fun for sales associates and buyers alike. Get Started Promoting Your Partnerships Delta Media Group® has made it easy to feature home builders, their communities on your website. Spotlight the builders, their communities, and model homes you represent on your website using DeltaNET™️ 6 and its Builder Showcase feature. Add a detail page for each builder highlighting their company details, inventory listings, and open houses. Call special attention to model homes. Adding Google maps to these pages, your website visitors can find these communities and listings easily. You'll be able to add floorplans, plat maps, brochures, and videos for potential buyers to view. Promote upcoming open houses on your website too. Find the right builder in your area, and your partnership could be the platform that brings you both to the next level. Not getting your copy of Delta Media Group's magazine, Real Estate Marketing & Technology? Sign up today. Your subscription is free. To view the original article, visit the Delta Media Group blog.
MORE >
How to Sell Property 'Off the Plan' in 72 Hours... even if you've never done it before.
MORE >
Are You Marketing New Construction Homes Correctly?
Introduce Buyers to Builders and Their Communities on Your Website Many buyers opt for new construction homes over existing homes, especially in markets where a lack of housing inventory exists. No matter why a buyer is opting to build a house, marketing new construction homes is often a challenge for real estate businesses. The new construction market is strong, but you may still have to adopt new tactics to market newly built homes to your audience. Get started with these steps to market new construction homes to your clients.
MORE >
Top-Ranked Real Estate Agent Ben Caballero Issues New Podcast Episode
MORE >
Marketing New Construction Homes: What Real Estate Agents Need to Know
New construction homes are a popular choice for many buyers, especially in markets where a lack of housing inventory exists. No matter what the reason a buyer is opting to build a house, marketing new construction homes often presents unique challenges for real estate agents. The market for new construction is strong, but you may still have to adopt new tactics to market new construction homes to your audience. Get started with our guide on what real estate agents need to know about marketing new construction homes.
MORE >
How to Help Me as a First Time Home Builder
MORE >
Develop Online Applications with dataFloat
IDC Global is a software development company that focuses on database and data processing specialized to improve the performance of Internet and other networked applications. Their new product, dataFloat, offers significant improvements in performance and scalability for Internet and mobile applications and also allows clients to develop e-business and multilingual applications easier and more efficiently.
MORE >