Builders Assoc


More than 900 business professionals engaged in all facets of residential construction trekked to Capitol Hill on June 12, 2024 to call on Congress to ease the chronic headwinds that are fanning the nation’s housing affordability crisis and impeding builders from boosting housing production.

“Members of the housing community from across the nation have come to the nation’s capital for the National Association of Home Builders (NAHB) 2024 Legislative Conference to deliver a powerful message: ‘The only way to tame shelter inflation (homeownership and rental costs) and to ease the housing affordability crisis is to build more homes and apartments,’” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan.

There is currently a nationwide shortage of 1.5 million housing units and the lack of housing has surpassed an inflection point. NAHB has released a 10-point plan to help erase this shortfall and improve the business climate so that builders can increase the nation’s housing supply. Eliminating burdensome regulations, easing permitting roadblocks and overturning inefficient zoning rules are just a few elements of the plan that will move the ball forward.

Making the Hard Choice

EPAB President’s Message

Jaime Gonzalez, President
El Paso Association of Builders

Like I said in my first message to you, Life is Great! And I truly believe that everything we do in life is affected by how we look at it. Is the glass half full? Or half empty?

However, an optimistic outlook on life, doesn’t relieve us from occasionally having to make tough decisions. These are never fun, but how we address them shapes the outcome. Anyone that has raised children understands that sometimes the right choice is often the hardest one.

I came across a quote by Jerzy Gregorek. “Hard choices, easy life. Easy choices, hard life.”

The choice is hard because it involves many factors that need to be taken into account. There are uncertain consequences and risk to consider. Often, we are dealing with feelings and emotions. Sometimes it might even involve a moral or ethical dilemma. The choices that are usually the hardest are the ones that will significantly affect our future or the future of others we care about.

In the adventure of being a small business owner, I find that the lines between work-life decisions and family-life decisions often get blurred and intertwined. What happens in one side usually affects the other. Decisions have to be made, not just for immediate results, but also considering long term impacts on our families, businesses, employees, and our customers.

Previously, I discussed the importance of getting involved and mentioned the concept of making choices by default. Postponing a tough decision is, in itself, a decision. If you are at the point where you need to make a hard choice, but you chose to postpone it, you are still making it. In the long run, it is better to act and make the decision than it is to avoid it and let others decide for you.

Unfortunately, there is often no clear answer as to which of the hard choices is the correct one. Making the hard choice is never, well, easy. But it is through these decisions that we have the ability to influence what happens in our life and hopefully get us closer to our goals.

Executive Message

Pray for Ruidoso, offer a hand use caution

By Ray Adauto
Executive Vice President, EPAB

Over 1400 structures gone. Two confirmed deaths. 5,000 acres burnt, and not contained. Such is the status of Ruidoso, New Mexico. One of the most frequently visited resort towns by El Pasoans and west Texans. Many El Paso families have cabins and vacation homes there for years. Many go up to escape the heat or challenge the snow. Others just like to shop or gamble there. And now what will happen to all that?

In a time of drought, fire is a real possibility. Anyone going to that area see the signs for fire danger. Those signs are up there for a reason. But despite the dangers we all still enjoy getting out into the cool fresh air. As of this editorial Ruidoso’s fires are only 31% contained on one side, 7% contained on another. While the videos and pictures from space show the fire and smoke clearly the inability to know if your home or vacation place is up or not won’t be known for a while. Fires and hot spots still burn. Relief efforts continue and will be needed for the near future. Determining whether the fire was nature started or not won’t be known for a while either.

A lot of residents won’t have much if anything left. While we send out prayer, we need to also send out help. However you decide to help use caution. Someone’s nightmare is breeding grounds for scammers. Know those to whom you are giving. Be aware and give generously. And continue to pray.

High Mortgage Rates Affect Builder Confidence

Mortgage rates that continue to hover in the 7% range along with elevated construction financing costs continue to put a damper on builder sentiment.

Builder confidence in the market for newly built single-family homes was 43 in June, down two points from May, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the lowest reading since December 2023.

“Persistently high mortgage rates are keeping many prospective buyers on the sidelines,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots.”

“We are in an unusual situation because a lack of progress on reducing shelter inflation, which is currently running at a 5.4% year-over-year rate, is making it difficult for the Federal Reserve to achieve its target inflation rate of 2%,” said NAHB Chief Economist Robert Dietz. “The best way to bring down shelter inflation and push the overall inflation rate down to the 2% range is to increase the nation’s housing supply. A more favorable interest rate environment for construction and development loans would help to achieve this aim.”

The June HMI survey also revealed that 29% of builders cut home prices to bolster sales in June, the highest share since January 2024 (31%) and well above the May rate of 25%. However, the average price reduction in June held steady at 6% for the 12th straight month. Meanwhile, the use of sales incentives ticked up to 61% in June from a reading of 59% in May. This metric is at its highest share since January 2024 (62%).

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI component indices posted declines in June and all are below the key threshold of 50 for the first time since December 2023. The HMI index charting current sales conditions in June fell three points to 48, the component measuring sales expectations in the next six months fell four points to 47 and the gauge charting traffic of prospective buyers declined two points to 28.

Looking at the three-month moving averages for regional HMI scores, the Northeast held steady at 62, the Midwest dropped three points to 47, the South decreased three points to 46 and the West posted a two-point decline to 41.
HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at Housing Economics PLUS.

NAHB: Housing Starts Retreat in May

-NAHB

Single-family and multifamily housing starts fell in May as high interest rates for construction and development loans and mortgage rates held back both housing supply and demand.

Overall housing starts fell 5.5% in May to a seasonally adjusted annual rate of 1.28 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The May reading of 1.28 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 5.2% to a 982,00 seasonally adjusted annual rate. However, on a year-to-date basis, single-family starts are up 18.8%, albeit off weak early 2023 data. The multifamily sector, which includes apartment buildings and condos, declined 6.6% to an annualized 295,000 pace. This is the lowest pace for apartment construction since April 2020.

“Overall lower housing production correspond with our latest industry surveys, which show builders are concerned with a high interest environment that is making it harder to get acquisition, development and construction loans to increase home building activity,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and custom home builder from Wichita, Kan. “Higher rates for builder and developer loans, along with ongoing supply-side challenges regarding construction labor and buildable lots, are acting as headwinds for new home and apartment construction.”

On the demand side, mortgage rates averaged 7.06% in May per Freddie Mac, the highest reading since November 2023. This high interest rate environment is causing many potential buyers to remain on the sidelines.

“It is not just the single-family market that is experiencing challenges. The three-month moving average for multifamily starts is the lowest since the fall of 2013 as the multifamily development deceleration continues,” said NAHB Chief Economist Robert Dietz.

The ratio of multifamily completions to starts (the total number of apartments completing construction compared to those starting construction) was 1.8 in May, tied with April for the highest ratio since Covid. “This ratio was 0.6 in April 2022 when many more apartments were starting construction compared to finishing construction, demonstrating the significant reversal for the multifamily construction pipeline,” said Dietz.

The number of apartments under construction is now down to 914,000, the lowest count since Sept 2022 and down 11% since the peak rate in July 2023.

On a regional and year-to-date basis, combined single-family and multifamily starts are 22.2% lower in the Northeast, 8.0% lower in the Midwest, 2.3% lower in the South and 2.6% higher in the West. Declines for multifamily construction are driving the weakness for those regions showing year-to-date total housing starts declines.

Overall permits decreased 3.8% to a 1.39-million-unit annualized rate in May. Single-family permits decreased 2.9% to a 949,000 unit rate; this is the lowest pace since June 2023. Multifamily permits decreased 5.6% to an annualized 437,000 pace.

Looking at regional data on a year-to-date basis, permits are 0.7% higher in the Northeast, 5.3% higher in the Midwest, 0.8% higher in the South and 1.5% lower in the West.