The National Association of Home Builders and Wells Fargo, which publish the monthly report, revealed sentiment increased by 5 points to 75, markingthe highest reading since June of 1999.
“Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates, and a strong labor market,” said NAHB Chairman Greg Ugalde.
In December, the index measuring current sales conditions rose to 84 points, while buyer traffic grew to 58 points and sales expectations over the next six months inched forward to 79 points.
The three-month moving averages for regional HMI scores show the South grew to 76 points, the West increased to 84 points and the Midwest climbed to 63 points. However, the report indicates the Northeast declined to 61 points.
Although sentiment improved in a majority of the nation’s regions, NAHB Chief Economist Robert Dietz warns homebuilders across the country continue to grapple with affordability concerns.
“While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability,” Dietz said. “Higher development costs are hurting affordability and dampening more robust construction growth.”
NOTE: The NAHB/Wells Fargo Housing Market Index gauges builder opinions of single-family home sales and expectations, asking for a rating of good, fair or poor. Builders are also asked to rate prospective buyer traffic from very low to very high. The scores are used to calculate a seasonally adjusted index with a rating of 50 or over indicating positive sentiment.
According to NAHB analysis of the Survey of Construction (SOC), nationally, there were 881,076 new single-family units started in 2018, 4% higher than the units started in 2017. It was the double of the units started in 2011, and still 49% less than the peak of 2007 (1,731,171 units).
Among all the nine Census divisions, new single-family units started in the South Atlantic, West South Central and Mountain Divisions exceeded 100k in 2018. These three divisions represent 21 states, while the number of new single-family housing starts in these three divisions accounted for about 62% of the total new single-family housing starts in 2018.
In addition, there were 98,760 new single-family units started in the Pacific Division and 78,858 units started in the East North Central Division in 2018. The Pacific Division accounted for 11% of the total new single-family housing starts, while the East North Central Division accounted for 9%. The other four divisions, including East South Central, West North Central, Middle Atlantic and New England, accounted for the remaining 18% of the total new single-family housing starts.
The scatter plot below compares the nine Census divisions’ annual growth rates of new single-family housing starts in 2017 and 2018. The red line represents the national level in 2018. The X-axis presents the annual growth rates in 2017; the Y-axis presents the annual growth rates in 2018. Each division grew at the different pace, while, nationally, new single-family housing starts rose by 4%. Four out of the nine divisions grew faster than the national level. The New England Division and the Mountain Division led the way with a 13% increase each, followed by the West South Central Division with an 8% increase, and the South Atlantic Division with a 4% increase. Meanwhile, the growth rates of the other five divisions were below the national level.
As shown in Figure 2, compared to last year, the New England Division and the Mountain Division had an acceleration in growth in 2018. Noticeably, the New England Division grew by 13% in 2018, after a 5% growth rate in 2017. Meanwhile, six out of the nine divisions, including South Atlantic, East North Central, Pacific, Middle Atlantic, East South Central and West North Central, experienced a deceleration in growth in 2018. Among them, the West North Central Division experienced the largest deceleration with a decline of 14% in 2018. Moreover, the West South Central Division grew by 8% in 2018, unchanged from 2017.
Startups are racing to fix the construction productivity problem at large. VCs poured $3.1 billion into Construction Tech in 2018. Most of this money went towards modular housing companies or software that promises to optimize current processes such as project management and communication. Yet neither of these buckets addresses the labor shortage head-on. Many startups claim that robots might.
Over the last year, I have been looking into the startups trying to plug this gap with construction robotics.
With such an acute labor shortage, felt deeply by contractors and developers, are robots really the next best thing? What tasks can they accomplish on site today? Most importantly, will the customer— real-life, historically risk-averse contractors and developers—adopt robotics with open arms? If so, when?
The Construction Robotic Landscape
The robotics companies that currently exist take on the shape of a subcontractor. They use robotics to accomplish a vertical task on site like excavation, drywall installation, painting, and roofing. Some companies are inserting their autonomous software into pre-existing construction machinery. While other start-ups are adapting manufacturing robotics and small self-driving vehicles to do construction tasks.
Most construction robotics companies promise to reduce construction costs by 1) cutting down on labor expenses, 2) taking less time to accomplish a task by working longer shifts and into the night, and 3) performing tasks faster—not by actually working faster than a human, but by shortening downtime between sub-tasks.
It’s important to note that many of the companies I spoke to are in their pilot phase. They are testing their technologies on live construction sites for the first time and require additional engineering oversight to get the job done. If these pilots (which may take six-plus months) run successfully, these construction robotics companies will most likely be ready for commercial use in one-and-a-half to two years. The biggest technological hurdles for robotic construction technology at the moment are 1) seamlessly integrating into an already-complicated construction site, 2) working off of plans and maps that evolve as they work, 3) being able to execute the task as well as a contractor.
However, the biggest challenge of all remains whether developers and contractors will adopt the technology at large.
The Customer: Curious, Risk-averse, & Cost-aware
Even though the labor shortage is real, one can’t help but wonder: if the construction industry has been hesitant to adopt technology in the past, will they adopt robotics today?
Unlike in manufacturing, where a single owner is incentivized to operate as efficiently as possible and invests in large capital expenditure projects that pay off over time, construction managers are motivated to turn around a single project as cost-effectively as possible while delivering to the architect’s specifications. They only work on a handful of projects each year, so they have a low willingness to experiment.
From speaking to contractors, I found that they would be willing to adopt technology or hire a robotics sub-contractor if there was proof that the robotic option could drastically reduce costs on their project.
To understand the biggest opportunity for cost savings, I set out to understand what costs the most on a construction site. While this data is challenging to obtain and costs are extremely variable site-to-site, through conversations with contractors, I have seen some patterns emerge, which I plot in the accompanying graph. Costs tend to be held up in a few key verticals, and then widely distributed across most other tasks.
% of Overall Cost CREDIT: JULIETTE CILIA
Of the verticals that tend to cost the most today (structural support [i.e., concrete and steel] and mechanical and plumbing), not many can be automated because of the complexity of the task or we have yet to uncover companies in those verticals. Some verticals that proportionally cost less but still incur significant costs and are deployed across asset types, like drywall and bricklaying, are appealing, but it is unclear how quickly a large-scale contractor would rush to adopt them.
In the near future we will see more companies tackling the cost-consuming tasks on big development projects. CREDIT: PXHERE.COM
The space is still evolving, but I suggest holding off on large checks until we see movers who can tackle some of the costlier verticals, like cast-in-place concrete or facade installation. Automating these jobs will save contractors major money and could be widely adopted in time. While construction robotics are still maturing, I believe that in the next two to three years, we will see more companies tackling the cost-consuming tasks on big development projects, helping us finish more of our cities, offices, hospitals, and homes on time.
Facebook’s advertising practices are, once again, under scrutiny.
This week, Gov. Andrew Cuomo called on the Department of Financial Services (DFS) to investigate Facebook’s ad practices that, according to reports, allow New York state-regulated advertisers to exclude consumers—even those looking for housing—through zip code information, based on classifications including race, sex, disability, national origin, religion, and familial status, the Daily News first reported.
“Facebook touts its advertising platform as a powerful means for housing and housing-related advertisers to reach desired consumers,” a statement from Cuomo’s office reads.
“The allegations against Facebook advertisers are extremely troubling and fly in the face of everything that New York stands for,” Cuomo said in a statement. “I am calling on the Department of Financial Services to investigate these claims and help ensure that New Yorkers seeking housing for themselves and their families are not discriminated against in any way.”
In March, following several legal actions, the American Civil Liberties Union (ACLU) announced a civil rights settlement with the tech giant as it vowed to take steps to ensure that advertisers could not discriminate when sending credit, job, and housing ads to users.
“As the internet—and platforms like Facebook—play an increasing role in connecting us all to information related to economic opportunities, it’s crucial that micro-targeting not be used to exclude groups that already face discrimination,” Galen Sherwin, senior staff attorney at the ACLU, said in a statement.
The spring home buying market got off to a disappointing start in April, as sales sputtered and the state marked the ninth consecutive month of year-over-year sale declines, a new report Thursday shows.
The median sale price of a single-family house was unchanged in April, at $250,000, on a 5-percent decline in sales, according to the monthly report from The Warren Group, which tracks real estate trends in New England.
Sales closed in April typically would have gone under contract 45-60 days earlier, right around the traditional start of the spring homebuying season.
Through the first four months of this year, sales are down nearly 7 percent, compared with the same period in 2018. In the same period, the median sale price fell 1.2 percent, to $240,000, compared with $243,000 for the same four-month period last year.
Hartford County’s home sale market did better than the state as a whole in April. Sales were flat, but the median sale price crept up 1.4 percent to $223,000 from $219,000 for the same month a year ago.
Across all the state’s eight counties, all but Hartford, Litchfield and Middlesex counties saw year-over-year sale declines in April. The deepest decline was registered in New London County, down 16.6 percent compared with April of 2018.
The statewide median sale price was pulled down by declines in Fairfield, Tolland and Windham counties. Price gains in the other five counties — the highest being a 11-percent year-over-year rise in Middlesex County — were not strong enough to lift the overall median price to an increase.
So far in 2019, the four-month trend for sales and prices paid is disappointing for the state’s housing market, which has struggled to recover from the last recession, which ended in March 2010. There were hopeful signs in 2018 when Connecticut registered its third consecutive annual gain in median sale price. The velocity of sales remain a concern, however, failing to show upward momentum.
The median sale price is a well-watched indicator of changes in sale prices and trends affecting property values. But it doesn’t necessarily mean all home prices and values, for that matter, are moving in the same direction.
More and more Americans are fleeing high-tax states – from California to Hawaii to New Jersey to New York – and relocating elsewhere in the hopes of holding onto some more of their hard-earned cash.
Problem is that’s pushing up the cost of living in the states they’re fleeing to, according to the country’s largest real estate trade group.
They’re going to nearby secondary states that used to be “affordable” – states like Washington, Nevada, Colorado and Arizona, for example, says Lawrence Yun, chief economist of the National Association of REALTORS(r).
And it isn’t just the working class looking to move to lower-tax states.
Taxes are often a top consideration particularly when someone is relocating for work or looking to retire says tax expert Bob Meighan, a former executive with Intuit. The biggest tax you’re going to face, after the IRS, is the one your state presents.
That’s why Florida is a big draw “particularly among northeast residents currently living in high property-tax states such as New York, New Jersey (the highest in the country), and Connecticut,” says Yun. “In Florida, you get both lower taxes and a warmer climate.”
Last year, these were the ten highest income tax states, according to TurboTax (*These rates do not include local taxes.):
Builder confidence in the market for newly-built single-family homes rose one point to 68 in October on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builder confidence levels have held in the high 60s since June.
Builders continue to view solid housing demand, fueled by a growing economy and a nearly 50-year low for unemployment. Lumber price declines for three straight months from elevated levels earlier this summer have also helped to reduce some cost pressures, but builders will need to manage supply-side costs to keep home prices affordable.
Favorable economic conditions and demographic tailwinds should continue to support demand, but housing affordability has become a challenge due to ongoing price and interest rate increases. Unless housing affordability stabilizes, the market risks losing additional momentum as we head into 2019.
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index 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.
The HMI index measuring current sales conditions rose one point to 74 and the component gauging expectations in the next six months increased a single point to 75. Meanwhile, the metric charting buyer traffic registered a four-point uptick to 53.
Looking at the three-month moving averages for regional HMI scores, the Northeast rose three points to 57 and the South edged up one point to 71. The West held steady at 74 and the Midwest fell two points to 57.
The U.S. Environmental Protection Agency announced a settlement with Powerstar Home Energy Solutions for failing to comply with federal lead-based paint rules at several residential properties in Southern California. The company will pay a civil penalty of $11,429.
Powerstar has also agreed to spend about $34,000 to purchase equipment to test blood lead levels in children. Blood lead analyzers will be donated to ten community health clinics in San Bernardino and Orange counties. The analyzers measure lead in blood samples and give results in as little as three minutes, allowing immediate follow-up by health care providers. The clinics will receive enough kits to test 480 children.
“Children are highly susceptible to lead-based paint and symptoms are not easily recognized,” said Alexis Strauss, EPA’s Acting Regional Administrator for the Pacific Southwest. “This settlement will give hundreds of families the opportunity to have their children tested, giving parents the information they need to protect their loved ones.”
Powerstar Home Energy Solutions, a trade name of Smithlum & Friend, Inc., is headquartered in Anaheim and offers residential coatings and window replacements. In 2014, EPA found the company violated EPA’s Renovation, Repair and Painting rule by renovating five homes built before 1978 in the cities of Anaheim, Brea, Chino and Redlands without following practices required to reduce lead exposure. The company failed to:
Become certified by EPA to perform residential work;
Distribute the “Renovate Right” brochure to educate occupants about lead-safe work practices;
Keep complete records documenting whether the work followed lead-safe practices.
Common renovation activities like sanding, cutting, and demolition can create hazardous lead dust and chips. When companies fail to follow lead-safe practices, the resulting lead dust and chips can contaminate home surfaces. Contractors who disturb painted surfaces in pre-1978 homes and child-occupied facilities must be trained and certified, provide educational materials to residents, and follow safe work practices. The U.S. banned lead-based paint from housing in 1978 but EPA estimates that more than 37 million older homes in the U.S. still have lead-based paint.
Though harmful at any age, lead exposure is most dangerous to children because their bodies absorb more lead, and their brains and nervous systems are more sensitive to its damaging effects. Babies and young children can also be more highly exposed to lead because they often put their hands and other objects that can have lead from dust or soil on them into their mouths. The effects of lead exposure can include behavior and learning problems, slowed growth, hearing problems, and diminished IQ.
Often lead poisoning occurs with no obvious symptoms, so it may go unrecognized. Parents or caregivers who think their child has been in contact with lead should notify their child’s health care provider who can help decide whether a blood test is needed or recommend treatment.
EPA enforces the federal Toxic Substances Control Act and its Renovation, Repair, and Painting rule and the lead-based paint Disclosure Rule. The Renovation, Repair, and Painting rule protects residents and children from exposure to lead-based paint hazards from activities that can create hazardous lead dust when surfaces with lead-based paint are disturbed. The Disclosure Rule requires those who sell or rent housing built before 1978 to provide an EPA-approved lead hazard information pamphlet, include lead notification language in sales and rental forms, disclose any known lead-based paint hazards and provide reports to buyers or renters, allow a lead inspection or risk assessment by home buyers and maintain records certifying compliance with applicable federal requirements for three years.
30-year fixed-rate mortgage (FRM) averaged 4.16 percent with an average 0.5 point for the week ending December 15, 2016, up from last week when it averaged 4.13 percent. A year ago at this time, the 30-year FRM averaged 3.97 percent.
15-year FRM this week averaged 3.37 percent with an average 0.5 point, up from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 3.22 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
Quote Attributed to Sean Becketti, chief economist, Freddie Mac.
“As was almost-universally expected, the FOMC closed the year with its one-and-only rate hike of 2016. The consensus of the committee points to more rate hikes in 2017. However, the experience of this year combined with the policy uncertainty that accompanies a new Administration suggests a wait-and-see outlook.
“This week’s mortgage rate survey was completed prior to the FOMC announcement. The 30-year mortgage rate rose 3 basis points on the week to 4.16 percent. The MBA’s Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases. If rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017.”
Ongoing home price appreciation offset a small decline in mortgage interest rates to move housing affordability slightly lower in the third quarter of 2016, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).
In all, 61.4 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $65,700. This is down from the 62.0 percent of homes sold that were affordable to median-income earners in the first quarter.
The national median home price increased from $240,000 in the second quarter to $247,000 in the third quarter. Meanwhile, average mortgage rates edged lower from 3.88 percent to 3.76 percent in the same period.
Elgin, Ill., was rated the nation’s most affordable major housing market, where 94.3 percent of all new and existing homes sold in this year’s third quarter were affordable to families earning the area’s median income of $82,500. Meanwhile, Fairbanks, Alaska, was rated the nation’s most affordable smaller market, with 97.7 percent of homes sold in the third quarter being affordable to families earning the median income of $93,800.
For the 16th consecutive quarter, San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market. There, just 9.7 percent of homes sold in the third quarter were affordable to families earning the area’s median income of $104,700.