The Expert Podcast

Overview:

• Challenges in the building and construction trade: rising costs, permits, and labor.
• Issues with long approval times and carrying costs that make projects less viable.
• The impact of market conditions on new developments and remodels.

Key Discussion Points:

• Expensive Project Costs:
  • High costs for clients and contractors, including permits, materials, and labor.
  • Carrying costs becoming a major issue for new construction due to long approval times.
• Permit Delays & Impact:
  • The delay in obtaining permits can lead to increased material costs and interest rates, affecting project viability.
• Real Estate Market Outlook:
  • Housing prices expected to remain high for years, according to Fortune.
  • Even though interest rates are high, housing prices are unlikely to come down.
• Interest Rates & Mortgage Costs:
  • Mortgages becoming more expensive as rates increase and more borrowers become ineligible for standard rates.
  • A slight pause in rate hikes may end by mid-2024, with another increase expected to balance inflation and bond returns.
• Tighter Construction & Real Estate Markets:
  • Moody’s downgrade of US debt will likely push rates higher, tightening the construction and real estate market.

Call to Action:

• Share your opinion in the comments about how these market conditions are affecting you or your projects.

Builders and contractors: How are you adapting your building practices to meet the demands of the market and regulations influenced by climate change?

Greener Homes and Energy Efficiency:

• Are you seeing increased demand for energy-efficient, hurricane-resistant, or flood-resilient features in home construction?
• How are these changes affecting new builds, remodels, and additions?

Climate Risk and Regulations:

• Are zoning, permits, and regulations pushing you towards climate-conscious building practices?
• Is the demand for these features coming from clients, developers, or government regulations?

Investment in Climate-Resilient Homes:

• As a builder, is it worth investing in climate-resilient features (such as energy efficiency or hurricane resistance)? Will you see a return on this investment?

Energy Efficiency and Climate Defense:

• Beyond insulation and vapor barriers, are you seeing a shift towards more hardened, energy-efficient homes as the next level in climate defense?
• Are these changes a result of customer demand or regulatory requirements?

Call to Action:

• We want to hear from you! Builders and contractors, share your thoughts and experiences regarding the growing trend of climate-conscious home construction.
• Let us know in the comments what you think about this evolving industry shift.

Lumber Prices and Market Fluctuations:

• Lumber prices have experienced instability, ranging from $1,500-$1,600 per thousand board feet, now down to $500-$600.
• High interest rates initially created demand for new homes due to limited resales, but the situation has shifted as rates have decreased.

Interest Rates and Builder Optimism:

• Interest rates are dropping, now closer to 7%, which is bringing some optimism to builders.
• Lower rates could lead to more resale homes on the market, though it could also increase demand for new homes as buyers return to the market.

Challenges in New Construction:

• For non-spec homes, there’s a delay in construction time, leading to hesitation among buyers.
• While the Federal Reserve may cut rates in the future, inflation in building materials and mortgage company markups may keep rates stable.

Labor Shortages and Market Shifts:

• Skilled labor shortages continue, with potential impacts on new home construction.
• Remodels and additions are expected to decrease, especially those done during the pandemic.
• Growing pressure for multifamily housing due to municipal pushes for workforce housing, apartment complexes, and duplexes/triplexes.

Call for Feedback:

• Builders are encouraged to share their thoughts on the market outlook for 2024-2025.
• Builders are also invited to share how these market shifts are affecting their ability to secure projects and clients in their local and national markets.

Current Market Trends:

• Home builders and contractors are seeing an increase in volume.
• Interest rates have slightly dropped, which is helping drive production, especially single-family homes.
• The availability of 30-year mortgages is contributing to growth in production.

Predictions for the Future:

• Some experts predict a "golden age" for home builders with a backlog of homes keeping them busy through 2024, 2025, and beyond.
• However, many industry analysts believe that despite the ramp-up in production, it may not be enough to ease the backlog of homes.

The Two Sides of Real Estate:

• Real estate has two primary components: the land (parcel) and the improvements (construction).
• Many older homes built in the 40s and 50s are now becoming outdated and may need complete remodels or new construction, especially in areas like South Florida.

Key Factors to Watch:

• Demand for remodeling or new homes is high, particularly in areas with older properties now becoming primary residences.
• Builders, contractors, subcontractors, and employees will all be impacted by these trends.

Looking Ahead:

• How much of this demand will filter down to contractors and subcontractors?
• Will there be enough qualified, skilled labor to meet the demand for home building and construction in the coming years?

What’s happening in your area?

• Share your thoughts on the future of home building and construction. Do you think there’s enough qualified labor to meet the demand?

 Key Points:

• Demand for Skilled Workers: Construction firms are adding an average of 166,000 jobs each month, a 50% increase compared to pre-pandemic numbers.
• Unfilled Jobs: Currently, there are 500,000 unfilled construction jobs due to a shortage of qualified workers.
• Retiring Workforce: The shortage is primarily caused by retiring workers who are not being replaced, especially in skilled trades like framing, plumbing, electrical, insulation, and roofing.
• Training and Experience: Many construction jobs require specific skills and experience, making it challenging to fill roles quickly.
• Housing Market Impact: While the housing market is slow, builders are working to increase inventory, but the shortage of labor affects production.
• Resale Market Challenges: People are hesitant to sell their homes due to low mortgage rates, contributing to the shortage of available housing.
• Employee Retention Issues: Construction companies face challenges retaining good employees, as competitors often offer higher wages, making it difficult to maintain workflow and plan for projects.
• Call to Action: If you're in construction, whether as a contractor, builder, or in the trades, share your experience with how the worker shortage is impacting your business or income. 

 Can’t find a resale house? With inventory low, you might be considering new construction as your next option.

Downsides of New Construction:

• Construction Quality: Many new homes today are built with materials and techniques that may result in a shorter lifespan (e.g., 40-50 years) compared to older homes that were built to last longer.
• Layout & Lot Appeal: Once the fresh paint and countertops fade, the floor plan and lot may not be as desirable, especially in the long run.
• Higher Property Taxes: New homes can have higher property taxes, even if their market value is similar to a resale home that benefits from a lower tax rate.
• Limited Negotiation: Unlike resale homes, where sellers might negotiate on price, new homes typically sell at list price with little room for discounting.
• Additional Costs for Basics: New homes often lack basic items like carpets, blinds, and appliances, which might require an additional $5,000-$10,000 in expenses.

Key Considerations:

• If you're choosing between a new or resale home, weigh these factors to make an informed decision. New homes may offer customization options but come with additional costs and considerations.
• Resale homes might offer better value, lower taxes, and fewer hidden costs.
• The choice depends on your needs, preferences, and budget.

Make sure to consider all aspects before making your final decision! 

Is the new construction industry going up or down?

• Conflicting reports: Some say new homes are in demand, while others predict a potential crash.

The rise of new home buyers:

• Many buyers are opting for newly built homes due to limited resale options.
• With high mortgage rates, many homeowners are reluctant to sell because they can’t find another home to buy.
• Even as rates come down, low inventory continues to push people towards new construction.

Why new homes may be more appealing:

• Newly built homes are often turnkey, meaning no immediate maintenance or updates needed.
• Unlike older homes, you won’t have to replace things like paint, roof, or gutters immediately.
• First-time buyers may need to buy new window treatments or carpets, but these costs can apply to resale homes as well.

Housing market challenges:

• The market has been bogged down by high prices, rising mortgage rates, and lack of inventory, pushing buyers to the sidelines.
• Existing homes account for 90% of sales, but many homeowners are locked in with low mortgage rates and reluctant to sell.

The quality of homes over the years:

• Older homes from the 60s to 80s were solidly built and may last longer than newer ones.
• Homes from the 90s and 2000s tend to be more cookie-cutter and may not be as durable.
• A 50-year-old house might be in better condition than a 20-year-old one due to better construction practices in the past.

New home construction:

• Construction quality can vary, so it’s important to research builders and get proper inspections.
• New developments are on the rise, with one builder in South Florida planning to build 300 new homes.

Let us know your thoughts:

• Share your observations on new home construction in your area. Is it booming, or is it still too expensive?

Overview:

• Explore an often overlooked factor in why affordable housing is difficult to build, particularly for small builders.
• The issue revolves around high permit fees and impact fees that make smaller housing units, like cottages, financially unfeasible.

Featured Story:

• A letter to the editor by Dick Nson, a real estate consultant with 43 years of experience, highlights his personal story of trying to build affordable housing in Oregon.
• Dick is a member of the Build Small Coalition and is working on a project to build four cottages for lower-income seniors.

The Issue:

• Dick’s plan to build 400-square-foot cottages for $123 per square foot hit a roadblock with $49,000 in permit and impact fees per unit.
• This high cost per unit is a significant barrier to affordable housing construction.

Comparative Example:

• A nearby 9-bedroom, 4,000-square-foot house had the same $50,000 permit fee, but it’s easier to absorb this cost in a larger, more expensive home.
• Smaller projects like Dick’s cottages cannot absorb the same fees, making the math unworkable for affordable housing.

The Bigger Picture:

• The episode explores whether this issue is intentional, whether it's a barrier to building smaller homes, or whether it's a result of inefficient policies that make affordable housing harder to achieve.

Call to Action:

• Share your thoughts in the comments: Is this system intentional, or is it a failure to incentivize affordable housing development?

Key Points:

• A mill in Rosboro, Oregon is shutting down, resulting in 25 layoffs.
• Another larger mill in the central Oregon Valley (Wamit Valley) will lay off 100 employees in the coming weeks.
• These mills serve a significant portion of the Pacific Northwest, raising concerns about the industry's future.
• Market Watch reports a sharp 15% drop in housing starts, the steepest in nearly four years.
• Housing starts have been a bright spot in the real estate market, especially as resale homes are slow to hit the market.
• A potential decline in new home construction could affect the timber, lumber, and construction sectors, as well as the real estate market overall.

Engagement: Share your thoughts in the comments—how do you think these changes will affect the industry? 

Robot Construction Workforce on the Rise:

• A groundbreaking article in Forbes reveals that a Boston-based billionaire is creating a robot army to handle construction for his building company.
• The company, Suffk Saoke, plans to start with commercial projects and eventually move into residential construction.
• The company’s strategy focuses on eliminating labor costs, despite a hefty investment in technology.
• This innovation could reshape the construction industry, but what does this mean for human workers? Will smaller construction companies be left behind as larger firms adopt robotic technology?

Impact on Skilled Trades and Construction Jobs:

• Skilled tradespeople currently earn high wages (up to $100/hour), but robotic automation may threaten these jobs.
• Small construction companies may struggle to compete with the cost of advanced technology, leading to larger companies taking over more of the market.
• Could this mean the end of construction work as a viable profession for many? Let us know your thoughts in the comments.

Stricter Building Codes and Rising Construction Costs:

• New building codes in Michigan are making it more difficult and expensive to build homes.
• The higher standards will likely increase construction costs by $40,000 to $50,000 per house, pushing home prices up by as much as $200,000.
• Only high-end builders may be able to afford to meet these new standards, potentially pricing many out of the market.
• As building codes become more stringent and technology threatens to replace human labor, will construction still be a sustainable career path?

The Future of Construction:

• The combination of rising costs, new building regulations, and the automation of construction jobs could mean that homeownership and the construction industry may become out of reach for the average person.
• We want to hear your opinions—do you think these trends will harm the construction industry or are they just part of a natural evolution? Share your thoughts in the comments!