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Tag Archives: National Association of Home Builders

Tariffs boost housing renovation costs after Zillow and others go all-in on iBuying

Costlier supplies will shrink “razor thin” margins as iBuyers move into new markets

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The United States and China are locked in a tit-for-tat trade war that will boost the price of materials that go into home renovation and construction. The higher costs come as iBuyers such as Zillow, Opendoor and Offerpad are expanding into new markets with plans for fixing up and reselling homes.

 

Many of the products iBuyers need to paint, repair and in some cases renovate kitchens and other rooms will become more expensive in the next few months as the U.S. importers who pay the tariffs pass on the added costs to American consumers. The National Association of Home Builders said tariffs will boost housing construction and renovation costs by $2.5 billion.

“In iBuying, it’s razor-thin margins anyway, so any sort of ripple in the pond has the potential to disrupt,” said Mike DelPrete, a real estate strategist who tracks the iBuying market.

That’s not necessarily a deal-killer for the biggest iBuyers, said DelPrete. Most are well-financed and don’t necessarily need to make a profit from each house they sell as they build out their business models, he said. Some, like Zillow, are hoping to generate profit in other ways, such as attracting mortgage customers as sellers move up to their next purchase, he said.

“What’s happening right now in iBuying is a land grab, and a lot of these companies don’t need to be profitable right away,” said DelPrete. “But if you’re a big iBuyer and your buying and selling thousands of homes a month, higher costs have a potential impact.”

Zillow is the iBuyer who is expanding the fastest. It purchased 898 houses and sold 414 in the first quarter, the company said in its earnings report last week. That was a gain of 80% and 200%, respectively, compared to the fourth quarter. 

“In Q1, we received more than 35,000 seller requests, and that demand is rapidly accelerating,” CEO Rich Barton said on a conference call after the company reported its earnings to Wall Street. “We now receive one request every two minutes, which is nearly $200 million in potential transaction value per day.” 

Zillow and the other iBuying companies cited declined to comment.

Last week, President Donald Trump hiked tariffs to 25% from 10% on $200 billion worth of Chinese goods. In retaliation, China announced plans to raise tariffs to 25% on $60 billion worth of U.S. products starting June 1. President Trump has threatened to expand tariffs to a further $300 billion of Chinese imports.

The construction imports from China now carrying a 25% tariff include: concrete, nails, screws, ceramic tiles, and asphalt roofing shingles, according to the National Association of Home Builders. Also on the list: light fixtures, kitchen cabinets, circular saw blades, stainless steel used for appliances and various types of raw materials that go into U.S. building products.

Tariffs, also known as duties or levies, are collected by U.S. Customs and Border Patrol agents from importers – U.S. businesses – as goods enter the country. In other words, no one is handing China a bill. Typically, those American importers pass the added cost to their distributors who eventually pass it on to the consumer at the end of the line – in the renovation industry, that’s the guy sent to Home Depot, Lowes or similar retailers to pick up supplies. 

“To be clear, tariffs are taxes paid by American businesses and consumers, not by China,” said David French, senior vice president of government relations at the National Retail Federation.

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Continue reading Tariffs boost housing renovation costs after Zillow and others go all-in on iBuying

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U.S. Housing Starts Top Forecasts on Multifamily Construction

U.S. new-home construction rose by more than forecast in March on a rebound in multifamily starts, giving a boost to first-quarter economic growth, government figures showed Tuesday.

HIGHLIGHTS OF HOUSING STARTS (MARCH)

  • Residential starts rose 1.9% to 1.32m annualized rate (est. 1.27m) after upwardly revised 1.3 mln pace in prior month
  • Multifamily home starts rose 14.4%; single-family fell 3.7%
  • Permits, a proxy for future construction of all types of homes, rose 2.5% to 1.35m rate (est. 1.32m) after 1.32m pace 

Key Takeaways

The results show a tight job market, improved finances and consumers’ elevated confidence to purchase big-ticket items are supporting construction. That means homebuilding probably contributed to economic growth for the second consecutive quarter. 

The strength in March was concentrated in multifamily construction such as apartment buildings. That category tends to be volatile; March’s advance in starts followed a 10.2 percent drop in the prior month. Permits for single-family homes were a weak spot, dropping 5.5 percent, the biggest decline in seven years, to the lowest level since September.

While demand remains solid, a shortage of workers, rising costs for materials and a scarcity of ready-to-build lots are limiting gains in building activity. With borrowing costs rising, affordability is also becoming a hurdle, as property values outpace potential buyers’ income growth.

 
 

Sentiment among homebuilders fell in April for a fourth straight month amid limited land availability and higher lumber prices, according to data Monday from the National Association of Home Builders/Wells Fargo.

Nevertheless, sentiment remains elevated, and in an indication that builders will remain busy in coming months, the number of homes under construction at the end of March reached 1.125 million, the highest level since July 2007. Single-family dwellings under construction inched up to 504,000, the most since mid-2008.

What Our Economists Say

The overall strength in March housing starts is all the more encouraging given that the colder-than-average weather is likely to have curtailed gains. Fundamentals appear to support a positive outlook for the construction sector, despite labor constraints and rising material costs. Demand should also be supported by a tight labor market and steady pay gains.

— Niraj Shah and Carl Riccadonna, Bloomberg Economics

Read more for the full reaction note.

Other Details

  • Single-family home starts fell to a 867,000 rate from 900,000 the prior month
  • Groundbreaking on multi-family homes rose to an annual rate of 452,000
  • Gains in housing starts were led by Midwest, with a 22.4 percent advance; Northeast rose 0.8 percent, while South and West dipped
  • Report shows wide margin of error, with a 90 percent chance that the March housing-starts figure was between a 10.5 percent drop and 14.3 percent gain
  • Report released jointly by the Census Bureau and Department of Housing and Urban Development in Washington

— With assistance by Chris Middleton

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Continue reading U.S. Housing Starts Top Forecasts on Multifamily Construction

Demand for major remodels remains strong

As more long-term homeowners make the decision to stick with the home they have, they are undertaking larger-scale remodeling projects, such as complete room renovations or additions.

Due to the complexity of these changes, more homeowners are hiring professionals to assist with or do the entire project for them. While that’s great for business, it is pushing out wait times as project backlogs begin to pile up.

Continue reading Demand for major remodels remains strong

Mixed signals keep housing market in check

For real estate agents, February was a relatively good month. For homebuilders, it was disappointing. Consumers were happy to find extra money in their paychecks as the new tax laws took effect. Prospective homebuyers were concerned about impending mortgage rate hikes and escalating prices.

Continue reading Mixed signals keep housing market in check

No end in sight for remodeling industry’s upward trajectory

Earlier speculation that the red-hot remodeling industry might begin to cool down in 2018 appears to have been premature.

Despite challenges of labor shortages and rising materials costs, market conditions are generally favorable for remodelers of all stripes. A number of factors are coalescing that likely will not only continue to drive positive growth this year, but may also outpace that of recent years.

Continue reading No end in sight for remodeling industry’s upward trajectory

The right approach to design for aging in place

Building and remodeling projects to make homes more aging-friendly have boomed in recent years. And no wonder. The 74-plus million members of the baby boom generation — whose youngest members will turn 55 in two years and oldest members are already in their 70s — make up the largest portion of the nation’s homeowners and the second-largest group of homebuyers.

However, surprising as it may seem, these senior homeowners are undertaking changes to their homes not because they anticipate getting older, but because they foresee a time when their lives will change.

A survey conducted last spring by the National Association of Home Builders Remodeling Group found 80 percent of remodeling companies were doing aging-in-place projects, up from 68 percent in 2013. Interviewing local remodelers about the survey, the Detroit Free Press cited the example of one firm that had seen its business from aging-in-place projects increase to 30 to 40 percent of total revenue from just 15 to 20 percent five years ago.

In its second-quarter 2017 Home Design Trends Survey, the American Institute of Architects reported that aging-friendly and multigenerational living modifications were among the most commonly requested special features in residential projects. The NAHB’s most recent 55+ Housing Market Index shows builder confidence remaining positive and optimistic for the 14th quarter in a row.

Housing, building and senior organizations have been expecting the demographic inevitability of the aging of the baby boom generation for the past several decades. With multiple surveys showing that the vast majority of boomers have long planned to remain in their homes in their later years, much has been written about the benefits of modifying the home for aging-in-place.

In anticipation of the “silver tsunami,” professional associations like the National Kitchen & Bath Association and the American Society of Interior Designers established efforts early on to educated their members on the changes that occur with aging and how to design environments to make homes supportive, comfortable and safe for older occupants.

Although it took them some time to warm up to the idea, boomers are now coming round to appreciate the benefits of making some modifications, renovations and upgrades to their homes in response to present and future needs. But not so much, as one might expect, because they have come to accept that they are aging. Rather, it is because their lives are changing, and they want homes that will accommodate those changes.

Findings from this year’s Home Advisor Aging in Place report provide insights that should prove valuable to interior designers and kitchen and bath specialists. One of the difficulties designers have had with selling aging-in-place modifications to homeowners has been the stigma around aging.

Whatever their age, people in general don’t think of themselves as elderly, and they don’t want to think about getting “old,” by which they usually mean infirm or incapacitated. However, they do recognize that changes are occurring in their lives, whether that means no longer having children at home, experiencing some health or mobility issues, entering retirement or observing the needs of caring for an aging parent or relation.

“So, how do homeowners prepare for aging in place when they can’t admit that they’re aging in the first place?” asks the report’s author Marianne Cusato, adjunct associate professor at the University of Notre Dame’s School of Architecture.

“They perform regular maintenance and complete projects to keep their homes in good working order, for starters. And that sets them up to layer on the aging-related projects as their aging-specific needs are revealed.”

The report identifies a seven-phase planning period, which begins typically around age 55 and may continue to up to age 75 and beyond. As homeowners’ physical needs and lifestyles change over time, they move up to the period to add more extensive age-friendly modifications.

The changes usually begin by addressing low-cost, ease-of-use and ease-of-maintenance issues, and gradually move to renovations and upgrades made to improve functionality, safety and mobility. A major motivator for making changes is the experience of watching a loved one struggle to get around their home as they age.

For designers, the big takeaway from the report is that they don’t have to talk to these clients about aging. They just have to know what kinds of modifications and improvements to offer them that will suit the changes in their lives they want to address. It also indicates that there is substantial opportunity to attract clients early on by assisting them with smaller projects and then continuing to help them as their needs change over time.

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