As a follow up to our last column on What Covid Means To The Home Building Industry, we are going to summarize where we are now.
Lot Availability
Lot inventory is still low in most of the communities we build in with very few developments in the pipeline. If you go further out you may find large master planned communities with mostly production builders. However if you want to be in the North East Tarrant County area it will be much harder to find a good lot and you will be paying a premium. Even neighboring communities like Argyle have a limited supply of custom home lots (under 5 acres).
Financing
Rates are low and liquidity is slowly returning to the market. Many mortgage companies and lenders are still struggling to get funding. Be careful of where you go for loans. The loan officers are great resources however they are sales persons and they do not have control over the back end where the funding comes from. Sometimes a pre approval doesn’t guarantee a funded loan.
Credit requirements have increased as have equity requirements which means larger down payments. Be very careful about your debt, liquid funds, etc… We have all heard about not buying a car, apply for a credit card or spending your savings on a vacation before your loan closes. Now this is more important than ever. Lenders are still nervous. Don’t give them an excuse to hit the eject button.
Supply Chain
The supply chain is rough now and it is going to get worse before it gets better. Even though companies are slowly coming back on line, the production will be slow to rebound. Many companies were shut down, specifically lumber mills.
As new safety protocols are put in place at factories and transportation companies, there will be further delays. More than ever we are going to have to be careful about changing selections and orders after the fact.
Home building will be more expensive as costs that will trickle into our suppliers. They are working through shortages, less productivity (fewer employees working), higher transportation costs and eventually the relocation of manufacturing to higher cost areas (fleeing China). Shortages, delays and price increases are all on their way. Homes are going to get more expensive. Please don’t shoot the messenger.
Home Pricing
Prices have moderated as we are still building with pre virus pricing. The number of unsold homes on the market is dropping as fewer are being started. We would expect prices to start escalating this summer as the new costs are flowing into the system. We are still hearing that many national builders are slow to start new building cycles (that will change) and lenders are being much more restrictive on spec homes. Supply of ready to move in homes will be shrinking.
The Building Process
We do not expect any significant changes in the near term other than waiting on materials to show up. The wettest winter since 1908 was a bigger issue in the construction process than the virus. When we get into 3rd & 4th quarter we do expect more delays in getting material. This should abate by 2nd quarter 2021.
Home Design
We are seeing a host of changes coming to homes which will focus around health and comfort. We shared an interesting column from Forbes recently. Although it focused more on large condominium developments it has some relevance on detached homes. Watch for new design concepts and health features being offered in the next generation of homes.
Home Health
We will be introducing some features and elements for our families to consider which may give more peace of mind in the environment for our family’s homes. Many of these are features we have offered for years which we will be reminding families. Specifically we see less porous materials used inside and air/water filtration.
Changes are coming to our industry. If you would like to visit on how this will modify your family’s plans please reach out.