The Nail, March 2023

THE NAIL

The official magazine of Home Builders Association of Middle Tennessee President

Brandon Rickman

Vice President Jim Hysen

Secretary/Treasurer

Kelly Beasley

Executive Vice President John Sheley

Editor and Designer Jim Argo

Staff

Connie Nicley

Kim Grayson

THE NAIL is published monthly by the Home Builders Association of Middle Tennessee, a non-profit trade association dedicated to promoting the American dream of homeownership to all residents of Middle Tennessee.

SUBMISSIONS: THE NAIL welcomes manuscripts and photos related to the Middle Tennessee housing industry for publication. Editor reserves the right to edit due to content and space limitations.

POSTMASTER: Please send address changes to: HBAMT, 9007 Overlook Boulevard, Brentwood, TN 37027. Phone: (615) 377-1055.

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Building materials remain top challenge

Materials remain the top challenge to builders, though interest rates and general inflation are swiftly rising up the list.

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NAHB awards highlight 2023 design trends

BALA Award winners at the NAHB’s 2023 International Builders Show (IBS) reflect the top design trends for the coming years. 11

Spring Fling & Builders Show returns this May

The HBAMT Spring Fling & Builders Show returns May 9th. Secure your booth or sponsorship to participate now.

Advertise in THE NAIL

For advertising rates and information, or to secure your ad, please email jargo@hbamt.org with your questions and requests.

New home sales on the rise in January

Declining mortgage rates and home prices in January, coupled with home builders use of sales incentives, helped boost new home sales last month.

Sales of newly built, single-family homes in January increased 7.2% to a 670,000 seasonally adjusted annual rate from an upwardly revised reading in December, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“The latest HMI survey shows 57% of builders are using incentives to bolster sales, including providing mortgage rate buy-downs, paying points for buyers and offering price reductions,” said Alicia Huey, chairman of the NAHB and a custom home builder and developer from Birmingham, Ala. “Buyer incentives, along with stabilizing mortgage rates during the month of January, increased the pace of new home sales for the month. However, in a sign of current market weakness, sales are down 19.4% compared to a year ago.”

“Even though new home sales edged higher

in January, the recent uptick in mortgage rates would imply continued weakness in the coming months,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “In terms of affordability, the median price is down for the third straight month and is down compared to a year ago.”

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the January reading of 670,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory declined in January but remained elevated at a 7.9 months’ supply. A measure near a 6 months’ supply is considered balanced. Completed, ready-to-occupy inventory, is up 115% from a year ago, to 73,000 in January from 34,000 last year. However, that inventory type remains just 17% of total inventory.

The median new home sale price declined for the third straight month after peaking in October at $496,800. In January the median price was $427,500, down 8.2% from December.

Regionally, on a monthly basis, new home sales fell in three regions, down 19.4% in the Northeast, 6.9% in the Midwest and 7.3% in the West. New home sales rose 17.1% in the South. n

Buyer incentives, along with stabilizing mortgage rates during the month of January, increased the pace of new home sales for the month.

Cautious optimism for builders in February

Two consecutive solid monthly gains for builder confidence, spurred in part by easing mortgage rates, signal that the housing market may be turning a corner even as builders continue to contend with high construction costs and building material supply chain logjams. Builder confidence in the market for newly built single-family homes in February rose seven points to 42, according to the NAHB/ Wells Fargo Housing Market Index (HMI) released recently. This is the strongest reading since September of last year.

“With the largest monthly increase for builder sentiment since June 2013, excluding the period immediately after the onset of the pandemic, the HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market,” said NAHB Chairman Alicia Huey. “The two monthly gains for the HMI at the start of 2023 match the optimism noted by builders at the recent International Builders’ Show in Las Vegas, who reported a better start to the year than expected last fall.”

Noting that the most challenging part of the home building market remains construction of entry-level homes, Huey called on policymakers to “help by reducing the cost of developing lots

and building homes via regulatory reform.”

The average 30-year fixed rate mortgage rate peaked at 7.08% in October, according to Freddie Mac. Although rates declined to approximately 6.1% at the start of February, the 10-year Treasury rate has moved up more than 30 basis points during the past two weeks, indicating an increase for mortgage rates lies ahead.

“While the HMI remains below the breakeven level of 50, the increase from 31 to 42 from December to February is a positive sign for the market,” said NAHB Chief Economist Robert Dietz. “Forecasts indicate that the housing market has passed peak mortgage rates for this cycle. And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.”

And while builders continue to offer a variety of incentives to attract buyers during this housing downturn, recent data indicate that the housing market is showing signs of stabilizing off a cyclical low:

n 31% of builders reduced home prices in February, down from 35% in December and

2023 off to sluggish start for single-family production

Although rising builder sentiment indicates a turning point for housing later this year, lackluster single-family production in January is a sign that the housing sector faces further challenges, as elevated mortgage rates and high construction costs continue to put a damper on the market.

Overall housing starts decreased 4.5% to a seasonally adjusted annual rate of 1.31 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The January reading of 1.31 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 4.3% to an 841,000 seasonally adjusted annual rate. The multifam-

ily sector, which includes apartment buildings and condos, decreased 4.9% to an annualized 468,000 pace.

“Housing construction weakened in January as ongoing affordability conditions fueled by high mortgage rates and building material costs challenged the market,” said Alicia Huey, NAHB chairman. “And while a recent two-month upturn in builder sentiment indicates a turning point for single-family construction could take hold in the months ahead, policymakers need to fix the supply chain for building materials to ensure builders can add the additional inventory the housing market desperately needs.”

“As completions continue to outpace construction starts, this marks the eighth straight monthly decline for the number of

36% in November.

n The average price drop in February was 6%, down from 8% in December, and tied with 6% in November.

n 57% offered some kind of incentive in February, down from 62% in December and 59% in November.

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 indices posted gains for the second consecutive month. The HMI index gauging current sales conditions in February rose six points to 46, the component charting sales expectations in the next six months increased 11 points to 48 and the gauge measuring traffic of prospective buyers increased six points to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose four points to 37, the Midwest edged one-point higher to 33, the South increased four points to 40 and the West moved three points higher to 30 n

single-family homes under construction, which has fallen to 752,000,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “Meanwhile, the number of apartments under construction stands at the highest level since November 1973, which means a slowdown for apartment starts is approaching.”

On a regional basis compared to the previous month, combined single-family and multifamily starts were 42.2% lower in the Northeast, 25.9% lower in the Midwest, 7.3% higher in the South and 5.5% higher in the West.

Overall permits increased 0.1% to a 1.34 million unit annualized rate in January. Single-family permits decreased 1.8% to a 718,000 unit rate. Multifamily permits increased 2.5% to an annualized 621,000 pace.

Looking at regional permit data compared to the previous month, permits were 7.8% lower in the Northeast, 1.7% higher in the Midwest, 3.0% higher in the South and 4.6% lower in the West. n

Materials remain builders top challenge

The price and availability of building materials again topped the list of problems builders faced last year, but interest rates, general inflation and negative media moved considerably up the list.

The price and availability of building materials again topped the list of problems builders faced last year, while interest rates (along with general inflation and negative media reports) moved considerably up the list. According to special questions on the January 2023 survey for the NAHB/Wells Fargo Housing Market Index, building material prices were a significant issue for 96% of builders in 2022. The second most widespread problem in 2022 was availability/time it takes to obtain building materials, cited by 86% of builders. These were the same two problems that topped the list in 2021. Cost and availability of labor has also been a relatively widespread problem, reported as a significant by 82% of builders in 2021 and 85% in 2022, a result that is not surprising given the large number of unfilled job openings in the construction industry.

Compared to 2021, some of the problems became significantly more widespread in 2022. High interest rates were a problem for only 2% of builders in 2021, but this increased to 66% in 2022. Rising inflation in the US economy was a significant problem for 63% of builders in 2021, compared to 85% in 2022. And 26 percent of builders said negative media reports making buyers cautious was a significant problem in 2021, compared to 55 percent in 2021.

Even more builders—a full 93%—expect high interest rates to be a problem in 2023, up strongly from the 66% who said it was a problem in 2022. Moreover, both the current and expected numbers were much higher in the recent survey than at any time in the 2011-2021 span.

Compared to the supply-side problems of materials and labor, problems attracting buyers have not been as widespread, but builders expect many of them to become more of a problem in 2023. Negative media reports making buyers caution was a significant problem for 55% of builders in 2022, but 79% expect them to be a problem in 2023. Buyers expecting prices or interest rates to decline if they wait was a significant problem for 49% of builders in 2022, compared to 80% who expected it to be an issue in 2023. Concern about employ-

ment/economic situation was a problem for only 41% of builders in 2022, but 73% expect it to be a problem in 2023. Gridlock/uncertainty in Washington making buyers cautious was a significant problem for 38% of builders in

2022, compared to 54% who expected it to be a problem in 2023. Finally, buyers unable to sell their existing homes was a significant problem for only 13% of builders in 2022, but 52% expect it to be a problem in 2023 n

NAHB awards showcase 2023 design trends

More than 140 single-family, multifamily, interior design, remodeling and community projects were honored at the 2022 Best in American Living™ Awards (BALA) ceremony during the 2023 International Builders’ Show in Las Vegas, hosted by the NAHB. The awards are sponsored by Monogram, and the media partner is Professional Builder.

Judges awarded nine Best in Region, seven Of the Year homes and projects, a Wow! Award and a Community Impact Award. These front-runners represent the nation’s best in home and community design, interior design and remodeling, and showcase top design trends that home buyers can expect to see in homes and communities over the next several years.

“Outdoor living was a huge focus in a lot of the awards we saw— from single-family to multifamily and community amenities,” noted Deryl Patterson, chair of the 2022 judging panel, and president and founder of Housing Design Matters, Inc. “Even in colder climates, there were great indoor/outdoor spaces that could be utilized differently depending on the time of year.”

Additional trends include:

• Wine in Design. These dazzling features provide not only a great focal point for entertaining spaces, but also highlight what wine symbolizes, Patterson shared. “It’s not just a drink, but a celebration,” she said. “We’re taking the celebratory nature of wine and making it a design element.”

• Luxury in the Bathroom. “The showers can’t get any bigger,” observed Patterson. The size of the home does play a role to some degree, and standalone or additional soaking tubs are more likely

in bathrooms with larger square feet. Great bathroom designs also focus on the ability to bring in lots of natural light while still maintaining privacy, whether through frosted panes or outdoor privacy walls.

• Colorful Kitchens. From eye-catching backsplashes to ceiling details, today’s kitchens are expanding beyond the basic white and wood palettes in years prior through thoughtful touches and clean-line designs. Even hood designs are getting more creative as designers work to disguise them in clever ways and help them to blend more seamlessly with the overall space.

• Kitchen Islands also remained prominent in many designs. “The kitchen island continues to reign supreme,” stated Patterson. Award-winning designs featured creative insets and add-ons, such as wine fridges, and larger kitchens may feature not one, but two of these entertainment workhorses.

• Fantastic Foyers. Rich materials, strong contrasts and sweeping staircases made great first impressions in several standout entryways.

• Exteriors with Style. Details added a level of richness to the stunning projects that wowed the judges, including the 2022 BALA Home of the Year. From traditional to contemporary to modern farmhouse, rich regional materials found balance with contrasting colors to create strong curb appeal. Color blocking was also prevalent in multifamily designs to create a cohesive, yet unique, appearance.

More information about this year’s winners and trends can be found at bestinamericanliving.com n

Builders SHOW Exhibit Tent

The Builders Show exhibit tent will be located on the south side of the HBAMT building and measure 120 x 40 feet boasting space for forty-five (47) 10 x 5 feet exhibit spaces.

DON’T MISS OUT ON THIS TERRIFIC OPPORTUNITY!

Return your registration form to the HBAMT today to reserve your space or sponsorship! Exhibit spaces are limited to two per company.

Tuesday, May 9th

Return your registration form to the HBAMT today!

Tuesday, May 11

2023 SPRING BUILDERS SHOW EXHIBITORS/SPONSORS REGISTRATION FORM

Secure your spot today by returning the registration form provided below to the HBAMT today!

I am registering as an: r EXHIBITOR - $595 per booth r SPONSOR - $550

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cnicley@hbamt.org

SPIKE REPORT

Twenty-two SPIKES (in bold) increased their recruitment numbers last month. What is a SPIKE? SPIKES recruit new members and help the association retain members. Here is the latest SPIKE report as of January 31, 2023.

MARCH CALENDAR

CHAPTERS

CHEATHAM COUNTY CHAPTER

Chapter President - Roy Miles

Cheatham County Chapter details are being planned. Next meeting: to be announced.

Chapter RSVP Line: 615/377-9651, ext. 310

DICKSON COUNTY CHAPTER

Chapter President - Mark Denney

The Dickson County Chapter meets on the third Monday of the month, 12:00 p.m. at Colton’s Steakhouse in Dickson. Next meeting: to be announced.

Price: FREE, lunch dutch treat.

Chapter RSVP Line: 615/377-9651, ext. 264

MAURY COUNTY CHAPTER

Chapter President - Lisa Underwood Maury County Chapter details are currently being planned. Next meeting: to be announced.

Chapter RSVP line: 615-377-9651, ext. 312; for callers outside the 615 area code, 1-800-571-9995, ext. 312

METRO/NASHVILLE CHAPTER

Chapter President - Tonya Esquibel

The Metro/Nashville Chapter meets on the third Tuesday of the month, 11:30 a.m. at the HBAMT offices.

Next meeting: to be announced.

Topic: to be announced.

Price: to be announced.

RSVP to: cnicley@hbamt.org

ROBERTSON COUNTY CHAPTER

Next meeting: to be announced. Robertson County RSVP line: 615-377-9651, ext. 313.

SUMNER COUNTY CHAPTER

Chapter President - Joe Dalton

The Sumner County Chapter meets on the fourth Tuesday of the month, 11:30 a.m. at the new Hendersonville Library.

Next meeting: to be announced.

Chapter RSVP Line: 615/377-9651, ext. 262

WILLIAMSON COUNTY CHAPTER

Chapter President - Christina James

The Williamson County Chapter meets on the third Tuesday of the month, 11:30 a.m. at the HBAMT offices.

Next meeting: to be announced.

Builders Free pending sponsorship.

Price: $10 per person with RSVP ($20 w/o RSVP).

Chapter RSVP Line: 615/377-9651, ext. 305

WILSON COUNTY CHAPTER

Chapter President - Margaret Tolbert

The Wilson County Chapter meets on the second Thursday of the month, 9:00 a.m. at the Mt. Juliet Chamber of Commerce: 2055 N. Mt. Juliet Road, #200 - 37122.

Next meeting: to be announced.

Topic: to be announced.

HBAMT members free pending sponsorship

RSVP to: cnicley@hbamt.org

COUNCILS

HBAMT REMODELERS COUNCIL

Council President - Eli Routh

The HBAMT Remodelers Council meets at varying

locations throughout the year.

Next meeting: to be announced.

Topic: to be announced.

Council RSVP Line: 615/377-9651, ext. 263 RSVP to: cnicley@hbamt.org

INFILL BUILDERS COUNCIL

The Infill Builders Council typically meets on the third Thursday of the month, 11:30 a.m. at the HBAMT offices

Next meeting: to be announced.

Price: to be announced.

RSVP to: 615/377-9651, ext. 265.

MIDDLE TENN SALES & MARKETING COUNCIL

Council President - Kelvey Benward

The SMC typically meets on the first Thursday of the month, 9:00 a.m. at the HBAMT offices*.

Next meeting and topic: Thursday, March 2nd.

*MARCH SPECIAL EVENT at TRAVELLERS REST!

636 Farrell Pkwy, Nashville, TN 37220

The March SMC meeting is being held at historic Travellers Rest in Nashville. Meeting starts at 9:00 a.m.

Topic: “Knowing and Selling Your Home Town!”

With special guest Heather Middleton, Senior VP of Marketing for the Nashville Convention & Visitors Corp. Heather and meeting sponsor Margaret Tolbert will focus on how you can better sell your homes by knowing your home town SMC members free thanks to Tolbert Marketing & Events; non-SMC members $15 w/RSVP, $20 w/o RSVP RSVP to: cnicley@hbamt.org