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EL PASO
National, State & Local Building Industry News 2017: Issue 9
BUILDERS A S S O C I AT I O N O F
Harvey will hammer Texas' already stretched building industry By Steve Brown, Real Estate Editor DALLAS NEWS
Texas' already tight housing market is going to feel a bigger pinch as a result of Hurricane Harvey. The damage from the storm will add to shortages of labor and push up prices on building materials as Gulf Coast communities recover. Thousands of homes and apartments were either destroyed or damaged as Harvey moved inland near Corpus Christi, then followed the coast north to the Houston area. Before the storm, Texas' was the country's largest homebuilding market. Now builders and construction workers who were already struggling to keep up with the state's demand for new housing are going to face the challenge of replacing and repairing what Harvey wrecked. "The homebuilders, remodelers and construction people are going to be busy for the next two years," said Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University. "There was not very much extra capacity in the construction market, and now there will be higher strain to repair and replace what got damaged." Even Texas cities that suffered no storm damage, including Dallas, could see a shortage of building-sector workers as people head south to deal with the damage.
Study Finds Green Home Building Continues to Gain Traction
One third of builders surveyed say green building is a significant share of overall activity, and many have built a net zero home. Green construction is rapidly gaining traction among both single family and multifamily home builders, according to new research published in the Green Multifamily and Single Family Homes 2017 SmartMarket Brief. The report is available for free download at www.nahb.org/SMR.
"I'm glad this didn't happen a year ago when my house was being built," Gaines said.Ted Wilson, a housing analyst with Dallas-based Residential Strategies, said there is already "a lot of chatter" in the building industry about what Harvey will do to construction labor and materials demands. "Obviously it's going to be a big problem," Wilson said. "Once the water goes down, the amount of work that has to be done will put a huge strain on the Houston housing market. "It will put a huge strain on the industry." Don't expect immigrants After previous Texas hurricanes, laborers from Mexico and Latin America have helped with cleanup. But don't expect that to happen with Harvey, Wilson said. "With the ramping up of border security and the fact the Mexican economy is better, we haven't seen people coming across like we have in the past," he said. Wilson also expects a spike in prices for construction materials, including drywall, plywood and roofing because of Harvey. Such increases are common after natural disasters and may linger for months. "In the short run, building material prices locally will increase due to supply bottlenecks," said Robert Dietz, chief economist with the National Association
The latest in a series of studies conducted by Dodge Data & Analytics in partnership with the National Association of Home Builders (NAHB), the study shows that green homes are continuing to gain market share. At least one third of single family and multifamily builders who were surveyed said that green building is a significant portion of their overall activity (more than 60 percent of their portfolio). By 2022, this number should increase to nearly one half in both the single family and multifamily sectors. Within this group, nearly 30 percent of multifamily builders fall into the category of “dedicated” green builders (more than 90 percent of their portfolio). On the single family side, the percentage of “dedicated” green builders is nearly 20 percent, but that share is expected to grow sizably by 2022. “These findings show that green building has become an established part of the residential construction landscape,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “It is no longer a niche business; our members recognize the value of building green and are incorporating these elements into their standard business practices.” Increasing energy efficiency continues to be the most common method of improving the performance of a green home, followed by creating a healthy indoor living environment.
of Home Builders. "However, the primary effect of an event like this is delays for construction activity. "We are already seeing delays in large markets, like those in Texas, due to labor scarcity and increases in lumber prices due to the imposition of tariffs on Canadian softwood lumber. The storm will make these bottlenecks worse in the areas affected, and we will see some decline in home production volume during the cleanup period." 4 percent Dietz said the industry impact from the storm will be significant. "The affected areas are a significant share of new construction nationwide," he
said. "The counties in the state disaster area represent approximately 4 percent of nationwide single-family construction and 32 percent of Texas new home construction." Texas homebuilders were already fighting one of the worst labor shortages on record. Now the demand for workers to rebuild after Harvey will create more shortages. "I anticipate it to impact not only Houston's housing market, but the entire state of Texas," said Paige Shipp of housing analyst Metrostudy. "This is yet another layer of complexity to an industry wrought with problems."
“As consumers become more familiar with the impact that their homes can have on their health and well-being, we wouldn’t be surprised to see the influence of this factor continue to grow,” said Steve Jones, Dodge’s Senior Director of Industry Insights Research. “Homes are following the larger trend that Dodge has been tracking across commercial and institutional sectors for healthier buildings to become an increasingly important part of being sustainable.” The report also found that a considerable number of builders are developing net zero homes or plan to build net zero homes in the near future. Among those surveyed, 29 percent of single family home builders have built a net zero home in the past two years, and 44 percent expect to do so in the next two years. Builders see increased customer demand and a competitive advantage as the top two drivers to develop net zero homes. Another reason for the rise in net zero homes is the increasing use of renewable technologies, especially solar photovoltaic panels. In two years, the percentage of builders who used these panels increased from 19 to 23 percent. Nearly half (43 percent) of the builders surveyed expect to use this technology in the future. Other SmartMarket findings suggest the single family green home market is maturing. For one, the report found that
home builders are less concerned about higher start-up costs than in previous studies. There was also a decline among people who think consumers will not pay additional costs for green building. Finally, between one half and two thirds of respondents say seven different drivers are pushing them to build green, instead of one or two drivers as in the past. In fact, these top drivers, selected by between 64 and 57 percent of single family builders, include customer demand; greater availability and affordability of green products; the prospect of producing a higher quality home; appraisers recognizing greater value in green homes; government or utility incentives; and changes in codes, ordinances and regulations. Multifamily builders see government or utility incentives; customer demand; and changes in codes, ordinances, and regulations as the top drivers for future green building activity. With respect to green building obstacles, multifamily builders are most concerned about the costs associated with green; higher startup costs; and the unwillingness of consumers to pay more for green construction. Single family builders agree about the challenge of consumers not being willing to pay, the top obstacle for them. -NAHB