Todd Tomalak SVP Research - sbcmag.info...NWHM Home Builder Average Sales Price, 2018Q2-95K 128K 81K...
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1 HOUSING INDUSTRY OUTLOOK – BUILDING PRODUCTS 2018-2021 Todd Tomalak SVP – Research [email protected] 920-373-6727 OCTOBER 25, 2018
Transcript of Todd Tomalak SVP Research - sbcmag.info...NWHM Home Builder Average Sales Price, 2018Q2-95K 128K 81K...
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HOUSING INDUSTRY OUTLOOK – BUILDING
PRODUCTS 2018-2021
Todd Tomalak
SVP – [email protected]
920-373-6727
OCTOBER 25, 2018
Remodeling Market—Bull or Bear?Building Products Market—Bull or Bear?
We Collaborate With 200+ Diverse Subscriber Clients to Better
Understand the Housing Market
JBREC RESEARCH MEMBERSHIP DISTRIBUTION
This is the 2nd longest expansion in the
last 60 years.
We think it can
become the longest
This expansion has been mild – 6th
largest of last 10.
A forward looking component of the index with data back to 1953 provides a lead on recession events as well as an early indication of coming growth cycles. We did a
64 year back test of this data which shows a normal risk of recession in any given year on average to be 27% 2 years out and 50% four years out.
Source: John Burns Real Estate Consulting, LLC (Pub: Aug-18)
53% 68%
Probability
Recession risks are also higher than norm.
53% within 2 years and 68% within 4 years
very low risk
very high risk
low risk
normal risk
high risk
27% 56%
0
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4 Big Downturns and 3 “Hiccups” in 47 years.
H O U S I N G C O N S T R U C T I O N 1 9 7 1 - 2 0 1 7
Source: John Burns Real Estate Consulting, LLC
SF Permits
1.7 M
We Expect Hiccup #4 Sometime in the Next Three Years,
With Sustained Growth Thereafter
-1%
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Year-over-Year Sales Rate Growth
*Note: The above chart shows YOY comparisons only for builders who participated in the survey one year prior. For the May survey, YOY comparisons include
200 responses.
Source: John Burns Real Estate Consulting, LLC, independent survey of ~18% of all US new home sales, NSA (Data: May-18, Pub: Jun-18)
Sales Rate Growth Per Community Growth
is decelerating too.
1 Year Ago (Oct 2017): 20% of Markets ‘Strong’ or
Better
Now (Oct 2018): Only 4% of Markets ‘Strong’ Downgraded 10 Markets in Last Month
Rising rates also support a shift to lower prices.
Some moveup buyers with great rates will stay put.
Source: John Burns Real Estate Consulting online survey, June 2018
Huge Differences in Resale Listings = Headwind for
Home Prices (Tough for Builders in Rising Cost Environment)
We Asked 90+ of The Smartest Housing Executives:
What is The WORST,
RISK-ADJUSTED
Housing Industry
Investment Today?
$151,258
$224,483
$164,542
$254,200
$172,608
$242,975
$222,783
$324,467
$150,000
$175,000
$200,000
$225,000
$250,000
$275,000
$300,000
$325,000
$350,000
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Home Price History, New and Resale12-month averages (to smooth out seasonality)
Resale New
Sources: Census Bureau and National Association of Realtors
High Costs Plus a Shortage of New Homes
have allowed builders to push new home
prices
Many big public builders have average home
prices above $400,000.
$231,000
$302,000
$336,000
$365,000
$377,000
$380,000
$385,000
$387,000
$402,000
$408,000
$413,000
$427,000
$440,000
$479,000
$480,000
$496,000
$633,000
$813,000
$1,211,000
LGIH
DHI
AVHI
BZH
CCS
NVR
HOV
MHO
KBH
MTH
LEN
PHM
GRBK
WLH
TMHC
MDC
TPH
TOL
NWHM
Home Builder Average Sales Price, 2018Q2
-95K
128K
81K
218K
-165K
-14K
-263K
97K
268K
188K
418K
271K
-300
-200
-100
0
100
200
300
400
500
<25 25–29 30–34 35–39 40–44 45–49 50–54 55–59 60–64 65–69 70–74 75+
Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC (Data: 2016, updated quarterly†)
Household Formation by Age
2016 YOY change, thousands
Based on our proprietary demographic models, the 55+ cohort experienced the most household formation
growth in 2016. Solid growth for the 25–39 age range supports builders’ pivot to entry-level housing.
Demographics Support Lower Price Points Too
Pub: Aug-18
Sacramento – “We are running into issues
with the city of Sacramento , they are not able
to get our permits through their internal
controls, 2 people working in the permit
department, go figure, we are waiting today on
56 permits. This costs us 30-45 days. We
aren't having foundation trade delays once we
get the permits to them”.
Sacramento – “We are running into issues with the city of Sacramento , they are not
able to get our permits through their internal controls, 2 people working in the permit
department, go figure, we are waiting today on 56 permits. This costs us 30-45
days. We aren't having foundation trade delays once we get the permits to them”.
Orlando - Municipal building departments are horrid in their plan approval. This has
bogged down into a continual fiasco. Locations that would only take 24 hours to less
than a week to be issued a building permit from submittal, now routinely take 8-10
weeks from submittal to receipt of a permit.
Portland - Delays in starts are almost exclusively due to increased challenges in
obtaining building permits.
Atlanta - Seeing starts delays in some counties, 2-3 weeks. Permit delays are
slowing us down, seeing some foundation trade sluggishness. Working with plats so
yes, some lot delays. Utility installations are normal.
Denver - Yes, our starts are delayed. We are lagging 30 -45 days in most
municipalities. We have permit delays. Also foundation labor delays because they
do not have crews to handle the bubble when municipalities release permits late and
in batches. Utilities are 3 – 6 months behind across the metro area.
Texas - Yes very evident [starts delays] as everyone is behind: city, design
teams, engineers, etc. We are trying to limit to 3 weeks delays tops, but can’t
afford to lose a month this year. Permit delays, waiting for foundation trades, lots
not ready and power company delays are all factors.
WE’VE SEEN THIS SCENARIO PLAY OUT BEFORE
29Source: John Burns Real Estate Consulting, LLC independent survey of ~23% of all US new home sales, NSA (Data: 1Q18, Pub: Apr-18)
• 1916 Drywall invented
Consumers hesitant to adopt
drywall because perception of low
quality – no ‘art of craftsmanship’
• 25 years later: WWII – labor
constraints causes permanent
shift to drywall.
25% OF BUILDERS WE SURVEY ARE USING TURN-
KEY FRAMERS FOR 100% OF THEIR HOMES!
30
†The Northern California region includes Reno, NV.
134
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2538
5063
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2112
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1283 79
73 7261 60
4232
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50
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Northwest Texas Southeast Northeast Midwest National Florida Southwest NorthernCal
SouthernCal
What % of Builder SF Homes are Built Using ‘Turn-Key’ Framers
100% 55%-95% 5-50% 0%
Source: John Burns Real Estate Consulting, LLC independent survey of ~23% of all US new home sales, NSA (Data: 1Q18, Pub: Apr-18)
2% 14%
70%
14%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Longer than Today Same as Today 0%-25% FEWERHours than Today
25%+ FEWERHours than Today
Expected Onsite Hours Required to Build SF Home Over Next 5 Years
Builders ‘Get’ That Efficiency Should Improve: 84% Of Builders Anticipate Faster Construction Methods
Within 5 Years
Before After
HGTV “Recipe” for Remodels
Existing Home Sales, Peak & Decline
#3 - Recent Home
Purchase 28%
Top Reasons for Kitchen Remodel
#2 - Finally Have
the Means 36%
#3 - Recent Home
Purchase 28%
Top Reasons for Kitchen Remodel
PROJECTS FUNDED BY SAVINGS—
60%
69%
74%
75%
78%
79%
80%
80%
80%
83%
84%
90%
0% 20% 40% 60% 80% 100%
Roofing
Siding
Insulation
Bedroom
Windows /…
K&B
Flooring
HVAC
Deck
Plumbing…
Fencing
Landscaping
Most Remodels are Funded Out of Pocket
41%#1 – Can No Longer
Stand Kitchen
#2 - Finally Have
the Means 36%
#3 - Recent Home
Purchase 28%
Top Reasons for Kitchen Remodel
39
2016–2018 2020–20212019
Mix Shift to Smaller Scale Projects
40
Let’s Connect—
920-373-6727
ttomalak@
realestateconsulting.com
Todd Tomalak
SVP Research
Let’s Connect!
Let’s Connect—Todd Tomalak SVP Researchttomalak@
realestateconsulting.com920-373-6727
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