The Nail, February 2024

THE NAIL

The official magazine of Home Builders Association of Middle Tennessee

President

Jim Hysen

Vice President

Kelly Beasley

Secretary/Treasurer

Eli Routh

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.

FEATURES

9

Top challenges for builders in 2024

An NAHB survey details the biggest challenges builders faced in 2023 and looks at what challenges they might face in the upcoming year.

10

HBAMT IBS Hospitality Suite

sponsorships

Sign up now to sponsor the HBAMT’s Hospitality Suite at the 2024 International Builders Show (IBS) in Las Vegas, Feb. 27 through Feb. 29th.

11

Building materials price growth down in 2023

Growth in the average price level of inputs to residential construction less energy fell from 15% in 2022 to 1.3% in 2023 DEPARTMENTS

6

News & Information

13

SPIKE Club Report

14

February Calendar

14

Chapters and Councils

ON THE COVER:

Can builders expect to face similar challenges in 2024 as they faaced in 2023? An NAHB survey focuses on the data and builder expectations. See page 9 (nine) for more details.

New home sales bounce back in December

Falling interest rates in the closing weeks of 2023 helped to bring buyers off the sidelines and provide a boost for new home sales.

Sales of newly built, single-family homes in December increased 8.0% to a 664,000 seasonally adjusted annual rate from an upwardly revised reading in November, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in December is up 4.4% from a year earlier.

On an annual basis, new home sales totaled 668,000 in 2023, up 4.2% from the 2022 figure of 641,000.

“The solid new home sales rate in December was fueled by a lack of existing inventory in the resale market and declining interest rates,” said Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Birmingham, Ala. “The rise in sales also coincides with our latest builder surveys, which show a marked increase in future sales expectations because of falling mortgage rates.”

“New home sales ended the year on a high note thanks largely to falling interest rates and a decline in existing home sales,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “And while moderating interest rates

are a promising sign for new home sales in the year ahead, long-term issues such as a shortage of buildable lots, a lack of skilled labor and excessive regulations will continue to pose challenges for builders.”

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 December reading of 664,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in December remained elevated at a level of 453,000, up 0.4% compared to a year earlier. This represents an 8.2 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. Completed, ready-to-occupy inventory, 88,000 homes in December, is up 22.2% from a year ago. However, that inventory type remains just 19% of total inventory.

The median new home sale price in December was $413,200, edging down 3.0% from November, and down 13.8% compared to a year ago.

Regionally, on a year-to-year basis, new home sales are up in all four regions: up 3.5% in the Northeast, 3.6% in the Midwest, 5.2% in the South and 2.1% in the West. n

Single-family housing starts down but post solid showing

In a sign that lower mortgage rates continue to boost the housing market, single-family production surpassed the million mark for the second straight month in December.

Overall housing starts fell 4.3% in December to a seasonally adjusted annual rate of 1.46 million units following an unusually strong reading the month before, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The December reading of 1.46 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 8.6% to a 1.03 million seasonally adjusted annual rate, but are up 15.8% compared to a year ago. The multifamily sector, which includes apartment buildings and condos, increased 8% to a 433,000 pace.

Total housing starts for 2023 were 1.41 million, a 9% decline from the 1.55 million

total from 2022. Single-family starts in 2023 totaled 945,000, down 6% from the previous year. Multifamily starts in 2023 totaled 469,000, down 14.4% compared to the previous year.

“Mortgage rates steadily fell below 7% in December, and lower rates combined with a lack of existing inventory in most markets helped to keep single-family production above a one million-unit annual pace,” said Alicia Huey, NAHB chairman. “And the fact that our latest surveys showed a big increase in builder confidence is an indicator that we can expect housing starts to improve in the coming months. Overall, 2023 was a challenging year for new home construction as housing took a hit due to higher rates and tight monetary policy.”

“Moderating mortgage rates are expected to provide a boost to new home construction in 2024, but an uptick in building material

Remodeling market sentiment improves in fourth quarter

The National Association of Home Builders (NAHB) released its NAHB/Westlake Royal Remodeling Market Index (RMI) for the fourth quarter, posting a reading of 67, increasing two points compared to the previous quarter.

The NAHB/Westlake Royal RMI survey asks remodelers to rate five components of the remodeling market as “good,” “fair” or “poor.” Each question is measured on a scale from 0 to 100, where an index number above 50 indicates that a higher share view conditions as good than poor.

The Current Conditions Index is an average of three components: the current market for large remodeling projects, moderately-sized projects and small projects. The Future Indicators Index is an average of two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The overall RMI is calculated by averaging the Current Conditions Index and the Future Indicators Index. Any number over 50 indicates that more remodelers view remodel-

ing market conditions as good than poor.

The Current Conditions Index averaged 74, increasing two points compared the previous quarter. All three components improved in the fourth quarter: the component measuring large remodeling projects ($50,000 or more) increased three points to 70, the component measuring moderate remodeling projects (at least

prices and a shortage of buildable lots and skilled labor are serious challenges for home builders,” said Danushka Nanayakkara-Skillington, NAHB’s assistant vice president for forecasting and analysis. “A rise in single-family permits is a sign that we will see the single-family market pick up steam in the near future. However, due to tighter financing, the multifamily market will weaken.”

On a regional and year-to-year basis, combined single-family and multifamily starts are 20.1% lower in the Northeast, 10.7% lower in the Midwest, 5.5% lower in the South and 11.6% lower in the West.

Overall permits increased 1.9% to a 1.50 million unit annualized rate in December and are up 6.1% compared to December 2022. Single-family permits increased 1.7% to a 994,000 unit rate and up 32.9% compared to the previous year. Multifamily permits increased 2.2% to a 501,000 pace.

Looking at regional permit data on a yearto-year basis, permits are 21.3% lower in the Northeast, 14.1% lower in the Midwest, 9.4% lower in the South and 12.2% lower in the West. n

$20,000 but less than $50,000) rose two points to 75, and the component measuring small-sized remodeling projects (under $20,000) increased two points to 78.

The Future Indicators Index increased two points to 59 compared to the previous quarter. The component measuring the current rate at which leads and inquiries are coming in remained even at 56, and the component measuring the backlog of remodeling jobs rose three points to 62.

“Remodelers’ sentiment was quite positive at the end of 2023, when seasonally adjusted for the slowdown that invariably occurs during that part of the year,” said NAHB Remodelers Chair Alan Archuleta, a remodeler from Morristown, N.J. “High costs remain an issue in some places, but in many markets customers seem to have adjusted to the unavoidable higher prices.”

“The seasonally adjusted RMI edged up on a quarterly basis at the end of 2023, although it was down slightly year-over-year,” said NAHB Chief Economist Robert Dietz. “Nevertheless, the index remains solidly in positive territory as it has been ever since the second quarter of 2020. Looking forward, we expect market conditions to improve throughout 2024, as interest rates continue to decline.” n

Top challenges for builders in 2024

According to the January 2024 survey for the NAHB/Wells Fargo Housing Market Index, high interest rates were a significant issue for 90% of builders in 2023, and 77% expect them to be a problem in 2024. The second most widespread problem in 2023 was rising inflation in US Economy, cited by 83% of builders, with 52% expecting it to be a problem in 2024.

The cost and availability of labor was a significant problem to only 13% of builders in 2011. That share has increased significantly over the years, peaking at 87% in 2019. Fewer builders reported this problem in 2020 (65%), but the share rose again in 2021 (82%) and 2022 (85%). The share eased slightly in 2023 to 74%. A similar 75% expect the cost and availability of labor to remain a significant issue in 2024.

In 2011, building materials prices was a significant problem to 33% of builders. The share has fluctuated over the years, from a low of 42% in 2015 to a peak of 96% in 2020, 2021, and 2022. The slowdown in single-family construction in 2023 made this less of a problem for builders last year, as ‘only’ 63% reported it as a significant issue. Fewer expect it to face it in 2024 (58%).

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 2024. Buyers expecting prices or interest rates to decline if they wait was a significant problem for 71% of builders in 2023, with 77% expecting it to be an issue in 2024. Negative media reports making buyers cautious was reported as a significant issue by 56% of builders in 2023, and 54% expect this problem in 2024. Concern about employment/ economic situation was another buyer issue for 48% of builders in 2023, but 55% anticipate this issue in 2024. Gridlock/uncertainty in Washington making buyers cautious was a significant problem for 42% of builders in 2023, but a larger 54% expect it to be a problem in 2024. Less than 30% of builders experienced problems in 2023 with buyers being unable to sell existing homes, potential buyers putting off purchase due to student debt, and competition from distressed sales/foreclosures. n

Building materials price growth plummets in 2023

According to the latest Producer Price Index report, growth in the average price level of inputs to residential construction less energy (i.e., building materials) fell from 15.0% in 2022 to 1.3% in 2023 (not seasonally adjusted). On a monthly basis, building materials prices rose 0.1% in December after increasing 0.1% in November (revised). Monthly price increases averaged 0.2% in 2023, down from 1.5% in 2021 and 0.7% in 2022.

The Producer Price Index for all final demand goods fell 0.4% in December, the third consecutive decline (seasonally adjusted). Most of the decline can be attributed to a 1.2% decrease in the index for final demand energy (SA). For the 12 months ended in December, the PPI for final demand goods less foods and energy increased 1.8% (NSA). The annual average increased 2.8% in 2023, the smallest increase since 2020.

Price growth of goods inputs to residential construction, including energy, declined 0.6% in December and gained 1.0% over the past 12 months. The annual average decreased 0.3% in 2023 after surging 17.7% and 17.3% in 2021 and 2022, respectively.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) declined 2.3% in December, the third consecutive decrease and the fourth over the past five months. The index has fallen 14.5% since reaching its 2023 high in July.

On an annual basis, prices declined 31.3% in 2023 after falling 3.2% in 2022. Although the 33.5% two-year decrease is massive in historical terms, prices remain 22.7% above the 2019 level as the index skyrocketed 84.6% between 2019 and 2021.

Gypsum Building Materials

The PPI for gypsum building materials declined 0.3% in December and have not increased since March 2023. The index decreased 2.0% over the past 12 months, a welcome change after the 44.6% increase seen over the two years ending December 2022.

Ready-Mix Concrete

Ready-mix concrete (RMC) prices decreased 0.2% in November (SA), just the fourth decline over the last 36 months. Year-over-year price growth decelerated for the second consecutive month, falling from 9.3% in November to 7.8% in December. The average price of RMC increased 11.2% in 2023 and 10.3% in 2022 (NSA), combining for the second-largest two-year increase since 2000.

The monthly decrease in the national data was entirely due to a 0.9% price decline in the South as prices in the Northeast, Midwest, and West regions were unchanged.

Steel Mill Products

Steel mill products prices climbed 3.3% in December, the first increase since May. Steel mill products annual average prices declined 16.1% in 2023 after increasing 8.7% in 2022 and the historic 90.3% increase of 2021. Prices are 31.2% lower than their 2021 peak but remain 65.1% higher than they were in January 2020. n

FEBRUARY CALENDAR

CHAPTERS & COUNCILS

CHAPTERS

CHEATHAM COUNTY CHAPTER

Chapter President - Roy Miles Cheatham County Chapter details are being planned.

Next meeting: to be announced.

RSVP to: cnicley@hbamt.org

DICKSON COUNTY CHAPTER

Chapter President - Mark Denney Dickson County Chapter details are currently being planned.

Next meeting: to be announced.

Price: FREE, lunch dutch treat.

RSVP to: cnicley@hbamt.org

MAURY COUNTY CHAPTER

Chapter President - Lisa Underwood Maury County Chapter details are currently being planned.

Next meeting: to be announced.

RSVP to: cnicley@hbamt.org

METRO/NASHVILLE CHAPTER

Chapter President - Tonya Esquibel Metro/Nashville Chapter details are currently being planned.

Next meeting: to be announced.

Topic: to be announced.

RSVP to: cnicley@hbamt.org

ROBERTSON COUNTY CHAPTER

Robertson County Chapter details are currently being planned.

Next meeting: to be announced.

RSVP to: cnicley@hbamt.org

Sales & Marketing Council meeting

Wilson County Chapter meeting

SUMNER COUNTY CHAPTER

Chapter President - Joe Dalton

The Sumner County Chapter typically meets at the new Hendersonville Library. Future meetings to be announced.

Next meeting: to be announced.

RSVP to: cnicley@hbamt.org

WILLIAMSON COUNTY CHAPTER

Chapter President - Christina James Williamson County Chapter details are currently being planned.

Next meeting: to be announced.

RSVP to: cnicley@hbamt.org

WILSON COUNTY CHAPTER

Chapter President - Margaret Tolbert

Next meeting: THURSDAY, FEBRUARY 8th, 11:30 a.m. at the Lebanon Airport - 200 Aviation Way Suite 202, 37090

Topic: Wilson County Growth and Community Update with guest speaker Corey Johns, Executive Director of the Joint Economic and Development Board. Free with RSVP thanks to Lennar! RSVP to: cnicley@hbamt.org

COUNCILS

HBAMT REMODELERS COUNCIL

The HBAMT Remodelers Council meets at varying locations throughout the year.

Next meeting: to be announced.

RSVP to: cnicley@hbamt.org

INFILL BUILDERS COUNCIL

Infill Builders Council details are currently being planned. Next meeting: to be announced.

MIDDLE TENN SALES & MARKETING COUNCIL

Council President - Beth Lewis

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

Next meeting: THURSDAY, FEBRUARY 1ST

Topic: Middle Tennessee Economic & Community Development Outlook. Join the SMC for their February meeting as the council welcomes a panel of Economic & Community Development Directors who will share what the future holds for their counties and respond to your questions and feedback.

SMC Members Free thanks to DR Horton!

Non-SMC members: $15 with RSVP; $20 w/o RSVP RSVP to: cnicley@hbamt.org