Housing Affordability
In a year of rising mortgage rates, elevated construction costs and chronic construction labor shortages, some predicted that the bubble would burst. Home prices rose to the point where many people were priced out of the dream of homeownership. And then mortgage rates began to climb. According to NAHB, the difference between a 3% mortgage rate and a 7% mortgage rate adds $1,000 to the mortgage payment to a typical, new median-priced single-family home. And every $1,000 added to home costs prices 18 million U.S. households out of the market for the home. These factors heightened the essential role that industry groups play. Their consistent challenge of new codes and regulations is crucial. It’s essential to weigh the benefits against the effect on housing affordability.
Many said 2023 would mark the beginning of another downturn for the housing industry and a fall in home prices. Now, most economists believe we’re unlikely to see anything that meaningfully affects housing affordability anytime in the near future. But now with mortgage rates coming down, a rally in the bond market may give some homebuyers a much-needed boost.
Legislation Addresses Housing Affordability and Attainability
Numerous bills supported by TAB sought to reduce and prevent restrictive, unnecessary, and burdensome land-use and housing policies. Another top priority was making the approval and inspection processes are clear, consistent and fair. A new law ensures that municipalities and counties base development review and inspection fees purely on the cost of performing these services. No longer can valuation of the plans, project, or components be assessed. Builders also sought changes to the building permit approval process timeline to protect against costly delays. Property tax cuts, a raise for retired teachers and billions in investments in infrastructure, research, tech and energy were among the 13 propositions approved by Texas voters on November 7.
Members advocated strongly for legislation which focuses on actual construction defects, provides necessary clarifications, and further encourages home builders to make reasonable offers of repair. Another legislative victory for builders creates a significant incentive to provide homeowners with strong written warranties in exchange for a lowered statute of repose (SOR). New Texas law lowers the statute of repose from ten years to six years so long as the homebuilder provides a warranty that includes a one-year warranty for workmanship and materials, two years warranty for plumbing, electrical, heating and air-conditioning delivery systems, and a six-year warranty for major structural components.
Skilled Worker Shortage Remains a Critical Concern
A weak talent pipeline, too much employee turnover, and a disconnect between what schools teach and what employers need are all to blame. And the consequences of failing to evolve in the modern era pose to make a bad problem even worse. The essential message to convey to the next generation of workers is that construction jobs are NOT under-paid, old-fashioned, or only for men!
The National Housing Endowment (NHE) has set a bold goal for 2024 — to introduce 100,000 students to career opportunities in the residential skilled trades. State and local home builders associations can apply for the Career Connections grant program, funded by the Skilled Labor Fund (SLF) and managed by the NHE, to help meet this challenge.
The Electrical Distribution Transformer Shortage
The shortage led to an increase of some 85% for transformers since 2018. But builders’ wait times for transformers, often ranging from 12 to 24 months or more, was even more concerning. Early this year, Senate leaders approved $1.2 billion in supplemental funding to boost the production of the sorely needed distribution transformers.
Real Estate Investors Reap Benefits
The low inventory of existing homes for sale led many prospective buyers to consider building their own residence. Investors spot this trend and seek to capitalize on the opportunities. So they’re betting big on homebuilders. Many production builders far exceeded their 2023 expectations as a result. But foreign investment is a concern, particularly the activity of agents of China’s communist regime.
Census Bureau numbers show approximately 21,000 single-family built-to-rent (BTR) units were started during the second quarter of 2022. That’s a 91% increase compared to the second quarter a year before. And the BTR numbers continue to rise. Some call it the solution to America’s housing affordability challenges. But the National Association of Realtors has warned that the financial benefits of home ownership are clear. There is a staggering difference in total household wealth between homeowners and renters.
Texas’ Population Growth Brings Challenges and Benefits
The mind-boggling growth of the Texas population continues to challenge housing inventory and infrastructure. On the up-side, it created a budget surplus for the state that led to property tax cuts and other significant reinvestments in our state. As expected, the 88th Texas Legislature brought many complicated and politically-sensitive conversations to the table. But the Texas Association of Builders says the past legislative session will bring the most significant changes to Texas residential construction law in the last 30 years.
Building Savvy Goes Texas-Wide
Speaking of changing “the way we’ve always have done it,” we made a major announcement about Building Savvy. We updated and increased our Dallas/Fort Worth and San Antonio circulation. And expanded our Texas Hill Country edition to include Austin! Houston soon followed, making Building Savvy Texas-wide! And thanks to the digital age, you have delivery options.
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