Home » MBJ FEATURE » Home builder confidence high, but cost and availability of homes are issues

Home builder confidence high, but cost and availability of homes are issues

By BECKY GILLETTE

The current mood of home builders in Mississippi and across the country is better now than it has been since the Great Recession, said David Saulters, immediate past president of the Home Builders Association of Mississippi (HBAM) and owner of Sigma Companies and RE-MAX Real Estate Partners in Hattiesburg.

“It took a long time for the construction business to make it through the Great Recession,” Saulters said.

According to the National Association of Homebuilders (NAHB), builder confidence is at an all-time high. However, in both Mississippi and the rest of the country, there is a lack of inventory, particularly when it comes to affordable housing.

“I see that from the real estate side of my business,” Saulters said. “The question is, ‘Can builders deliver homes that are affordable for the buyer and still profitable for the builders to be able to make a living?’ The cost of materials and labor has moved up and home prices have moved up, too, but not enough to have an adequate margin for builders.”

Risks builders take include constructing spec houses that either don’t sell or sell slowly. Another factor can be homes failing to appraise for the sales price needed to allow builders an adequate profit margin. 

“Custom homes have done pretty well, but I don’t think consumers understand the risks builders take with spec houses,” he said. “Not only does the builder take risks from the selling standpoint, but the warranties require builders stand behind the home’s  structural items for six years.”

Saulters said Hattiesburg is a super market for homes. Petal in Forrest County, as well as Oak Grove in Lamar County, have traditionally done well, but now so are Sumrall and Purvis.

Finding an adequate skilled labor force continues to be a challenge for homebuilders, said HBAM Executive Vice President Jimmie B. Reynolds.

“There is definitely a shortage of construction workers,” Reynolds said. “There are more jobs than people to fill those jobs. From comments Gov. Tate Reeves has made, he is focused on that. One of governor’s big things is workforce development and we want to be a big part of that. The leadership in the legislature also knows there is a shortage.”

One strategy for filling the need now and in the future is to introduce young people to careers in the building trades such as electrical, plumbing, masonry and carpentry. Reynolds said it is important to get past the mindset that everyone needs to attend a four-year college.

“There are incredible opportunities for lifetime careers for young people to go into the construction trades, and we want to make sure that public schools are providing educational opportunities to show students what good-paying jobs are out there for them,” Reynolds said. “There is great money to made without graduating from a four-year college or university with a large amount of student loan debt.”

Home builders want to protect the public by preventing unscrupulous people from taking advantages of consumers. Reynolds said one way to do this is to make sure home builders are licensed and meet minimum requirements set by the state.

“The Mississippi State Board of Contractors requirements set minimum standards,” he said. “We encourage the public to use licensed and insured contractors and builders.”

But it is important to prevent onerous legislation that raises costs for builders and buyers. Reynolds is at the Mississippi Legislature on a regular basis monitoring legislation that would impact the home building industry.

“Right now, the strong economy has created a good environment for home builders,” Reynolds said. “But it is important to keep track of regulatory changes.

Our association has a lot to offer builders. There are many benefits to being a member of the association. A lot of times folks don’t realize HBAM and NAHB are all about advocacy, working really hard every day to make sure to look out for the home building industry and the consumer.”

Nationally, there is an affordability issue which is partly related to government regulations, said Kenneth Estes, owner, Estes Building & Remodeling, Tupelo, president of the Homebuilders and Remodeling Association of Northeast Mississippi, a HBAM state representative, and immediate past chairman of the Area 8 region of NAHB.

“The president has tried to ease some of the regulatory burden,” Estes said. “He has gone back and reversed some of the laws President Obama put in effect. NAHB has estimated that out of the average cost of a new home, 25 to 30 percent is some form of local, state or national regulations.”

One example he gave is the standards dictating toilets use less water. Estes said there is a proposal to lower it once again from the current standard, which would drive up construction costs even more. Another proposal would require attic insulation in some climate zones go up from R-30 to R-49. While more energy efficient, it might take 15 years to recover the costs in energy saving. Estes said this would be a cost difficult to pass on to buyers.

Other proposals he thinks would unnecessarily drive up costs are requiring mandatory electric car charging stations in all residential construction, and mandatory air testing for tightness in all duct work.

“There is no appraisal value for that,” Estes said. “It is just an expense the builders would have to incur and try to pass on to the consumer. NAHB is working to combat those changes.”

Estes agrees home building is healthy overall. The economy continues to grow in Mississippi and the nation, and people are still building new homes across the nation.

“There are some pockets doing better than others,” Estes said. “You always have that even in a down economy. The market in Tupelo is pretty good, although still not back to pre-Recession levels. Right now, in Tupelo there is still a lot of residential construction and commercial construction is very hot.”

Estes agrees with others in HBAM that there are major issues with workforce availability.

“In recent years locally, I’ve probably averaged a phone call a month from someone wanting a job in construction,” Estes said. “I haven’t had a call in ten months from anyone asking for a job. The phone is ringing off the hook with people wanting jobs bid, but there is not enough labor force to get the jobs done. It takes longer to get onto jobs once you get them bid because of the lack of labor.”

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About Becky Gillette