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Note: Our blog for Nashville-area home builders shares a smarter way to set up and run your home remodeling business. It appears on the second Saturday of each month. Subscribe here.
Today, home builders face a perfect storm in the renovation market:
- Demand for reconstruction and remodeling is strong.
- But existing houses available for sale are scarce, with the smallest inventory since 1982.
- Despite low interest rates, right now is the hardest time for buyers to qualify for a mortgage in the past 6 years.
The good news is that demand for home renovation, remodeling and reconstruction is up.
Much of this demand is a result of changing needs. Many homeowners need to add a home office, fix up the kitchen since they eat at home more often, or fix up outdoor spaces for recreation.
Contractors are struggling to find enough skilled laborers. A survey from Autodesk and the Associated General Contractors of America (AGC) showed that 4 out of 5 construction firms said they have a hard time filling jobs for hourly craft workers.
As a result, wages are going up: 2 out of 3 firms said they increased base pay. About 1 out of 3 firms is offering incentives and bonuses to recruit workers. Half of contractors have launched or increased training and career-building programs. About 2 out of 5 are investing in technology to supplement their workers.
Contractors also are seeing longer lead times and higher prices on materials. For example, lumber prices have increased 160% in 6 months, reports the National Association of Home Builders (NAHB).
Fewer Homes to BuyIn August, existing home sales spiked to 6 million, the highest sales rate since 2006. One result: Not enough existing homes are available to meet buyers’ demand.
At the end of July, only 1.3 million single-family existing homes were for sale, the lowest count for any July going back to 1982, the National Association of Realtors (NAR) said.
That means there’s only a 3-month supply of housing, compared with 4 months’ supply in August 2019.
Banks Are Squeezing BorrowersIt’s getting tougher and tougher for homebuyers to get a conventional mortgage.
“Mortgage credit supply fell to its lowest level since March 2014,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting of the Mortgage Bankers Association (MBA). This graph on mortgage availability says it all:
Banks are squeezing borrowers, so conventional mortgages are hard to get.
Ouch!
For renovation contractors, the challenge is to survive today’s storm and position your firm to grow tomorrow.
Beacon Enterprises is your alternative source of financing for home renovation projects.
We work with contractors to find, fix. and flip or rent affordable housing units. Affordable housing includes units that cost homeowners no more than 30% of their household income.
We plan at least 12 projects, with a focus on the Nashville area, in the year ahead. If you need financing for a home renovation or rehab, reach out to Beacon today.
