By Don Fenley
The local new home industry is trying to take the fall-out from the coronavirus pandemic in stride.
New home construction is ongoing when the weather permits. The industry received an essential business status from Homeland Security, and builders are working to conform to CDC standards.
During an interview with Kelly Wolfe, Wolfe Development, the week BC (before coronavirus) hit the fan, he explained that some builders took the first steps by ordering and trying to get as much of the materials that they would need in advance of any potential supply chain slowdowns. “We started ordering two weeks ago,” he said. While he wasn’t optimistic that his firm could get everything he wanted in place it didn’t dampen his optimism for the new home market.
Fast-forward to early April.
Terry Orth, Orth Homes, said his firm hasn’t had many problems, yet. There has been slow down of material, and it’s likely we’ll see some slowdown in demand. “We had a lot of contracts going into this, and so far, we’ve only lost one,” he said. “I’m waiting for the loss of consumer confidence to show up. I don’t think we can steer clear of that.”
Another facet is builders are taking a hard look at what they build and what their buyers want because the pandemic will add some new “must-have” items for buyers. “We’re adding flex rooms to our plans – guest bedrooms that double as an office for example,” Orth said. Don’t be surprised if the Murphy Bed makes a comeback.
Builders think that any slowdown will drive pent-up demand that will be released as soon as an “all-clear” from the emergency declarations is issued.
The National Association of Builders’ confidence index dropped two points in March. According to the Advisor Perspectives website, “Builder confidence remains solid, although sales expectations for the next six months dropped four points on economic uncertainty stemming from the coronavirus. Interest rates remain low, and a lack of inventory creates market opportunities for single-family builders. However, down payment requirements are a limiting factor amid lower mortgage interest rates.”
Some of those limits include servicers struggling with forbearance issues and getting verification of employment. Chase bank recently raised its standard for home loans to a 20 percent down payment and FICO Score of 700.
During the most recent update from Meyers Research, it was reported that 94 percent of builders nationwide have kept their base prices flat while 42 percent have increased incentives.
The weather has also been a slowing factor for builders this year. There’s not a lot happening when you have a solid month of rainy weather. But that doesn’t mean the industry is standing still. During the first quarter, there were 82 new single-family and five multi-family building permits pulled in Bristol, Johnson City, and Kingsport. The lion’s share of them were in Johnson City.
DR Horton, Mitch Cox Construction, Orth Homes were the builders pulling most of the permits in the city markets. Most of those permits were pulled by DR Horton and Mitch Cox Construction.
Looking at the overall state of both the existing and new home markets so far, Orth said he thought “we would have lost more than we have. You have to give the Realtors and closing companies credit for keeping things going.”
Don Fenley’s analysis of housing data and economic and demographic trends in Northeast Tennessee can be found at www.donfenley.com.