Our industry right now could be broken down into a tale of two worlds.
On one hand, we have a robust, thriving market, where houses are selling well before they are even finished. Builders are juggling more contracts than they know what to do with and are busier than ever.
On the other hand, we have an industry that has been plagued with huge price increases, material shortages and time delays that are hindering the market from reaching its full potential.
Overall, our industry has been blessed, though. Through heavy lobbying pressure locally, statewide and nationally, the construction industry was deemed an essential business last year. This was a tremendous, successful effort that allowed for the construction sector to remain the one bright spot within the economy.
With three out of every five jobs touched by the real estate industry, it was paramount to keep this economic machine running, and run we have done. In addition to the in-migration of North Carolinians looking to make that move to the coast, we are also seeing a virus-fueled real estate boom from our Northern states.
Mortgage rates have remained at historically low rates, and within the Wilmington region, sales have been good – really good. After the initial virus concerns and safety protocols became more of our everyday routine, and people adjusted accordingly, we saw housing stage a dramatic turnaround beginning in the spring of 2020, and it was a great year for sales. We see these same sales trends carrying over into 2021.
We are seeing more developers working to position themselves on speculative land purchases and to increase land acquisitions. This is a positive sign especially as it relates to the increasing demands on housing in our area.
For the past 14 months, we have been battling inventory issues, and we have struggled to keep up with the demand. At the end of the day, we have to increase the overall market share of site-ready, buildable lots; otherwise, we are going to see higher-than-normal prices. This is especially true in New Hanover County, where the market demand for housing, for rent or to own, is far outpacing the available supply on the ground.
As an industry, we continue to hear the rallying cries for more affordable housing to the point that it is deafening. The unfortunate truth, though, is that without the city of Wilmington, New Hanover County and CFPUA stepping in to partner with the development community on infrastructure like water, sewer and roads, we fear that these cries are going to fall on deaf ears. When you couple that with the material delays and cost overruns on lumber, it is creating real challenges when it comes to providing cheaper housing.
This is where we look at the other side of the coin. As the homebuilding industry moves into 2021, unfortunately, we still see some of the same lingering trends carry over from 2020 as it relates to material pricing and delays. Lumber prices continue to remain very high and volatile. We saw prices jump 150% in the third and fourth quarters of 2020, and we have yet to see any relief as we have moved into the first quarter of 2021.
Our industry is a global industry that relies heavily on commodities and their overall supply chains moving along without disruption. The National Association of Home Builders, along with other coalition members, has increased pressure on the lumber mills in the U.S. and Canada. At the same time, NAHB has shifted its overall lobbying efforts to the new Biden administration.
Many of our members are asking and searching for relief, but in many respects this issue is strictly a supply-and-demand issue that will take some time to sort itself out.
At the same time, we are still seeing major manufacturing delays on windows, doors and appliances. Anecdotally speaking, I am hearing that many of our builder members are waiting anywhere from 14 to 18 weeks on windows alone. This is creating a major problem when we go to stage our trades and work to finish out the home as we cannot get the house to a stage to secure it from theft or vandalism.
One of the newest challenges is that many of the appliance and home goods manufacturers are narrowing their overall consumer offerings and selections. For example, instead of having 20 dishwashers a consumer can pick from, the manufacturer has reduced total offerings to 10. These offerings may now only include a few higher-end models, a few midgrade models and a few low-end models.
This has changed the design process as builders are having to navigate new ordering and scheduling terms and conditions that may not meet the consumers’ desires. Unfortunately, the entity that is being hurt the most is the consumer. Builders have had to draw out their construction schedules, which means it’s taking us longer to finish projects, thus creating delays in closings.
From an “outlook” standpoint, home construction will likely continue to expand, especially as we look at the second and third quarters of 2021. Much of this will be driven by a strong optimism that with the vaccine making its rounds, we will finally reach a true, new, “steady” normal.
Cameron Moore is executive officer of the Wilmington-Cape Fear Home Builders Association.