Kittle Homes

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  • New Listings Increase in Georgia Housing Market in May

    New Listings Increase in Georgia Housing Market in May

    The Monthly Housing Indicators for Georgia are in for May. Median Sales Prices were up 22 percent year-over-year, Days on the Market decreased 18 percent, and Months Supply of Inventory rose to 1.4 months.

    • New Listings increased eight percent to 18,889

    • Pending Sales decreased eight percent to 114,183

    • Closed Sales were down five percent to 14,140

    • Inventory levels increased six percent to 19,566 units

    • The Median Sales Price increased 22 percent to $355,000

    • The Average Sales Price increased 17 percent to $422,864

    • Days on Market decreased 18 percent to 22 days

    • Months Supply of Inventory was up eight percent to 1.4 month

    Looking at the Housing Supply Overview – which takes a closer look at key metrics in relation to price range, property type and bedroom count – stark contrasts exist between single-family homes and townhomes/condos, and as well and lower-priced (199K or less) properties. Pending Sales were down for all properties with the exception of homes priced $300,000 and above:

    • $124,999 or less – 8 percent decrease

    • $125,000 – $199,999 – 39 percent decrease

    • $200,000 – $299,999 – 22 percent decrease

    • $300,000 and above – 21 percent increase

    Additionally, Pending Sales for existing townhomes with four bedrooms or more posted the largest gain at 84 percent. Other Housing Supply Overview Indicators include:

    • Days on Market decreased for all price ranges and property types.

    • Median Sales Price increased for all property types regardless of bedroom count.

    • Inventory was up for single family homes priced at $125,000 and above, while condos and townhomes were down across all price ranges and bedroom counts. One-bedroom townhomes/condos saw the largest decrease at 50 percent.

  • U.S. New Home Sales Stronger in May

    U.S. New Home Sales Stronger in May

    The numbers: U.S. new home sales rose 10.7% to a seasonally-adjusted rate of 696,000 in May, from a sharply revised 629,000 in the prior month, the Commerce Department reported Friday. Analysts polled by the Wall Street Journal had forecast new home sales to come in at 587,000 in May from the initial estimate of 591,000. Year-over-year, new home sales are down 5.9%.

    Key details: The median sales price of new homes sold in May fell to $449,000 from a record high $454,700. The supply of new homes for sale fell 7.2% between April and May, equating to a 7.7-month supply.

    Regionally, sales fell drastically in the Northeast by 51.1%, followed by the Midwest, which saw an 18.3% drop in new home sales. The South and the West on the other hand saw increases in sales, at 12.8% and 39.3% respectively.

    Big picture: Despite the higher sales numbers, the housing sector is in the midst of a slowdown, with mortgage rates soaring past 5.8% for a 30-year fixed-rate mortgage, according to Freddie Mac. Inventory remains tight with the number of homes on the market.

    The data are often sharply revised. April new home sales initially stood at 591,000, now revised to 629,000.

    What are they saying? “The data can be volatile month-to-month and subject to revision,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note.

    But the “trend has weakened sharply so far in Q2,” Farooqi added. “Overall, home sales are likely to be constrained going forward by higher prices and ongoing increases in mortgage rates, as the Fed continues to normalize monetary policy.”

    “These data are wild – the margin of error in the May print is gigantic,” Pantheon Macroeconomics’ Ian Shepherdson noted, noting the 18.9% confidence interval.

    Even if sales did rise in May, that “does not change the big picture at all,” he added.

    The “housing market is rolling over, and sales will fall sharply over the next few months, lagging the plunge in mortgage applications,” Shepherdson said. “Potential homebuyers’ purchasing power has been drastically reduced by the surge in mortgage rates, so demand has plunged.”

    Market reaction: The Dow Jones Industrial Average and the S&P 500 were both sharply higher in early trading on Friday. The yield on the 10-year Treasury note inched down to 3.08%.

    By Aarthi Swaminathan and Greg Robb

  • New Home Construction Is Up, But Projects Are Stalling At a Higher Rate

    New Home Construction Is Up, But Projects Are Stalling At a Higher Rate

    According to a Dodge Building outlook webinar, total construction starts in the United States’ Northeast region increased by 20% in 2021, outpacing national growth. However, in the first half of 2022, activity has subsided

    North-eastern states will have to endure to deal with a wide range of obstacles that will persist in 2022 – rampant inflation, supply chain difficulties, COVID-19 variants, and the somewhat fragile consumer and investor attitude, said senior economist at Dodge, Sarah Martin. As a result, growth in the Northeast could be slower than expected, especially as the chance of recession rises.

    Construction starts in the non-residential category in the Northeast area, which includes Connecticut, Massachusetts, Maine, New Jersey, New Hampshire, New York, Rhode Island, Vermont, and Pennsylvania, were dominated by education and healthcare. This reflects construction patterns in other parts of the United States, such as the West, where education begins as well.

    Education

    According to Dodge, educational starts in the northeast region would total $14.9 billion in 2022, up 19% from the previous year. The education segment also includes research labs in addition to campus projects. Pharmaceutical laboratories, on the other hand, are classified as manufacturing, which is another fast-growing industry in the region.

    Martin remarked that education is the most important sector in the Northeast. Education starts are likely to increase this year as more students return to classes in both K-12 and colleges and institutions, according to the report.

    The $388 million Rutgers University Cancer Institute as well as the $250 million Lincoln Street lab office plus parking structure in Boston, for example, are some big education projects.

    Healthcare

    Healthcare building is another fast-growing industry in the region. Beginnings in this industry are expected to hit $6.25 billion in 2022, up 50% from 2021. Inpatient hospitals, clinics, and nursing homes fall into this group.

    According to Richard Branch, chief economist at Dodge, increased possibilities in inpatient hospital building are expected. There has been a significant lack of investment in the inpatient end of the industry in the United States, Branch explained. This will undoubtedly enable this market to expand. He anticipates that inpatient care will outgrow outpatient care.

    As people flee high-cost cities in the Northeast, Martin believes that more rural places, such as New Hampshire, Vermont, and Maine, will see an increase in healthcare start-ups. These states have had some of the highest percentages of in-migration since the epidemic began.

    Manufacturing

    Manufacturing starts in the Northeast are expected to reach $2.99 billion in 2022, up 47% year over year, according to Dodge. Still, that’s only a small part of the overall infrastructural development in the West, where Dodge predicts that spending will peak at $14.39 billion in 2022.

    Impact of Inflation

    Those increases are significant if taken at face value. According to Martin, inflation, on the other hand, is improving growth figures. For instance, corrected for inflation, predicted education starts in 2022 will fall from 19% to 7%. When inflation is included, nonbuilding starts in 2022, such as motorways, bridges, power plants, and gas plants, go from an 8% expansion to a 3% contraction.

    According to Dodge, office starts in the Northeast region are expected to drop to $8.35 billion in 2022, a 17% decrease from 2021. Beginnings in the hospitality industry are expected to fall to $1 billion in 2021, down 4% from 2021.

    Leaders and laggards in the Northeast

    New York dominated the Northeast region in overall building starts in 2021, with $41.27 billion, up 18% from 2020. Despite the increase, starts remained below the $50.71 billion pre-pandemic average of 2019. And by April, construction had slowed. Non-residential construction activity in New York, Northern New Jersey, and Long Island fell by 4% in the first 4 months of 2022.

    Pennsylvania came in second in the Northeast area, with $22.2 billion in total building starts in 2021, up 32% from 2020 and higher than the previous year’s totals. However, non-residential infrastructure in Pennsylvania fell by 12% in the first 4 months of 2022. According to Dodge, Connecticut had the only negative construction start increase in the Northeast area in 2021, decreasing 6% from 2020. Non-residential development in the state fell 27% in the first 4 months of 2022, following a regional pattern.

    Expectations for GDP growth in 2022

    Connecticut and Rhode Island’s GDP are expected to expand 3.8% in 2022, below just Massachusetts’ predicted 4.1% in the Northeast area, according to Dodge. As per Dodge, growth in New York and Pennsylvania is expected to be 3.2% and 3%, respectively. This is lower than the national GDP prediction of 3.5%.

    Further to the prospects that one is expecting in construction in the US, there are a certain factors that must be considered with all dimensions and geographies put together.

    The expansion of commercial building is happening in the US in spite of worries about supply chains, the situation in Ukraine, and inflationary pressures.

    Growth in the industry will be fuelled by customers who are looking to create more robust supply chains through projects in the Western United States such as chip manufacturers.

    The amount of enthusiasm in the Midwest US is not quite on par with that found in other locations, but the region is home to some very remarkable performers who are capable of amazing things.

    Although there appears to be a slowdown in the construction arena in Texas and Florida, the warehousing business is showing signs of decent growth.

  • What’s the Deal with Lumber Prices?

    What’s the Deal with Lumber Prices?

    Over the past few years, lumber prices have skyrocketed. According to the National Association of Home Builders, prices went up by 30% between Hurricane Harvey in August 2017 and January 2018. At the time, this price was higher than any prices on record since NAHB started keeping such records in 1995. March of 2018 saw lumber futures climb even higher, over $520 per 1,000 board feet, up from January’s numbers, which climbed between $420 and $460 per 1,000 board feet.

    These days? Although the reasons for it have changed, lumber prices are still soaring higher and higher. Today, these higher prices are in large part due to the pandemic creating chaos throughout markets. New numbers from the National Association of Home Builders shows that since mid-April of 2020, lumber prices have risen by 130%, and those increased costs have increased the cost of single-family homes more than $16,000 on average.

    With these thoughts in mind, here are some of the causes of these rising costs—and a quick look into the future concerning both lumber prices and how these prices will affect housing costs.

    Why are Lumber Prices High?

    There are a variety of factors coming together all at once to affect lumber prices. Over the past few years, demand has increased dramatically while supply has tightened. For starters, growth of gross domestic product in all major economic regions of the world is fueling something of a world-wide construction boom. In the U.S. alone, single family home construction increased 7% between January 2017 and January 2018.

    With the pandemic, the amount of lumber being used in construction continues to rise. Surprisingly, housing starts are up, showing an increase of about 17% between May and July. With that, other areas are placing demand on the lumber industry. More DIYers are doing projects like decks so that they have a place to get outside during these troubled times, and restaurants across the U.S. are using more and more lumber to build outdoor seating and dining areas.

    Meanwhile, the lumber industry has faced struggles of its own with shutdowns and a decreased demand for timber in other areas, like paper manufacturing and home goods, where downturns have been steep. All of this is combined with the fact that several years ago, the U.S. raised import duties on Canadian lumber, which has been causing a supply shortage in the U.S. as Canada exports less lumber southward.

    Pandemic aside, there are also the rising costs of everything going into lumber production—labor, transportation, containers and so on, all costing more across the board, which drives up the cost of lumber regardless of supply or demand. The cost of a flatbed truck to haul lumber, for instance, went up 24% between January 2017 and January 2018.

    Where are Lumber Prices Right Now?

    In some cases, lumber prices have doubled and tripled over the past year. OSB board prices, for example, were three times higher in September 2020 compared to September 2019. Other prices have gone way up, too. Western SPF 2x4s, for example, have gone up 158% over the past year, studs have risen 164%, and southern pine has gone up 147%.

    Will Lumber Prices Stay High?

    Back in 2018, experts were saying that with the current chaos in the lumber markets, prices were expected to be high through 2020. After that, costs were expected to come down.

    Now that COVID-19 is here to stay, however, things have become much more unpredictable. In order for prices to come down, several things need to happen. In the U.S., lumber production will need to increase to cover the lost supply from Canada or Canadian import duties will need to come down so that Canada can export more lumber to the United States. Shutdowns within the lumber industry will need to come to an end, and timber producers will need to increase the amount they’re producing in order to bring costs down.

    Once these things start to happen, lumber prices should fall—but when that may happen depends on when life will return to “normal,” and no one knows when that might happen or how quickly lumber prices may fall when it does happen.

    How Does This Affect Housing Costs?

    If you’re a builder, the rising lumber costs aren’t necessarily bad news. Of course, the higher price means that not only are housing costs going up, but mortgage costs are rising as well. The cost of single-family homes has risen by $16,000 on average—but the good news is that buyers are very willing to pay that higher price.

    Back in January 2017 and January 2018, housing starts were up all over the country—7% among single family homes. Between May and July of 2020, housing starts went up by an incredible 17% across the country. This number is down about 4% over 2019 numbers, but it still reflects that buyer confidence is high.

    Part of the reason for housing remaining steady despite the pandemic is that mortgage rates are at all time lows. In July, average rates for 30-year fixed mortgages dipped beneath 3%, which is the first time rates have gone so low since Freddie Mac started to track this data in the 1970s.

    Lumber prices are up, astronomically so compared to prices over the last two decades, but they are expected to come down as the pandemic eases. Meanwhile, a high demand for new construction, particularly single-family homes, means that builders in the United States should quite easily be able to weather the volatile lumber market for the foreseeable future.

    (Source: Michael Flood, New England Building Supply)