single-family Archives - Hillwood Loves Realtor

Where Do Builders and Remodelers Buy Building Products?

Eric Lynch2025-04-14T08:19:20-05:00

The most common sources for products used in home building and remodeling are specialty retailers, lumber yards, and wholesale distributors, according to two recent NAHB surveys. The surveys include one of single-family homebuilders in the October 2024 NAHB/Wells Fargo Housing Market Index (HMI) and one of remodelers in the Q3 2024 NAHB/Westlake Royal Remodeling Market Index (RMI). Both surveys asked respondents where they purchase building products, regardless of who ultimately purchases them (themselves or subcontractors) When averaging across 24 building product categories, the top three major channels of distribution are roughly the same for both builders and remodelers. Specialty retailers, lumber yards, and wholesale distributors together account for around 70% of building product purchases. When analyzing the specific products purchased at lumber yards, the top products purchased by both builders and remodelers were basic lumber products including plywood & OSB, sawn lumber, and engineered lumber & I-joists. One major difference between builders and remodelers was the share of those who purchase products from home improvement centers. Remodelers are three times as likely to buy products at this channel of distribution compared to builders. Nevertheless, one specific product category, hand & power tools, is purchased at home improvement centers by a majority of both remodelers (68%) and builders (56%). Of those that do purchase hand & power tools at home improvement centers, 11% of remodelers purchased at least one other product there compared to 3% of builders. A subsequent post on who is most often responsible for choosing these products will come later. Please click here to be redirected to the full report. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Where Do Builders and Remodelers Buy Building Products?Eric Lynch2025-04-14T08:19:20-05:00

Almost Half of the Owner-Occupied Homes Built Before 1980

Na Zhao2025-04-08T08:16:35-05:00

Around 48% of the U.S. housing stocks dates back to the 1980s and earlier. The median age of owner-occupied homes has climbed to 41 years in 2023, up from 31 years in 2005 according to the latest data from the American Community Survey[1]. The U.S. owner-occupied housing stock has aged rapidly particularly, particularly since the Great Recession, as the residential construction continues to fall behind in delivering new homes. Currently, new home construction faces headwinds such as rising material costs, persistent labor shortage and elevated interest rates. These challenges have contributed to an insufficient supply of new construction, making the nation’s owner-occupied housing stock significantly older over time. As a result, the aging housing stock signals a future growing remodeling market. Older structures require updates to add new amenities or need repairs or replacements of old components. Moreover, the lock-in effect from historically low mortgage rates during the pandemic period has led many homeowners to stay put and renovate their existing homes to accommodate the growing needs of their families. Over the long run, the aging of the housing stock implies that remodeling may grow faster than new construction. From 2020 to 2023, new construction added nearly 2.6 million owner-occupied homes, accounting for only 3% of total owner-occupied housing stock as of 2023. Relatively newer homes built between 2010 and 2019 took up around 9% of the stock, while those constructed between 2000 and 2009 made up 15%. In contrast, around 48% of the owner-occupied homes were built before 1980, including around 35% built before 1970. Due to modest supply of housing construction, the share of relatively newer owner-occupied homes (those built within past 13 years) has declined greatly, from 18% in 2013 to only 12% in 2023. Meanwhile, the share of older homes that are at least 44 years old has increased significantly, rising from 39% in 2013 to 48% in 2023. This shift further reflects the ongoing aging of the U.S. housing stock, highlighting the growing importance of the remodeling sector to address the growing needs of homeowners nationwide. [1] : Census Bureau did not release the standard 2020 1-year American Community Survey (ACS) due to the data collection disruptions experienced during the COVID-19 pandemic. The data quality issues for some topics remain in the experimental estimates of the 2020 data. To be cautious, the 2020 experimental data is not included in the analysis. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Almost Half of the Owner-Occupied Homes Built Before 1980Na Zhao2025-04-08T08:16:35-05:00

Single-Family Housing Starts Hit 12-Month High in February

Jing Fu2025-03-18T10:19:07-05:00

Limited existing inventory helped single-family starts to post a solid gain in February, but builders are still grappling with elevated construction costs stemming from tariff issues and persistent shortages related to buildable lots and labor. Overall housing starts increased 11.2% in February to a seasonally adjusted annual rate of 1.50 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The February reading of 1.50 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 11.4% to a 1.11 million seasonally adjusted annual rate, the highest pace since February 2024. The multifamily sector, which includes apartment buildings and condos, increased 10.7% to an annualized 393,000 pace. While solid demand and a lack of existing inventory provided a boost to single-family production in February, our latest builder survey shows that builders remain concerned about challenging housing affordability conditions, most notably elevated financing and construction costs as well as tariffs on key building materials. On a regional and year-to-date basis, combined single-family and multifamily starts were 4.7% lower in the Northeast, 21.5% lower in the Midwest, 8.3% lower in the South and 20.2% higher in the West. Overall permits decreased 1.2% to a 1.46-million-unit annualized rate in February and were down 6.8% compared to February 2024. Single-family permits decreased 0.2% to a 992,000-unit rate and were down 3.4% compared to the previous year. Multifamily permits decreased 3.1% to a 464,000 pace. Looking at regional permit data on a year-to-date basis, permits were 30.1% lower in the Northeast, 2.3% higher in the Midwest, 2.1% lower in the South and 12.5% lower in the West. The number of single-family homes under construction in February was down 6.7% from a year ago, at 640,000 homes. In February, the count of apartments under construction increased 0.3% to an annualized 772,000 pace. It marks the first gain after 18 months of consecutive declines but was still down 20% from a year ago. There were 526,000 multifamily completions in February, down 15% from the previous year. For each apartment starting construction, there are 1.5 apartments completing the construction process. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Single-Family Housing Starts Hit 12-Month High in FebruaryJing Fu2025-03-18T10:19:07-05:00

Builders’ Profit Margins Improved in 2023

Rose Quint2025-03-11T09:16:47-05:00

Profitability for single-family home builders reached the highest levels in more than a decade in 2023. Industrywide profit benchmarks are important because they allow companies to compare their financial performance against the entire industry. Doing so can guide resource allocation, budgeting, and target setting for costs and expense lines. More broadly, understanding industry benchmarks can lead to an improved business strategy and to higher financial results. On average, builders reported $11.3 million in total revenue for fiscal year 2023. Of that, about $9.0 million (79.3%) was spent on cost of sales (i.e., land, direct and indirect construction costs), which translates into an average gross profit margin of 20.7%. Operating expenses (i.e., finance, S&M, G&A, and owner’s compensation) cost builders an average of $1.4 million (12.0% of revenue), leaving them with an average net profit margin of 8.7%. This post summarizes the results from NAHB’s most recent edition of the Builders’ Cost of Doing Business Study. Based on historical survey data (performed every three years), the 20.7% average gross profit margin in 2023 was the highest registered since 2006 (20.8%). As a point of reference, builders’ gross margin sank to a record low of 14.4% in 2008 (i.e., during the housing recession), but bounced back steadily through 2017 (19.0%). The onset of COVID-19 in 2020 increased costs, causing builders’ average gross margin to drop (18.2%) for the first time since 2008. The 8.7% average net profit margin for fiscal year 2023 is the highest in this survey’s recent history, exceeding the 7.7% reported in 2006. However, increased use of financial incentives, such as mortgage rate buydowns, and cuts in home prices are likely to have caused this margin to shrink in 2024. The Cost of Doing Business Study also tracks builders’ balance sheets. On average, builders reported $7.2 million in total assets on their 2023 balance sheets. Of that, $4.5 million (62%) was financed by liabilities (either short- or long-term) and the other $2.7 million (38%) by equity builders held in their companies. Historical data show the average $7.2 million in total assets in 2023 was 23% lower than in 2020 ($9.4 million), and builders’ lowest asset level since 2010 ($6.2 million). But perhaps more important than fluctuations in the size of their balance sheets, the data reveal a long-term decline in builders’ reliance on debt to finance their operations: in 2006, 74% of their assets were backed up by debt; by 2020, the share was down 10 points to 64%; and by 2023, it dropped to a record low of 62%. Logically, the latter means builders are using more of their own capital to run their companies, as illustrated by their equity share rising from 26% of assets in 2006 to 38% in 2023. The NAHB Economics team will conduct a Cost of Doing Business Study for residential remodelers in the spring of 2025. If that is your firm’s primary activity, please consider participating in this confidential survey. We simply can’t produce benchmarks without your input. To participate, please complete this form. A summary of the most recent profitability benchmarks for residential remodelers is available in this blog post. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Builders’ Profit Margins Improved in 2023Rose Quint2025-03-11T09:16:47-05:00

New Home Sales Slow in January 2025

Jing Fu2025-02-26T12:21:06-06:00

New home sales decreased in January to a three-month low, as housing affordability continues to sideline potential home buyers. Mortgage rates are expected to remain above 6% throughout 2025, coupled with elevated home prices, creating a significant affordability challenge for both first-time buyers and those looking to upgrade. Sales of newly built, single-family homes in January decreased 10.5% to a 657,000 seasonally adjusted annual rate from an upwardly revised December number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in January is down 1.1% compared to a year earlier. A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the January reading of 657,000 units is the number of homes that would sell if this pace continued for the next 12 months. New single-family home inventory in January continued to rise to a level of 495,000, up 7.4% compared to a year earlier. This represents a 9 months’ supply at the current building pace. Completed ready-to-occupy inventory was at a level of 118,000, up 39% compared to a year ago. While the monthly supply of new homes is 9 months, there is currently only a 3.4 months’ supply of existing single-family homes on the market. NAHB estimates the combined new and existing total months’ supply rose to a 4.2 months’ supply in January. The market has not been near a 6 months’ supply, which represents a balanced market, since 2012. The median new home sale price in January was $446,300, up 3.7% from a year ago. It is the highest median sale price since October 2022. The Census data reveals a decrease in new home sales priced between $300,000 and $399,999, which made up 24% of new home sales in January, compared to 29% a year ago. Regionally, on a year-to-date basis, new home sales are down 60.0% in the Northeast, and up 7.1% in the West. New home sales remain unchanged in the Midwest and South. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

New Home Sales Slow in January 2025Jing Fu2025-02-26T12:21:06-06:00

Single-Family Home Size Increases

Robert Dietz2025-02-24T12:16:41-06:00

An expected impact of the virus crisis was a need for more residential space, as people used homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower. As markets expect some decline for long-term interest rates, will new single-family home size reverse and move higher in 2025? Data from the end of 2024 suggests this may be occurring. According to fourth quarter 2024 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was 2,205 square feet, the highest reading since mid-2023. Average (mean) square footage for new single-family homes registered at 2,417 square feet. The average size of a new single-family home, on a one-year moving average basis, trended higher to 2,373 square feet, while the median size is at 2,162 square feet. Home size increased from 2009 to 2015 as entry-level new construction lost market share. Home size declined between 2016 and 2020 as more starter homes were developed. After a brief increase during the post-COVID building boom, home size has trended lower due to declining affordability conditions. As interest rates decline, new home size could level off and increase on a sustained basis in the quarters ahead. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Single-Family Home Size IncreasesRobert Dietz2025-02-24T12:16:41-06:00

Gains for Custom Home Building

Robert Dietz2025-02-24T08:15:41-06:00

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates gains for custom home builders after a period slight softening of market share. The custom building market is less sensitive to the interest rate cycle than other forms of home building. There were 47,000 total custom building starts during the fourth quarter of 2024. This marks a 7% increase compared to the fourth quarter of 2023. Over the last four quarters (2024 as a whole), custom housing starts totaled 181,000 homes, just below a 2% increase compared to the prior four quarter total (178,000 in 2023). Currently, the market share of custom home building, based on a one-year moving average, is approximately 18% of total single-family starts. This is down from a prior cycle peak of 31.5% set during the second quarter of 2009 and the 21% local peak rate at the beginning of 2023, after which spec home building gained market share. Note that this definition of custom home building does not include homes intended for sale, so the analysis in this post uses a narrow definition of the sector. It represents home construction undertaken on a contract basis for which the builder does not hold tax basis in the structure during construction. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Gains for Custom Home BuildingRobert Dietz2025-02-24T08:15:41-06:00

Townhouse Construction Expanded in 2024

Robert Dietz2025-02-21T00:17:38-06:00

Townhouse construction expanded 10% during 2024, outpacing the rest of the single-family home building market. According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the fourth quarter of 2024, single-family attached starts totaled 44,000. Over the last four quarters (2024 as a whole), townhouse construction starts totaled a strong 174,000 homes, which is 10% higher than the prior four-quarter period (158,000 in 2023). Townhouses made up 19% of single-family housing starts for the fourth quarter of the year, a data series high. Using a one-year moving average, the market share of newly-built townhouses stood at 17.3% of all single-family starts for the fourth quarter. With recent gains, the four-quarter moving average market share is near the highest on record, for data going back to 1985. Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6% on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s. The long-run prospects for townhouse construction are positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities. Where it can be zoned, it can be built. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Townhouse Construction Expanded in 2024Robert Dietz2025-02-21T00:17:38-06:00

Housing Starts Retreat at the Start of 2025

Robert Dietz2025-02-19T09:22:55-06:00

Constrained housing affordability conditions due to ongoing, elevated interest rates led to a reduction in single-family production to start the new year. Overall housing starts decreased 9.8% in January to a seasonally adjusted annual rate of 1.37 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The January reading of 1.37 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 8.4% to a 993,000 seasonally adjusted annual rate; the January pace was 1.8% lower than a year ago. The multifamily sector, which includes apartment buildings and condos, decreased 13.5% to an annualized 373,000 pace. As mirrored in the NAHB/Wells Fargo HMI, high construction costs, elevated mortgage rates and challenging housing affordability conditions are causing builders to approach the market with caution. There are competing upside and downside risks, including discussed tariffs and regulatory reform. Given persistent affordability concerns, reducing inefficient regulatory costs would offer the best policy path to improve attainable housing supply and bring down shelter inflation. On a regional basis compared to the previous month, combined single-family and multifamily starts are 27.6% lower in the Northeast, 10.4% lower in the Midwest, 23.3% lower in the South and 42.3% higher in the West. Overall permits increased 0.1% to a 1.48 million unit annualized rate in January. Single-family permits were at a 996,000 annual unit rate, remaining unchanged compared to the previous month. Multifamily permits increased 0.2% to an annualized 487,000 pace. Looking at regional permit data compared to the previous month, permits are 6.1% lower in the Northeast, 1.8% higher in the Midwest, 0.1% lower in the South and 2.3% higher in the West. The number of single-family homes under construction in January is down 6.3% from a year ago, to 641,000 units. The number of multifamily units under construction is down 22.1% from a year ago, to 768,000 units. There were 669,000 multifamily completions in January, up 11% from January 2024. For each apartment starting construction, there are 1.8 apartments completing the construction process. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Housing Starts Retreat at the Start of 2025Robert Dietz2025-02-19T09:22:55-06:00

Builders’ Top Challenges for 2025

Ashok Chaluvadi2025-02-06T09:19:00-06:00

The most significant challenge builders faced in 2024 was high interest rates, as reported by 91% of builders in the latest NAHB/Wells Fargo Housing Market Index survey. A smaller, albeit still significant share of 78% expect interest rates to remain a problem in 2025. The next four most serious issues builders faced in 2024 were rising inflation in the U.S. economy (80%), buyers expecting prices/interest rates to decline (77%), the cost/availability of developed lots (63%), and the cost/availability of labor (61%). Builders don’t expect much improvement in these challenges in 2025, except for rising inflation, which ‘only’ 52% see as a serious problem in the year ahead. In addition to those top tier challenges, 55% to 60% of builders also reported facing serious problems in 2024 with gridlock/uncertainty in Washington (60%), building material prices (57%), concern about employment/economic situation (55%), impact/hook-up/inspection and other fees (55%), and negative media reports making buyers cautious (55%). Looking ahead at 2025, significantly fewer builders expect gridlock/uncertainty in Washington (32%) or have concerns about the employment/economic situation (39%). In contrast, more builders are expecting building material prices to be a problem in 2025 (64%) and about the same expect continuing problems with impact and other fees (58%). Builders have been asked about their most serious challenges every year since 2011. High interest rates have been a problem for a negligible share of builders (under 10%) during most years, except for 2022 (66%), 2023 (90%), and 2024 (91%). When first introduced to the survey in 2021, 63% of builders reported challenges with rising inflation in the U.S. economy, but the share grew to at least 80% in 2022, 2023, and 2024. Prior to 2022, relatively few builders reported problems with buyers expecting prices or interest rates to fall, but that share rose to 49% in 2022, 71% in 2023, and 77% in 2024. The cost/availability of developed lots has been a serious challenge to most builders in nine of the 14 years of the series history. In 2022, 51% of builders faced this problem; by 2024, 63% did—tying a record high set in 2019. Meanwhile, more than half of builders have reported the cost/availability of labor as a serious problem for the past 11 years in a row. While 82% and 85% of builders faced this challenge in 2021 and 2022, respectively, the share has eased to 73% in 2023 and to 61% in 2024. For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full survey report. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Builders’ Top Challenges for 2025Ashok Chaluvadi2025-02-06T09:19:00-06:00

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