Page 8 - Builder Brief August 2023

2023 PRESIDENT
LOOKING TOWARD THE FUTURE
We just returned from the Sunbelt Builders Show hosted by the Texas Association of Builders (TAB) in Fort Worth, Texas. It was a great show and one of the highlights for me was the Friday Keynote with Ali Wolf, the Chief Economist for Zonda. Most of you have heard of Zonda, they are the largest new home construction data company in North America.
Ali heads up their economics department, manages and analyzes all content for Zonda and strategizes with the nation’s largest homebuilders. At this keynote, Ali provided housing statistics specific to Texas and San Antonio. She predicted that the Federal Reserve would raise interest rates at least once and possibly twice before the end this year before they take a pause in 2024.
As Ali forecasted, the Federal Reserve’s monetary policy committee increased the federal funds rate to a top target of 5.5 percent at the conclusion of their meeting the last week of July. The end goal is to bring inflation back to 2 percent.
Since March of 2022, the Federal Reserve has had eleven (11) rate hikes. Ali mentioned several factors driving mortgage rates that include the Federal Reserve, the debt ceiling, inflation, expectations of the buying public, the number of active investors, alternative investment opportunities and market dysfunction.
Housing supply remains tight as sellers consider their options. Statistics show that San Antonio new home inventory is down 20 to 30 percent since 2019 but the growth in the greater San Antonio area is up 26 percent due to natural growth and net migration. It’s no secret that the market is changing but there is good news, especially with the high-income buyer — where we have seen a 20 percent to 30 percent growth across Texas, including San Antonio.
While interest rates and home prices are keeping some new home buyers, investors and ‘flippers’ sitting on the sidelines, new home sales have rebounded and currently account for a near record 29 percent of all homes for sale in the United States. This recent rebound is driven by a resurgence in enthusiastic buyer psychology, reflected in a rise in traffic of prospective buyers. Whether this increase is sustainable will be clearer in the coming months. Zonda reported that the constraints on homebuilding continue to be the availability of land/lots, building supplies, government services and labor. However, builders are competing with the resale market for quick move-in opportunities and Ali reported that there are a lot of mortgage rate buy downs being offered by builders of all sizes.
Ali also provided statistics on the remodeling market and said that this is the ‘Golden Decade of Remodeling’ because sellers are staying put due to high interest rates. This is good news for our remodeler members.
SHAD SCHMID
I don’t have a crystal ball, but I am optimistic that Ali’s prediction of one final rate hike at the end of October 2023 will be the last one of the year. With housing driving our economy, we hope that the Federal Reserve will take a pause on raising rates and hopefully start reducing interest rates in 2024. This will boost buyer confidence and get us back on track for future new home sales. Zonda will be part of our 2024 Housing Forecast on Friday, January 5th, 2024, at 8:00 a.m. so mark your calendars and join us at the JW Marriott in San Antonio for breakfast. Promotional partnerships are available, so email ksutterfield@sabuilders. com now to lock in the best opportunities.
Thank you for being a member and please join us on Thursday, August 17th from 5pm to 7pm for our Summer Membership Mixer. Watch your email for details.
Sincerely,
8 AUGUST 2023 | GREATER SAN ANTONIO BUILDERS ASSOCIATION