Page 10 - Builder Brief September 2024 Issue

2024 PRESIDENT
DATA SHOWS A ROUGH PATCH EXPECTED FOR RESIDENTIAL CONSTRUCTION
The National Association of Home Builders (NAHB) 's Chief Economist, Dr. Rob Dietz, recently released a new housing forecast on August 21st, predicting that the Federal Reserve will lower interest rates at its September meeting. Dr. Dietz reported that inflation is moving in the right direction, and Gross Domestic Product (GDP) growth is going to slow down.
The unemployment rate has risen from 3.5 percent to 4.3 percent as the labor market cools. Since March 2023, the United States' job growth has been slower than expected. However, the Lone Star State has bucked the trend and is seeing growth in the labor market.
While overall inflation is approximately 2.9 percent, the Federal Reserve aims to reduce it to 2 percent. Predictions are that we can look forward to more than one interest rate cut in 2024. Economists anticipate additional cuts in 2025, with five to six interest rate cuts expected through 2025.
Housing affordability continues to be at an all-time low, with the average homeowner paying 38 percent of their income to afford their home mortgage. Dr. Dietz reported that workforce housing is declining while the government deficit is growing. Additionally, there is a lot of uncertainty on the horizon with the federal elections just two short months away.
The 2017 tax cuts expire in 2025, and there is still some uncertainty ahead for the residential and remodeling industries. Regulatory costs per new home are approximately $93,870 per home, an 11 percent gain from 2016 to date. To make things worse, last week, the Federal Government doubled the lumber tariffs on Canadian lumber from 8 percent to 15 percent, which is not good news for housing affordability.
The future does not look promising for new construction in the short term and recent housing studies indicate that the residential remodeling industry nationwide is in for a soft patch. However, remodeling should bounce back due to our country's aging housing stock.
Nationwide statistics show a 9.3-month supply of new homes on the market. In Texas, the current level of supply ranges from 6 to 8 months, which is considered a healthy supply, and predictions look good moving forward.
Single-family starts in the United States increased 11 percent in 2022 and 6 percent in 2023. While the data isn't yet available for 2024, we expect a small gain. New home construction should spike in 2025 with the anticipated interest rate cuts.
Dr. Dietz shared some interesting trends in the new home market. New home sizes are decreasing, developed lots delivered today
TIM PRUSKI
are smaller, the single-family-for-rent market is expanding, and the legal and regulatory burdens are increasing. The resale inventory on the market is lower than in 2017 and there will be fierce competition between resale and new home markets in the next few years. Many frustrated homebuyers are on the sidelines waiting for interest rates to fall below 5 percent.
A lot is going on in your association and the residential construction market. We must all engage with our local, state, and national associations. The 3PAC Fundraiser & Clay Shoot event is one of the most important events we host each year. We sincerely need your support and personal contribution to the San Antonio Builders Political Action Committee (SABPAC) on Wednesday, September 18th. Join us for this vital fundraising event at the San Antonio Gun Club from 3:00 pm to 7:30 pm. We will kick off with the Clay Shoot, followed by an evening of delicious delicacies, cocktails, and discriminating cigars. We expect several elected officials to attend! I want to thank PAC Chairman Ed Berlanga and Co-Chair Eric Bernal for their leadership and hard work on this critical event. Thank you for your continued support of the association, and I hope to see you there.
Sincerely, Tim Pruski
10 SEPTEMBER 2024 | GREATER SAN ANTONIO BUILDERS ASSOCIATION