The Headlines: July 21, 2017

Ten Home Building industry stories we have read recently:

• Jimmy Carter: Trump is right. Canada's lumber trade practices are unfair. The Washington Post.
• Builders, how do you define substantial completion for your subcontractors? Professional Warranty Service Corporation blog.
• Deitz: slow but steady growth for housing. NAHBNow.
• Home builders can't find enough workers. CNN Money. (quoted: NAHB CEO Jerry Howard)
• Real estate's new normal: homeowners staying put. New York Times. (good news for remodelers?)
• How tales of "flippers" led to a housing bubble. New York Times.
• Former Chief Just offers stark reminder of South Carolina Construction Law. Midlandsbiz.
• Worker-friendly rules scrapped by Labor Dept. USA Today.
• Who's powering the housing market? Surprise! It's Millennials. NBC News.
• Home building slowed as cities try to tame growth. USA Today.

July 21, 2017

U.S. house prices rise 1.4 percent in the first quarter

U.S. house prices rose 1.4 percent in the first quarter of 2017 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). House prices rose 6.0 percent from the first quarter of 2016 to the first quarter of 2017. FHFA's seasonally adjusted monthly index for March was up 0.6 percent from February.

The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. FHFA has produced a video of highlights for this quarter.

"The steep, multi-year rise in U.S. home prices continued in the first quarter," said FHFA Deputy Chief Economist Andrew Leventis. "Mortgage rates during the quarter remained slightly elevated relative to most of last year, but demand for homes remained very strong. With housing inventories still languishing at extremely low levels, the strong demand led to another exceptionally large quarterly price increase."

Significant Findings

• Home prices rose in 48 states and the District of Columbia between the first quarter of 2016 and the first quarter of 2017. The top five areas in annual appreciation were: 1) District of Columbia 13.9 percent; 2) Colorado 10.7 percent; 3) Idaho 10.3 percent; 4)Washington 10.2 percent; and 5) New Hampshire 9.5 percent.
• Among the 100 largest metropolitan areas in the U.S., annual price increases were greatest in the Grand Rapids-Wyoming, MI, where prices increased by 13.7 percent. Prices were weakest in San Francisco-Redwood City-South San Francisco, CA (MSAD), where they fell 2.5 percent.
• Of the nine census divisions, the Pacific division experienced the strongest increase in the first quarter, posting a 2.0 percent quarterly increase and a 7.7 percent increase since the first quarter of last year. House price appreciation was weakest in theMiddle Atlantic division, where prices rose 1.0 percent from the last quarter.

Compliance with regulations account for nearly 25 percent of the cost of a new home

By Bob Barreto, President, Home Builders Association of Greenville

      President, GBS Building Supply

On average, regulations imposed by all levels of government account for 24.3 percent of the sales price of a new single-family home, according to a 2016 study by the National Association of Home Builders (NAHB).

Breaking down the total regulatory costs further, the study revealed that three fifths of compliance costs, or 14.6 percent of the final house price, is due to a higher price for a finished lot resulting from regulations imposed during the lot's development. The other two fifths, or 9.7 percent of the house price, is the result of costs incurred by the builder when building the home after purchasing the finished lot.

In the Greater Greenville area, the study indicates that a new home is $67,424 more expensive as a result of the cost of complying with regulations. 

These regulations come from many sources.  They include new land-use controls that reduce the potential density yield of a parcel of land, which increases the cost of the finished lot.  Other regulations include significant changes to the building code that has added thousands of dollars to the price of a new home.  Labor-law changes also have had an impact.  As well as significant increases in building permit fees, development compliance fees, and new sewer account fees.  But the greatest increase in the cost of compliance has come in the form of new and increased environmental regulations to control erosion and stormwater runoff during development and construction.

When the 2016 study is compared to a previous study prepared in 2011, NAHB found that the cost of compliance with regulations increased by 29.8 percent in the five years between the two studies.  That means the cost of constructing a new home in the Greater Greenville area increased by more than $20,000, in just five years, to comply with new rules imposed by government.  Meanwhile, personal disposable income in the U.S. increased by just 14.4 percent during that same time period, meaning that the average cost of regulation embodied in a new home is rising more than twice as fast as the average American's ability to pay for it.

According to another study by the National Association of Home Builders, 521 families in the Greater Greenville are priced out of Homeownership by a $1,000 increase in the cost of purchasing a new home.  If you do the math, and I have, that means the increase in the last five years in the cost of compliance with regulations has priced out of homeownership more than 10,000 families in our community.

There has been considerable discussion and debate about affordable housing in our community.  Studies by the City of Greenville and Greenville County are providing evidence of the problem.  Many want to blame home builders and land developers for the problem.  But a reading of the studies by the National Association of Home Builders demonstrates that at least part of the problem lies with well-meaning regulations that fail to take into account the impact on a family’s ability to afford a home.

Clearly, a portion of the solution to our community’s housing affordability problem lies in a thorough review of the cost of complying with our own regulations.

Featured Bridge Award: Ryan Homes at Carrollton Court

This week's Featured Bridge Award, presented by GBS Building Supply, is in the Craftsmanship Category, New Home.  Ryan Homes' project on Carrollton Court won the Bridge Award in the $250,000 to $500,000 price range. 

Ryan Homes at Carrollton Court

The award included Best Kitchen, Best Bathroom, Best Exterior, and Best Overall.  Congratulations Ryan Homes.  See all of the Bridge Awards by visiting HBAofGreenville.com.