Key Building Materials Prices Far Surpassed Inflation in 2016

Softwood lumber, oriented strand board, ready-mix concrete, and gypsum products all posted price changes in 2016 well above the 1.3% average for the Consumer Price Index, according to the latest Producer Price index released by the Bureau of Labor Statistics.

Oriented strand board prices surged 13.8% in 2016, while softwood lumber rose nearly 8.7%. In November, the cost of ready-mix concrete and gypsum products rose 3.5% and 5.0%, respectively, on a year-over-year basis.

In an ominous sign, the price of softwood lumber rose by 2.3% in December, which is the largest monthly increase since April 2016.

A nine-year softwood lumber agreement between the U.S. and Canada that established a system of fees and quotas on Canadian imports to the U.S. triggered in response to changes in the market price of softwood lumber expired in October 2015.

Negotiations on a new agreement have failed. U.S. lumber producers recently filed a petition with the International Trade Commission, reigniting a long-term trade battle between the two countries.

National Association of Home Builders is fighting to ensure American consumers have access to a stable, dependable, and affordable lumber supply.

For more details from this report, click here.

Reedy River Project Selected by NAHB for Funding

The National Association of Home Builders' Board of Directors approved six funding requests, including the Reedy River proposal from the Home Builders Association of Greenville. These proposals came from state and local HBAs requesting help with their advocacy efforts through the National Association of Home Builders State & Local Issues Fund.

The board acted on the recommendation of the State and Local Government Affairs Committee, which reviewed the requests during its meeting at the International Builders’ Show in early January.

The Reedy River, a signature part of the Greenville, S.C., community is impaired by nitrogen. The Home Builders Association of Greenville and a community coalition together have addressed the issue with stormwater regulations and modernization of sewer treatment facilities. Coalition partners have aggressively opposed the state’s efforts to place a Total Maximum Daily Load regulation on nitrogen on the Reedy River. They support an alternative called 5R, a community-based, bottom-up plan to accomplish same result as a Total Maximum Daily Load regulation but without costly litigation. The board approved $20,000 to build an economic model to show community-based collations in Greenville and other HBAs how they can solve environmental impairment problems without Total Maximum Daily Load regulations and costly litigation.

Click here to see the other five proposals.

NAHB Chair Details Legal Challenge to OSHA Rule

National Association of Home Builders has joined several other industry groups to file a challenge against the Occupational Safety and Health Administration and the Department of Labor regarding OSHA’s final Improve Tracking of Workplace Injuries and Illnesses rule, which National Association of Home Builders Chairman Ed Brady called “unlawful and arbitrary” in a press statement issued Thursday.

“We have vigorously opposed this rule from the start, and cannot allow this type of regulatory overreach to occur,” Brady said.

“There are significant concerns associated with Occupational Safety and Health Administration’s requirement of employers to submit detailed injury and illness logs to the agency for public posting. Not only does Occupational Safety and Health Administration not have the authority to do this, it also exposes a business to significant reputational harm, all without demonstrating any evidence that it would effectively reduce workplace injuries and illnesses,” he said.

“We also have serious concerns about the anti-retaliation portion of the rule, which would allow Occupational Safety and Health Administration inspectors to cite an employer without needing a complaint from a worker. This is a clear overreach of authority, as it goes against Congress’s carefully constructed mechanism to address retaliation that is specifically set forth in the Occupational Safety and Health Administration statute.

“Occupational Safety and Health Administration has not justified any of the rule’s requirements with any real benefits analysis and has relied entirely on anecdotal information. This is entirely insufficient and cannot be allowed to stand and potentially serve as a precedent for other agency rules. Workplace safety is of the utmost concern of our members, however this rule is unlawful and does not serve its intended purpose of improving workplace safety. The rule needs to be vacated and set aside in its entirety,” Brady said.

Rising Interest Rates, House Prices Push Thousands Out of the Market

One thousand dollars might sound insignificant when compared to the overall price of a new home. But that relatively small amount of money has a surprisingly big impact on affordability.

The National Association of Home Builders economists recently determined that for every $1,000 increase in the cost of today’s median-priced home, nearly 153,000 American households are priced out and would no longer be able to afford it.

Many builders and developers are finding it increasingly difficult to avoid these price jumps in the face of mounting regulations and government-imposed fees, which can add up quickly and shut the door on a growing number of prospective buyers.

Those numbers become even more eye-opening when looking at potential interest rate increases. With just a quarter-point rise in the rate for a 30-year fixed-rate mortgage, approximately 1.2 million people would be priced out of that segment of the market and forced to set their sights lower than a median-priced home—or delay their home purchase altogether.

But the impact varies widely across the country. The effects are more significant in areas where new homes are more affordable.

Eye On Housing recently revealed which states and metro areas have the highest percentage of priced-out households.

Fannie-Freddie to Raise Conforming Loan Limits in 2017

The Federal Housing Finance Agency today announced that the maximum baseline conforming loan limit for mortgage loans acquired by Fannie Mae and Freddie Mac in 2017 will increase to $424,100 from $417,000. This will be the first increase in the conforming loan limit since it was raised to $417,000 in 2006.

The Housing and Economic Recovery Act of 2008 established $417,000 as the baseline loan limit and mandated that after a period of price declines, the baseline loan limit would not be permitted to rise until home prices had returned to pre-decline levels.

The loan limit will rise 1.7% in 2017 because the Federal Housing Finance Agency has determined that the average U.S. home value in the third quarter of this year increased 1.7% above its level in the third quarter of 2007.

Higher loan limits will be in effect in higher-cost areas as well. In areas where 115% of the local median home value exceeds the baseline loan limit, the maximum area loan limit will be higher. The new ceiling loan limit in high-cost markets will be $636,150 (150% of the $424,100) for single-family properties. The previous ceiling was $625,500.

Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $636,150 for single-family properties, but actual loan limits may be higher in some specific locations. A list of the 2017 maximum conforming loan limits for all counties and county-equivalent areas in the country may be found here.

Corps Letter Clarifies JDs for Wetlands Permits

The U.S. Army Corps of Engineers this week issued a Regulatory Guidance Letter in response to the U.S. Supreme Court’s decision in Hawkes v. United States.

In that decision, the court said that a jurisdictional determination—in which the Corps decides whether a piece of land should be subject to federal oversight under the Clean Water Act—is something that a developer can take to court.

The guidance letter clarifies the differences between the two kinds of jurisdictional determinations and how builders and developers can obtain them.

Jurisdictional determinations are important because developers have no way of knowing whether a feature is jurisdictional simply by looking at it. However, once the Corps issues a jurisdictional determination, it carries significant legal and financial consequences on everything from lending practices to state rules and regulations.

The Supreme Court said in Hawkes that when the Corps determines the precise boundaries of jurisdictional waters on a landowner’s property, that landowner can dispute the determination in court.

The new guidance—the first of its kind issued by the Obama Administration—accepts the Supreme Court decision and provides guidance to the Corps’ staff (and public) explaining when it is appropriate to issue an approved jurisdictional determination or preliminary jurisdictional determinations or not make any determination at all.

The Corps guidance explains that approved jurisdictional determinations are official determinations that jurisdictional waters exist on one’s property, while preliminary jurisdictional determinations are not legally binding. Finally, the guidance provides the forms that property owners are to use when requesting that the Corps conduct an approved jurisdictional determination or preliminary jurisdictional determinations.

Supreme Court to Hear Property Rights Case

The U.S. Supreme Court docket includes a Fifth Amendment “takings” clause case that will undoubtedly affect home builders: Murr v. Wisconsin.

This case deals with the “relevant parcel” rule under the takings clause and can be explained in terms of fractions.

If you own 100 acres and the government takes 40 acres of your land, the fraction is 40/100. The “relevant parcel” is the denominator (100), the total that property courts should use to decide how much of that land has been taken by the government.

In the example, it is easy to determine the relevant parcel, but the Murr case shows why this issue is not as simple as it looks.

In the late 1950s, William Murr bought a small parcel of lakefront property, Lot F, on which he built a family cabin. A few years later, William separately purchased Lot E, the unimproved lot directly adjacent to Lot F. In time, the titles for both lots were passed on to Murr’s children.

In 2004, the Murr children began to look into upgrading the family cabin, but they required the proceeds from the sale of the unimproved Lot E to finance these upgrades. Unfortunately, local regulations prohibited the children from selling Lot E by itself because of minimum lot size restrictions. Further, the children could not develop Lot E because of a local ordinance prohibiting development of adjacent lots if owned by the same person.

In short, the Murr children were left with no options for Lot E except to keep it in its unimproved condition.

The Murr children brought a claim for the 100% taking of Lot E only. They did not include any claims for Lot F. However, the government argued that the relevant parcel for purposes of takings analysis was Lot E combined with Lot F; thus, the taking would be far less than 100% since Lot F is not affected by the government regulation.

The Wisconsin appellate court agreed with the government, and ruled that because the two lots are geographically contiguous and under common ownership, takings analysis requires combining the two parcels when determining the loss of economic value. This is despite the fact that Lot E and Lot F were created as legally separate lots, taxed separately, purchased at separate times, and passed on to the children at separate times.

As a legal side note, there is a huge difference when a landowner claims a complete taking (100%) of property as compared to a partial taking under 100%. A landowner subject to a complete taking is automatically entitled to just compensation (referred to as a Lucas taking). A landowner subject to a partial taking is subject to an additional hurdle: the Penn Central legal test. Penn Central takings cases are very difficult for property owners to win.

It is easy to see how this decision could affect the home building industry. For example, if a home builder has completed the first phase of a project and the government prohibits the development of Phase II, it would be very difficult for the builder to establish an unconstitutional taking if the relevant parcel includes the entire site.

National Association of Home Builders submitted an amicus brief to ensure that the interests of home builders are heard by the Supreme Court. The court has not scheduled a date for oral argument, but it is likely to take place sometime in 2017.

Are You Committing One of These Common Code Violations?

At a recent Builder Breakfast, speakers Buddy Skinner and Ruthie Helms spoke about the common code violations found by the respective cities builder inspectors. After the meeting, both had their inspectors each compile a list of the top five most common code violations for residential construction. Are you committing one of these mistakes?

1. Incorrect foundation anchorage
2. Inadequate bracing of rafters (kings and valleys)
3. Improper span and bearing of porch beams
4. Improper fasteners of star stringers and landings
5. Ductwork not properly sealed

1. Fire blocking
2. Concrete encased electrode or 2 rods
3. No pressure on gas lines
4. Missing hangers
5. 3" elevation of HVAC

1. Wrong size breaker on condenser unit
2. Draft stop of stairs, fireplaces, and chases
3. Inadequate foundation anchoring
4. No grounding electrode
5. No or low pressure on water test supply

1. Air trapped in lines - underground plumbing not completely filled with water
2. Steps and chases not properly fire blocked/draft stopped
3. Foundation straps not installed per manufactures instructions
4. test is not on gas and water lines
5. Outside HVAC units not 3 inches above final grade

FHA Proposes New Condo Approval Rules

The Federal Housing Administration  is proposing a new rule for condominium developments that the agency says is intended to be more flexible, less prescriptive and more reflective of market conditions.

The agency is proposing to reinstate spot approvals in unapproved condominium developments and require condo projects to re-certify their approval status every three years rather than the current two.

The Federal Housing Administration currently stipulates that approved condominium developments have a minimum of 50% of the units occupied by owners. To respond to future market changes, the agency is proposing to establish an allowable range between 25% and 75%.

Regarding commercial/nonresidential space within an approved condominium development, Federal Housing Administration currently requires that this should not exceed 50% of the project’s total floor area. The agency anticipates maintaining this requirement in the near term, but to achieve added flexibility Federal Housing Administration is proposing to establish a range of between 25% and 60% via subsequent notice.

View HUD’s press release and Federal Housing Administration’s proposed rule.

New Emissions Standards for Heavy-Duty Trucks, Trailers

The Environmental Protection Agency and the Department of Transportation have finalized standards for medium- and heavy-duty vehicles in an effort to improve fuel efficiency and cut carbon pollution.

The standards, which apply to trucks built in model years 2021-2027, are expected to lower carbon dioxide emissions by 1.1 billion metric tons, save vehicle owners $170 billion in fuel, and reduce oil consumption by up to 2 billion barrels over the lifetime of the vehicles sold.

Heavy-duty trucks account for about 20% of greenhouse gas emissions and oil use in the transportation sector, according to Environmental Protection Agency.

The standards apply to semi-trucks, large pickup trucks and vans, and all types and sizes of buses and work trucks.

And for the first time, the agencies are finalizing fuel-efficiency and greenhouse gas standards for trailers. Cost-effective technologies for trailers – including aerodynamic devices, lightweight construction and self-inflating tires – can significantly reduce total fuel consumption by tractor-trailers, while paying back the owners in less than two years due to the fuel saved.

Recognizing that many trailer manufacturers are small businesses, Environmental Protection Agency has included provisions that reduce burden, such as a one-year delay in initial standards for small businesses and simplified certification requirements.

Today’s final rulemaking builds on the fuel efficiency and emissions standards already in place for model years 2014-2018, which are expected to result in carbon dioxide emission reductions of 270 million metric tons and save vehicle owners more than $50 billion in fuel costs, according to Environmental Protection Agency. Truck sales were up in model years 2014 and 2015, the years covered under the first round of truck standards.

For more details on the new standards for medium- and heavy-duty vehicles, visit the EPA website.

Thank You PAC Donors

Thank you to our South Carolina Builders Political Action Committee donors for helping to improve and preserve our industry. Take a look at the bills the PAC has supported or fought in an effort to protect the housing industry.

Lots in 2015 are Smallest on Record

The median lot size of a new single-family detached home sold in 2015 dropped under 8,600 square feet for the first time since Census Bureau’s Survey of Construction started tracking the series.

An acre is 43,560 square feet, so the current median lot size is just under one-fifth of an acre. In 2014, Paul Emrath used a football field analogy to help visualize the median lot size that proved to be very popular. So using a football field as a measuring stick, 5.6 median lots would fit between the goal lines of a football field in 2015.

While nation’s lots are getting smaller on average, the regional differences in lot sizes persist. Looking at single-family (attached and detached) speculatively built (or spec) homes started in 2015, the median lot size in New England exceeds half an acre. This is 2.6 times larger than the national median lot.

New England is known for strict local zoning regulations that often require very low densities. Therefore, it is not surprising that more than half of single-family spec homes started in New England are built on some of the largest lots in the nation, with more than half of the lots exceeding half an acre.

The East South Central Division comes as a distant second with the median lot occupying less than a third of an acre. The Pacific division where densities are high and developed land is scarce has the smallest lots, with half of the lots being under 0.15 acres. The neighboring Mountain and West South Central Divisions also report typical lots smaller than a national median, 0.17 and 0.16 acres, respectively.

The analysis above was limited to single-family speculatively built homes. Custom homes built on owner’s land with either the owner or a builder acting as the general contractor do not involve the work of a professional land developer subdividing a property. Therefore, in case of custom homes, lots refer to owner’s land area rather than lots in conventional sense. Nevertheless, the SOC reports lot sizes for custom homes and shows that they tend to have larger lots. The median lot size for custom single-family homes started in 2015 was exactly one acre.

For this analysis, the median lot size was chosen over average since averages tend to be heavily influenced by extreme outliers. In addition, the Census Bureau often masks extreme lot sizes and values on the public use Survey of Construction dataset making it difficult to calculate averages precisely but medians remain unaffected by these procedures.

New Resources for Complying with Lead Paint Rule

The National Association of Home Builders has developed two new documents to help members comply with the Environmental Protection Agency Lead; Renovation, Repair and Painting (RRP) Rule. The first document addresses inspections and the second tackles recertification.

RRP Inspections – What to Expect is based on a guidance document released in May for inspectors who conduct inspections or audits to monitor compliance with the RRP rule.

RRP Certification/Recertification Q&A is an updated resource compiling information on firm and individual renovator certification and training requirements, including recent Environmental Protection Agency action that modified the requirements of the refresher training which certified renovators must take to maintain their certifications.

Your HBA's Legislative Efforts Save You Money, More

In 2016, your Home Builders Association worked diligently to advance the issues most important to our members. The HBA was actively engaged in more than 170 bills during the 2015-16 legislative session to promote and protect the vital work of home builders and developers across South Carolina. 

Our efforts included:

• Successfully opposed mandated residential fire sprinklers in the building code: Over $180 million in annual savings;
• Supported a budget proviso for state-specific high wind and seismic zone mapping: Over $150 million in annual savings;
• Passed one-year Multiple Lot Property Tax Discount extension: $1.9 million in annual savings;
• Supported a bill that prohibits the abusive actions of entities commonly known as "patent trolls:" More than $500,000 annually.

These items along with other legislative and regulatory issues including building and energy codes, Home Owners Assocation reform, storm-water and septic tank policies and impact fees created a total savings of over $400 million for 2016 alone! That is a savings to S.C. homeowners of more than $14,285 per house in unnecessary regulatory costs. This success is is attributed to you, our members...Thank you!

Your HBA influences government on all levels. Our goal is to protect affordable housing and to stop needless regulatory costs, which ultimately trickles down and affects everyone who works in the home.

If you know someone who makes their living in the construction industry, but is not a member, ask them why. Keep our industry strong and ask that they join the HBA today to make sure they have a job tomorrow!

Lot Shortages Climb to All-Time High

If finding skilled laborers isn’t your top concern, chances are, finding lots to build on is your number one challenge.

For nearly 20 years, the NAHB/Wells Fargo Housing Market Index has periodically tracked builder sentiment regarding lot availability. In all that time, the percentage of builders reporting shortages has never been as high as it is now: 64% reported a “low” or “very low” lot supply — a 2% increase from the previous record set in May 2015.

Even back in 2005 — when the rate of housing starts was roughly twice that of today’s rate — the share of builders reporting shortages was down around 53%.

Nowhere is the scarcity of land more apparent than in the western U.S., where 39% of builders said lot supply was “very low” (compared to 23% in the South and 18% in both the Midwest and Northeast). But when referring specifically to premium “Class A” lots, builders from coast to coast reported more similar opinions of widespread shortages.

“Here in Northeast Ohio, the supply of ‘A’ lots has really dwindled,” said Bill Sanderson, vice president of Knez Homes, a Cleveland-area custom home building company. “A few spots are available for redevelopment, but that process takes time, and there still isn’t a ton of [land].”

Sanderson, who also serves as president of the Ohio Home Builders Association, says many builders have little choice but to look farther and farther out into the suburbs, where the prices need to be highly competitive to entice enough buyers.

“In those secondary locations, increased entitlement time and more regulations, including environmental and other issues, mean that lots are not coming online as quickly as planned,” Sanderson explained.

Builder Breakfast on June 9th

Join us at Hubbell Lighting (701 Millennium Blvd) on June 9th from 7:30-9 a.m. for our quarterly Builder Breakfast. This time we will have building officials from Greenville County to discuss the new single family permit regulations that became effective in March, along with a few other topics. Please register here to save your spot and complimentary breakfast.

This event is for Builder Members and Builder affiliates only.

2015 National Green Building Standard Available Now for Free

Green builders, remodelers, developers and verifiers have all heard the news: The ICC/ASHRAE 700-2015 National Green Building Standard™ has been approved by the American National Standards Institute.

But maybe you haven’t heard the equally great news: The standard can be downloaded as a PDF from the National Association of Home Builders BuilderBooks site. And it’s absolutely free.

If you aren’t familiar with how it works, the standard is a green building rating system that assigns points for green and sustainable building practices in the areas of water, resource and energy efficiency, indoor environmental quality, lot and site development and home owner education. To be certified, builders, residential developers and remodelers must meet certain thresholds across all categories to meet the Bronze, Silver, Gold, or ultra-green Emerald levels of certification.

What’s new in the 2015 edition? Improvements and more stringent rating levels in the energy efficiency section, changes that reflect new stormwater management practices, an expanded universal design section and more. You can get the details in this Home Innovation Research Labs press release. Home Innovation trains and accredits the verifiers that builders hire to certify their green projects.

Visit builderbooks.com/ngbs to download your free e-book.

Revised Department of Labor Overtime Proposal ‘Unacceptable’

The U.S. Department of Labor is considering a plan to reduce the cap on its forthcoming overtime salary threshold rate hike from $50,440 to $47,000. This minimal reduction would still amount to a 99% increase from the current overtime salary limit of $23,660.

National Association of Home Builders Chairman Ed Brady issued an official statement responding to the plan, declaring that “this proposal is a token effort at best” and is “unacceptable to America’s small businesses.”

“The unintended consequences of this aggressive regulatory overreach would hurt job and economic growth, as well as many of the workers the plan is trying to help,” Brady added. “There is no reasonable approach or road map on how this would be phased in without resulting in severe economic repercussions. If the $47,000 overtime threshold were to become law, it would hurt millions of small business owners, including home building firms, by forcing them to scale back on pay and benefits, as well as cutting workers’ hours to avoid overtime requirements. Indeed, it would be particularly harmful to the housing community, as the vast majority of home building firms have fewer than 10 employees.

“The Department of Labor must scrap this unworkable proposal and go back to the drawing board. We stand ready to work with Department of Labor to craft a practical plan that would gradually ramp up the current overtime threshold so that it does not result in real hardship for small businesses. The rule should also take into account regional variations in wages and cost of living when determining its formula. Such a measured response would help small business, workers and the economy.”

Feds Loosen Building Restrictions Near Threatened Bats

Common sense claimed a victory this week when the National Fish and Wildlife Service determined that it’s “not prudent” to designate any “critical habitat” within the 32-state range of the endangered northern long-eared bat.

The decision, published in the Federal Register today, brings an end to the latest chapter of the fight to save the bat, which has been decimated by reasons having nothing to do with land development and everything to do with the spread of a disease called white-nose syndrome in their typical nesting and breeding grounds.

It’s important for members to remember the bat is still a federally protected, “threatened” species under the Endangered Species Act.

That means developers and builders cannot undertake otherwise lawful activities if the Service determines that a proposed project may result in the intentional injury, harm or death of a bat.

Furthermore, if the developer needs to apply for a federal permit, such as a wetlands permit, the Service may determine that allowing the development to take place may jeopardize the bat.

To avoid violating the law in areas with northern long-eared bat habitats, builders and developers are urged to comply with FWS NLEB 4(d) rules: specifically, that developers avoid clearing trees within a quarter-mile from where the bats are known to hibernate, or within 150 feet of a known roost tree between June 1 and July 31.

Because the bat uses so many types of trees to roost in during the summer, regulators could make no specific determination of “physical and biological features” that are “essential to the conservation of the species” – a requirement for critical habitat designations which require builders to seek a special permit before beginning any construction or development on a property.

And while bats will find locations such as caves and abandoned mine shafts to spend the winters, designating them as protected areas would only encourage bat enthusiasts to further endanger the animals by pointing out specifically where they roost, regulators decided.

Earlier this year, the National Association of Home Builders helped regulators understand that the restrictions the Service had placed on development – not allowing any within a quarter-mile of a nesting site in the summer – would pretty much shut down all home building from Maine to Montana. But the decision to loosen restrictions and add more flexibility has been met with blowback by environmental groups, who are now likely to challenge this one as well.

Home Builders, Others File Suit Over Silica Rule

Eight construction industry organizations including the Texas Association of Builders filed a petition for review today of the final crystalline silica rule by the Occupational Safety and Health Administration with the U.S. Court of Appeals for the Fifth Circuit.

The affiliated national organizations for these groups—National Association of Home Builders, the American Road and Transportation Builders Association, American Subcontractors Association, Associated Builders and Contractors, The Associated General Contractors of America, Mason Contractors Association of America and Mechanical Contractors Association of America—will join the petition.

The construction industry raised numerous concerns regarding Occupational Safety and Health Administration’s proposal, but the agency failed to address many of these issues when promulgating the final rule. In particular, the industry presented substantial evidence that Occupational Safety and Health Administration’s proposed permissible exposure limit was technologically and economically infeasible.

The groups are concerned that the agency failed to take into account this evidence and moved forward with the same infeasible permissible exposure limit in the final rule. This and other final rule provisions display a fundamental misunderstanding of the real world of construction. The construction industry petitioners continue to be active participants in the rulemaking process and are dedicated to promoting healthy and safe construction jobsites.