MAY 2021 NEWSLETTER To promote, educate and advocate for the Residential Building & Remodeling Industry; providing resources that benefit industry professionals and consumers in the communities we serve. This year the Sport Clay Shoot is raffling off a Weatherby Orion Over/Under Walnut 12 gauge Shotgun! As we know, there are many members that hunt and would appreciate having this in their hands. Tickets are $20 for one (1) or $50 for three (3). Pictured: Janice Wolters with Busey Bank, winner of the 2020 Shotgun Raffle. WHATS INSIDE Upcoming Events May 21 - Sport Clay Shoot Challenge June 9 - Industry Product & Tool Expo June 24 - Bury The Hatchet / Axe Throwing Event July 16 - Herschel E. Johnson Golf Classic EXCAVATION START DELAY………… FIBER OPTIIC LINE IN THE WAY! Membership Announcements New Home Start Permit Report NAHB News: Is the Market Too Hot? National Housing Starts Illinois Policy Institute: IL to Lose 1 Seat in U.S. Congress New event for members! MarketGraphics Chairman, Edsel Charles Issues Affecting New Housing Construction Page 1
The excavation that was scheduled for Friday, April 16th did not happen because of the fiber optic line from AT&T is running thru the middle of the house! Ron Woods Excavating was able to talk to a high up person at AT&T that sent someone out that same day to confirm they screwed up. Now we are waiting for the engineer to come out and get it refigured. Unfortunately this will put us further behind than we anticipated. Ron Woods Excavating spent the rest of the day leveling out the pile of dirt between our lot and the house next to us and has started digging the hole on the other side of our lot hoping that the engineer will show up when he is there. The City of O’Fallon has gotten involved and helped to get AT&T moving forward to install the new fiber optic line in the correct location quickly as this could have taken weeks. The City of O’Fallon was told by AT&T that the new line has been installed and spliced. When we went to confirm the news this is what was onsite…… With this setback we anticipate the completion of the Showcase Home to be in July. Page 2
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ILLINOIS TO LOSE 1 SEAT IN U.S. CONGRESS Jobs & Growth Brad Weisenstein Illinois’ decade of population loss, with last year being the worst loss of people since World War II, will cost us one seat in the U.S. House of Representatives, not the two seats that Illinoisians thought. Illinois will lose one seat in Congress, according to the U.S. Census Bureau. Illinois currently has 18 House seats. It could have been worse: some predictions called for Illinois to lose two seats in the U.S. House of Representatives. Illinois had 12.8 million residents, the U.S. Census count found in 2020. Gains by other states drew bigger representation out of the 435 seats in the U.S. House. Illinois lost a seat along with California, Michigan, New York, Ohio, Pennsylvania and West Virginia, the Census Bureau reported. Those seven seats went to Colorado, Florida, Montana, North Carolina and Oregon, each gaining one, and Texas gaining two seats. The other states remain the same. seats since it peaked at 27 seats before 1943. “So now, as we reach the end of this session, and I look to the Legislature for their proposal for a redistricting map, I’ll be looking to it for its fairness. And that’s something that’s vitally important for our state, as an effect on the next 10 years and representation throughout the state,” Pritzker said April 27. Republican House leader Jim Durkin said Pritzker must suffer from “retrograde amnesia.” Illinois has been losing Pritzker in 2018 campaigned on the need for independent congressional and state legislative redistricting. He repeated that vow as recently as January, when his spokesman said Pritzker “has been clear he will veto a partisan map.” He said it is now too late for an independent commission, which would require amending the Illinois Constitution. He said the Democrats’ map was fair after the 2010 population count and he trusts them to be fair again. “The map that was put together for the last 10 years started out with a very strong leaning toward fairness, which was the Supreme Court rulings of the past dictated the drawing of minority districts in the state to start with that map – and then you have to draw from there,” he said. News of the lost House seat comes on the heels of a decade of population loss that saw about 18,000 fewer Illinoisans than in 2010. Illinois state lawmakers are tasked with redrawing the congressional districts, as well as their own state House and Senate districts by June 30. The partisan process in the past has been abused and gerrymandered by whichever party was in power at the time. Illinois Gov. J.B. Pritzker promised on the campaign trail and repeatedly after that, including earlier this year, to end partisan gerrymandering of political maps. Now he says, ‘Nevermind.’ He trusts lawmakers. Gov. J.B. Pritzker has been clear on two issues: He wants to increase taxes and he has repeatedly vowed to veto any partisan, gerrymandered legislative districts. It turns out that second promise was meaningless, as the governor now intends to trust state lawmakers to draw a fair map. But it’s not too late to create an independent commission, Illinois House Assistant Minority Leader Tim Butler, RSpringfield, said. Pritzker earlier said if there were not an amendment, he would still support creation of an independent commission, Butler said. Butler added that he has a bill ready to go, but Democrats have blocked the effort rather than Republicans as Pritzker now claims. “I would say it’s your friends and the Democratic Party that are not engaging. And we need to have you hold to your word, governor, that you will veto, veto, a partisan map like your office has said,” Butler said April 27 on the House floor. Both parties have abused the mapmaking process when they were in power to benefit their parties by squeezing out opponents and keeping their incumbents safe. The results have been that in the 2018 election, nearly half of the Illinois House of Representatives seats were uncontested. In the Illinois Senate, 20 of 39 senators up for election faced no opponent. That hurts voter turnout, because there is little incentive to vote when there is no choice on the ballot. Page 6
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Housing Starts Spring Forward in March Is the Market Too Hot? A number of unsustainable trends have developed in the housing market. The combination of a decade of underbuilding, favorable demographics, historically low interest rates, and a shift in consumer preferences have pushed single-family housing demand to the strongest levels in over a decade. However, there is simply not enough resale inventory to meet demand. Existing single-family inventory in March stood at a very lean 2.1-month supply — less than half of what a healthy market needs. Consequently, median resale pricing increased 17.2% year over year to more than $329,000. This magnitude of price growth — far in excess of underlying income growth — is not sustainable over the long run. The best means of protecting housing affordability is to boost inventory by increasing new home construction. Although home building is moving at its fastest pace since 2006, inventory stands at a thin 3.6-month supply. Moreover, inventory and sales of new homes are increasingly coming from homes that have not yet started construction, with this count up 150% over the last year. With the strong pace of single-family starts, building materials prices continue to rise on short supply. While not limited to lumber, lumber pricing is now up nearly 250% from a year ago, adding close to $36,000 to the average price of a new single-family home. A recent NAHB survey revealed that as a result of higher material costs, almost half of builders are including price escalation clauses in contracts, 29% are pre-ordering lumber prior to need, and 19% are delaying some building activity. Given these price increases for materials and existing housing, some analysts are talking about bubbles. However, the market is not in a bubble because this price growth is predominantly driven by lack of supply and true demographic demand (as opposed to loose mortgage underwriting). Nonetheless, the current pace of housing price growth is pushing affordability down. And clearly, inflation pressures are building in the economy. The question for the Federal Reserve is whether these forces will be long lasting or transitory as the economy restarts after the unusual recession of 2020. –NAHB Chief Economist Robert Dietz Page 8 Housing production jumped in March despite rising lumber and other material prices affecting the housing industry. Overall housing starts increased 19.4% percent to a seasonally adjusted annual rate of 1.74 million units, according to data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This was the fastest pace for combined single-family and multifamily construction since June 2006. The March reading of 1.74 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 15.3% percent to a 1.24 million seasonally adjusted annual rate. The three-month moving average (a useful gauge given recent volatility) did dip to 1.16 million starts, as charted below given past month data revisions. Single-family housing starts are up 19.6% on a year-to-date basis, when comparing the first quarter of 2021 to the first quarter of 2020. It is also worth noting that the number of single-family homes permitted but not started construction continued to increase in March, rising to 124,000 units. This is 39% higher than a year ago, as building material cost increases and delays slow some home building. As an indicator of the economic impact of housing, there are now 636,000 single-family homes under construction. This is 19% higher than a year ago. There are currently 670,000 apartments under construction, off a post-Great Recession high mark set in August 2020 (683,000) and down slightly from a year ago. On a regional basis and on a year-to-date basis, combined housing starts are 23% higher in the Northeast, 28% higher in the Midwest, 5% higher in the South, and 10% higher in the South. Overall housing permits increased 2.7% to a 1.77 million unit annualized rate in March. Single-family permits increased 4.6% to a 1.20 million unit rate. Multifamily permits decreased 1.2% to a 567,000 pace. Looking at regional permit data compared to the previous month, permits are 8.0% lower in the Northeast, 2.0% higher in the Midwest, 6.4% higher in the South and the West remained even.
Issues Affecting New Housing Construction & Sales “Over-starting” in an area by rushing new home inventory could lead to: spot “overbuilding” or putting foundations in on an “early basis” sometimes several builder-starts are taken through foundation, silt fence, garage floor, drive-gravel base, yard soil movement, temporary electric, sewer and water lines-street to foundation, foundation sealing, back patio slab (all this is after building permit is obtained and posted on site). Then Builders at Times Might Pause “Starts” can also include single family detached rentals and this investor can put in several foundations at one time. The large builder that does not build to match sales but builds just to produce homes; if they over-build, they discount to lower inventory, but the production rate is an even flow. All is complicated by builders dealing with price increases and how to pass off the increases. Serious material shortages, much due to the pandemic and some due to market manipulation, and some just short of supply; and some by growing housing demand. Supplier surplus material buying months ahead to try and fill the supply chain which complicates the issue. Some builders who pre-buy (one builder buys windows by the truck load for a warehouse) with no designation for an actual house. We need a 2.5-year supply of developed lots - In many markets the range is generally 1 year and 2 months to just over 2 years. If you remove the junk lots, it is less than 1 year supply of developed lots-to about 1.5 years; lot shortages will push up prices of raw land and developed lots. While all of this is going on, existing home resale inventory is down significantly because many people have deferred listing their existing house because of the virus; with low interest rates, people are buying many newer homes. In 4-6 months, the vaccine will result in a significant jump in available listings of existing homes and have a modest softening effect on new home sales. Lot price increases are forcing builders in some cases to over price a county land area. There must be increasing caution not to over-run a local market price. Today it is common to sell a house quickly all the way to getting 4 to 20 contract offers on a house with over 60% of the contracts over the asking price. Meanwhile the new administration is pushing up gas prices, spending money in unrealistic ways and the Federal Reserve will need to sort out how inflation will show up and when and to what degree - the start of a financial problem. Here are the cautions in order of priority – most difficult first: a. The over pricing of homes in some land areas because of lot shortages b. Buying land to develop, i.e., creating land shortages c. Material shortage and pricing increases d. Builders are not only finding a lot shortage now and it will not get better over the next 3 years e. Existing home inventory shortages with spots of no inventory f. Price issues across the board is the single issue driven mostly by shortages g. Single family permit count is “not all real” – many permits are single family detached rentals which contributes to shortages Then we have in this pandemic, buyers transfer from New York, California, Chicago & other markets to southern markets – increasing new home absorption rates. We see 5% to 30% of market parts as a market with incoming transfers. Starts are up because of a good market plus a current (temporary) lack of existing homes for sale; plus, a strong “transfer” in market; and many single families “starts” look like a new for-sale house but are in reality single family detached rentals. Thank you, Edsel Charles Chairman MarketGraphics Research Group, Inc. Page 9
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RENEWING MEMBERS Ambassador Floor - 8 years American Portfolio Mortgage - 2 years Belleville Supply Company - 45 years Benchmark Title company - 23 years Brennan Building & Remodeling - 19 years Champion Waterproofing - 20 years City of Troy - 4 years Crown Roofing & Exteriors - 10 years Custom Floors & More - 21 years Custom Marble, Inc. - 35 years D.M.I. Plumbing - 11 years Drake Construction - 7 years E.D.C. Drywall - 1 year Earthworks - 5 years Econ-O-Johns - 23 years Fulford Construction - 6 years Henges Interiors - 21 years Kappert Construction - 20 years Kaskaskia Mechanical Insulation - 13 years REMODELERS COUNCIL RENEWALS Arrowhead Building Supply Himstedt Roofing Landscapes unlimited L.D.C. Homes - 7 years Landscapes Unlimited - 8 years Lantz Homes - 61 years* Liese Lumber - 46 years Light Brite - 21 years MDB Electric - 20 years Padgett Building & Remodeling - 27 years Peoples National Bank - 1 year Quantum Homes - 8 years RE/MAX Results Realty - 4 years Rebel, Inc. - 29 years Schrage Service Company - 8 years Spencer Homes - 8 years Srogus Construction - 10 years Wade Sales & Service - 6 years Wausau Supply - 1 year Wells Fargo Home Mortgage - 31 years Yaekel & Associates Insurance Services - 18 years NEW MEMBER Share this newsletter with your industry friends! Point out this page to help strengthen our influence and consumer confidence. Katie Tebbe JT Build LLC 121 Broadway, Highland, IL 62249 O: (618) 830-6171 ktebbe@jtbuild.co www.jtbuild.co Page 11
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OFFICERS P L A T I N U M President, Ryan Butler Remington Properties 1st Vice President, Mike Lippert Liese Lumber 2nd Vice President, Mike Needles C.A. Jones, Inc. Associate Vice President, Mindy Shafer Wells Fargo Home Mortgage Treasurer, Scott Gruber First Mid Bank & Trust Secretary, Jerry Yaekel Yaekel & Associates, Inc. Immediate Past President, Aaron Klemme Klemme Construction DIRECTORS G O L D S I L V E R Allen Roofing & Siding B R O N Z Page 13 Jason Klein - Ameren Illinois Barry Buchman - Arrowhead Building Supply Matt Warren - Carrollton Bank Coy Mullenix - CMI Construction Michelle Rauk - Eagle Flooring Mark Fulford - Fulford Construction John Snapat - Fulford Home Remodeling Steve Macaluso - Halloran Construction Jon Elder - Henges Interiors Robert Dee, Jr. - Homes by Deesign, Inc. Scott Blumberg - Huntington Chase Ken Diel - Kerber, Eck & Braeckel Mike Lippert - Liese Lumber Josh McDermott - J.T. McDermott Remodeling Contractors Derek Brandmeyer - Light Brite Jason Huelsmann - New Tradition Homes David Padgett - Padgett Building & Remodeling Ron Padgett - Padgett Building & Remodeling Scot Lehr - Quality Installation & Home Improvement Jeff Schmidt - RLP Development Sue Schultz - Sandberg Phoenix & von Gontard P.C. Mike Rathgeb - Spencer Homes Mark Vogt - Vogt Builders, Inc. Jim Vernier - Village of Shiloh
6100 West Main Street Maryville, IL 62062 Phone: 618-343-6331 E-mail: tbutler@hbrmea.org Web: www.hbrmea.org Page 14
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