After the real estate market bounced back with ferocity from a brief slowdown early in the pandemic, there has been demand plus an extremely low supply of homes on the market.
That meant that the industry turned to home builders to increase construction and help slow down the rapid churn — and consequently rising prices — of the hyper-competitive, constrained market.
But in addition to that increased demand for new homes, the home builders have been dealing with other challenges, including a lumber shortage. Jennifer Motsinger, executive vice president of the Tampa Bay Builders Association, explained how 2020 has shaped home-building here and what her expectations are for 2021. The following interview has been lightly edited for length and clarity:
It’s been quite a year to be in any type of business, but the home-building business has faced some pretty unique challenges, in part because of the low inventory of houses on the market. What that’s been like?
Well, there’s really five reasons that I think we’re in the situation that we’re in now. First, the interest rates are historically low, and people do have a lot more discretionary income. Some of that is because of the pandemic, because, at least the home-buying public, has shifted from working in their offices to working in their homes. So they’ve looked around, and they’ve seen that they want something a little different. That leads into the third thing: There’s a huge lot supply shortage — there’s less than a month of inventory. In a healthy, typical market, we have about six months of inventory at least. And people are opting to build bigger homes. They want a subdivision lifestyle, where they have their own yards, and maybe a pool and an outdoor area, they also want flexible space. So they’re buying bigger homes, where they can have themselves work from home, maybe the spouse works from home, flexible space so that the kids, if they need to be home-schooled or (attend) virtual school, they can do that.
So those are four main reasons. And then I think the reason that people are choosing this area is because people love the Florida sunshine and lifestyle, and we’re very blessed with that.
But it’s been a very interesting challenge this year, to have that enormous growth in demand, coupled with the fact that we’re doing the same thing that everybody else is doing. Because as an essential business, we’re building homes for people to shelter in place, literally, so we have to figure out how to keep our workers safe.
All of the information that was coming out for everybody else was coming at the same pace for us. So keeping workers safe, putting in new guidelines, basically re-learning how to do everything in a very short period of time — and I’m talking about like from the middle of March to I would say May 1 — it was all day, every day, the industry learning all new things, all new protocols. The good news is we had a good foundation, because we have to comply with federal, state and local regulations, safety standards. So I think we did a great job in pivoting. But our industry is not immune to this pandemic, our workers get sick too. So it’s been an interesting challenge. But I think everybody in the industry is very, very blessed to have the role that we have this year.
And have local home builders ramped up their pace of construction as a result of this high demand?
Well, there’s a pretty fixed pace, you can’t really go faster than a certain pace and we can’t really go slower. It’s all about planning and the components of building a home and when you can get your trade partners scheduled to fulfill those needs. So, of course, materials, that comes into play, and that can affect the pace. Labor certainly is going to impact the pace. But think about all the demand — and we all essentially are at the same resource level, the same number of people that are on the regulatory side reviewing plans, and doing inspections issuing the building permits, and essentially the same number of people on our side that are doing the building.
Since you’re talking about materials, I’ve heard there was a lumber shortage this year. Can you tell me a little bit more about that?
Yes, lumber fluctuated wildly. It’s gone up, sometimes 200 percent in the matter of just a couple of months. A lot of that is trade-related, constraints on Canadian softwood lumber and things of that nature. We’re glad that it has come down, but we’re also seeing a trend that it’s going back up. So it’s still very volatile. I’m not really sure what’s going to happen in the long run on that. That is, unfortunately, something that our elected officials in D.C. have control over, not so much those in Tampa Bay.
What is your outlook for the coming year?
In this Tampa Bay market region, it’s going to be a continuation of peak demand. I think you’re going to see home values increase — from what I’m reading, it could be upwards of 20 percent. The demand that we’re seeing, we have no reason to believe that that demand will not continue.
So I think you’ll see next year look very much like this year for the home-building industry.
Is there anything else that you would like to touch on?
Yes, appliances. All of us have our our list of ‘Wow, I did not expect that in 2020,’ right?
I did not expect the level of demand to increase. That was a huge surprise. But now that, you know it has sustained for a few months, and now that we we know that people are choosing a different lifestyle, because of the changes in their lives, it make sense.
Also appliances — think about, okay, you’ve been in your house for two weeks, back in March. And you’re looking at your refrigerator, and you’re like, ‘Gosh, I’m not spending any money. I’m not going anywhere. I’m not using any gas. I’m not going to restaurants, not going to movies or anything.’ People started buying appliances, and they are scarce. You wouldn’t consider the finishes of home and the appliance package being a materials question mark. But yes, surprisingly enough, it is. It is not a given that your appliances will be here when you want them.
The pandemic has just caused so many unexpected things.