Homebuilder Activity
By studying homebuilder balances from the past 12 months, it seems that building activity peaked in October 2013. Then, balances fell each month, reaching their lowest point in February of this year. Activity was slowed by the Holidays and the brutal weather we saw in January and February. Since February, homebuilder balances have slowly risen each month.
Another reason for this slowdown in activity is lot availability. For some homebuilders, they sold homes in 2013 at a quicker rate than they anticipated. Their building outpaced their replacement of lots.
I’ve talked with many homebuilding companies recently, and the first four months of the year appear to be the calm before the storm. Many of those companies are wrapping up their current subdivisions and are heavily engaged in development. They are either opening new subdivisions, rushing to finish their new developments, or in the process of purchasing raw land to bring lots online later this year.
The amount of house lots that will be available the second half of this year will be something we haven’t seen in quite a while. We’ll keep our fingers crossed that the buyers will be there as well.
Labor Pains
This surge in building activity will bring a few challenges with it. Material prices will increase. And, most Trade contractors will have a difficult time finding laborers to get the work done.
One thing I often hear from homebuilders is that their current Trade contractors are not willing to grow to meet the increase in work activity. These Trades have chosen not to add more crews, trucks or equipment.
For many contractors, this decision is based on the pounding they took during the Great Recession. They either lack the capital or the gumption to climb that ladder again. I understand. High overhead and truck & equipment loans continue even if the work stops coming in.
This is forcing builders to find additional Trades to get their work done. We first saw this last Summer when homebuilders were desperate to find key Trades and suppliers to keep their homes on schedule.
At Herbert Construction, we have not taken the “no growth” stance that many of our peers are adopting. We still have trucks and equipment that aren’t fully utilized. We have the capability to increase our workload without investing in more trucks and other equipment. We’ve refined our hiring and training systems to reduce some of the typical labor problems.
We are open for business and we’re full steam ahead. If we were a doctor, the sign in front of our building would read, “Now Accepting New Patients.”
I am excited about our position. We can handle any increase in activity from our current clients. And, we have spots available for a few good homebuilding companies to join our team.
P.S. Even with the flurry of activity you are experiencing, remember to call “Pops” on June 15th – Father’s Day. And, if you are a Dad, don’t be too busy working to be a good father to your own kids.