Earlier this week, the National Association of Home Builders issued a press release stating that builder confidence dropped two points to 42 in this month in the most recent National Association of Home Builders/Wells Fargo Housing Market Index (HMI). In the release, Rick Judson, the owner of Charlotte’s Evergreen Development and the chairman of the NAHB, said while home sales are generally improving, rising costs in the construction industry is holding back job creation and new building.
“Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values.”
The NAHB’s chief economist, David Crowe, said supply chains for skilled workers, developed lots and building materials haven’t re-established themselves as of yet, so builders are still “feeling squeezed” by limited availability and rising costs.
The 25-year-old HMI measures builder perceptions of current single-home sales and sales expectations in the next six months. It also asks builders to rate their perception of potential buyer traffic. In each, builders are asked to give ratings of “good,” “fair” or “poor.” A score of 50 is the break-even point between good and poor builder confidence.
Dealing with costs — whether they’re rising or not — has always been an issue in the construction industry. But how can builders control costs when many of the variables, such as material and labor costs, are out of their hands?
Luckily, there are products such as Sage 100 Contractor and Sage 300 Construction and Real Estate on the market to help builders and developers track accounting and job costing. In the “new normal” of the construction and real estate industry, one of the most important things builders can do proactively is to make sure they tamp down on their own business processes, making sure all of their finances are tracked throughout their businesses with integrated software designed specifically for their industry.
Both Sage 100 and Sage 300 have the tools that can help construction companies get their costs under control whether the market is good or bad.
The good news is that Crowe didn’t have all bad news to report:
“… builders’ outlook for the next six months has improved due to the low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence.”