Oklahoma Home Builder News

The article below was written by Dr. Robert Dietz, Chief Economist at the National Home Builders Association. 

The 2024 election offers both upside and downside risks for housing and home building, given both the scale and scope of policy change now underway in Washington, D.C. Regulatory reform and cost reduction offer the most upside risk for the persistent problems that plague the housing market, namely growing construction costs and poor housing affordability due to limited inventory. Extension of the 2017 tax cuts would also be a net positive for home builders and remodelers. 
 
However, negative risks for residential construction include tariffs on imported building materials, concerns regarding immigration and workforce availability, and general policy uncertainty given the daily headlines of proposals and executive orders. The bond market also has long-run concerns over inflation and long-term government deficits
 
As a result, home builder sentiment fell after a post-election gain. The NAHB/Wells Fargo HMI was 42 in February, down five points from January and the lowest level in five months. While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for builders’ 2025 outlook. Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023.
 
Similarly, the NAHB Multifamily Production Index (MPI) remains below the break-even level of 50, although it did show signs of improvement at the end of 2024 by increasing seven points to a level of 48. The MPI is pointing to eventual stabilization of the multifamily construction market in 2025.
 
Reflecting the sentiment indicators, single-family starts in January decreased 8.4% to a 993,000 seasonally adjusted annual rate; 1.8% lower than a year ago. Multifamily starts decreased 13.5% to an annualized 373,000 pace. There were 669,000 multifamily completions in January, up 11% from January 2024. For each apartment starting construction, there are 1.8 apartments completing the construction process.
 
Higher construction financing costs and elevated mortgage interest rates continue to hold back the housing market, and the future of interest rates will depend on inflation data and policy change. During the past 12 months, on a non-seasonally adjusted basis, the Consumer Price Index rose by 3.0% in January. This was higher than the 2.9% rate recorded in December and is a warning that policies that increase costs on the supply side of the market, like tariffs, may push inflation higher in 2025 and keep the Federal Reserve on an extended hold.

The article below was written by Dr. Robert Dietz, National Home Builders Association Chief Economist. 

Despite ongoing easing of short-term interest rates by the Federal Reserve, long-term interest rates remain in the same range they have been in for the last two years. Frustratingly, the 10-year Treasury rate began the week at 4.6%, about 100 basis points above NAHB's forecast from a year ago. With the average 30-year fixed-rate mortgage now near 6.9%, interest rates for home buyers are back to levels from last July but remain below October 2023 cycle peaks. 
 
The rise in long-term rates has been driven by bond market concerns rather than monetary policy. After cutting the federal funds rate by 25 basis points in December, the Fed's policy rate target is now 75 basis points off the cycle high. Long-term interest rates have been driven higher because of improved economic growth prospects (a positive) as well as concerns over tariffs, a tight labor market and a potential increase to the federal deficit — all post-election changes for the economic outlook. Indeed, the Fed is projecting just two rate cuts for 2025, compared to earlier projections of four rate cuts, with a terminal rate for this cycle at 3.25% in 2026. The central bank also lifted its inflation forecast for 2025 to 2.5% (up from 2.1%), reflecting an even slower path back to its inflation target of 2.0%.
 
Amid these financial challenges, builder sentiment in December, as measured by the NAHB/HMI Housing Market Index (HMI), held steady at a level of 46. Nonetheless, builders remain confident that the positive factors of the outlook, including expectations for an improved regulatory environment and faster economic growth, will help spur the industry in 2025. As a reflection of that sentiment, the future sales component of the HMI increased three points in December — the highest reading since April 2022.
 
In November, single-family starts increased to a 1.01 million annual rate, rising 6.4% from the month prior and up 7.2% on a year-to-date basis. Multifamily construction slowed 23% in November to a 278,000 annual rate, with apartment construction on a path to be down almost 30% for the 2024 data. 
 
In addition to elevated interest rates and a multi-decade low for housing affordability, inventory is rising and becoming a concern in some local markets. However, on a national level, inventory remains below historical norms. The 8.9-month supply of new construction combined with a 3.8-month supply for single-family resale homes yields a still-low total of a 4.5-month supply of all for-sale housing. While inventory is expected to rise in 2025, solid economic growth and a positive labor market should support demand for housing.

The article below was written by Dr. Robert Dietz, National Home Builders Association Chief Economist. 

With the election in the rearview mirror, and personnel and policy decisions coming into focus for the incoming Trump administration, markets absorbed inflation data and elevated future risks. Inflation, which was a critical issue during the election, ticked higher in October as the Consumer Price Index (CPI) posted a 2.6% year-over-year growth rate. Overall, prices since the start of 2020 are up 20.2% — the largest spate of inflation in almost five decades. Due to higher construction costs and other supply-side factors, housing sector inflation continues to be a driving factor for the CPI. Shelter inflation increased at a 4.9% year-over-year rate in October and was responsible for 65% of total inflation over the last 12 months.
 
Due to lingering inflation pressure and possible future policy risks for prices, long-term interest rates remain elevated even as the Fed reduces short-term rates. The 10-year Treasury is near 4.4% — the highest level since the start of July. Fiscal policymakers need to show they will exert discipline for the federal deficit if risk increases. The 30-year fixed-rate mortgage is above 6.8% — also the highest rate since July due to similar concerns. NAHB’s forecast is for future declines in these interest rates over the next two years.
 
Ongoing elevated mortgage rates, combined with higher home prices, leave housing affordability in crisis-level conditions. The NAHB/Wells Fargo Cost of Housing Index (CHI) indicates that for the typical family, 38% of their income is required to buy a median-priced new or existing home. Low-income families would require three-quarters of their income. These affordability conditions are holding back home sales volume, although existing home sales improved in October. For the month, resales increased 3.4% to a 3.96 million annual rate — up 2.9% from a year ago and the first year-over-year gain for transaction volume in three years. Total inventory remains lean at a 4.2-month supply.
 
The November reading of builder sentiment, via the NAHB/Wells Fargo Housing Market Index (HMI), noted a post-election gain despite ongoing challenges for affordability and home construction costs. The HMI increased by three points to a still soft reading of 46. However, the measure of future sales expectations increased by seven points to a positive reading of 64, reflecting builders’ optimism for the economy and sales conditions, while mindful of current policy risks. For example, single-family construction starts were down 6.9% to a 970,000 seasonally adjusted annual rate in October, although on a year-to-date basis, single-family home building is up more than 9%. Multifamily construction is down 29% on a year-to-date basis, as that market continues to face localized oversupply and tight financing conditions. NAHB is forecasting a small gain for single-family construction in 2025, while apartment development will level off later in the year. 

Every year it is a privilege of the Oklahoma Home Builders Aassociation to hold the annual OK Building Summit & Expo. The initial idea behind the Summit was to help those builders and associates who cannot attend the International Builders Show an alternative – a mini-IBS if you will. It provides great education with an opportunity to meet and greet local vendors. It has grown where those that attend can obtain all the hours they need to complete their annual continuing education requirements for their Certified Professional Builder credentials.

This year we are stretching to do even more. With the slate of speakers, we have lined up, there is education, not only for the builder, but their superintendents, their sales staff, and even their framers! While not everyone needs CEU credits, everyone can utilize the education they will receive. Then add to that the networking environment and the great vendors and sponsors – it is a Summit you do not want to miss!

Let’s look at a few examples. Not only do we have Scott Sedam back with his amazing knowledge of processes, but we also are bringing in Charlie Scott to help sales staff and builders know what it takes to make an ultimate sales team. Realtors will gain invaluable knowledge in selling new home construction.

We also have Dr. Chris Ramseyer, a structural engineer, along with Mike Hancock, another engineer, sharing their insights and knowledge in proper techniques from framing to water barrier installations. These are classes your field guys will really appreciate.

Last one for everyone, even though there is much, much more. Ted Jones, recently retired chief economist for Stewart Title, brings his unique presentation methods to understanding the economic picture and what he expects to happen in the near future.

So, I call this one a Summit for Everyone. Take time to come and join us! You can sign up here to attend.

The article below was written by Dr. Robert Dietz, National Home Builders Association Chief Economist. 

With the Federal Reserve expected to cut short-term interest rates at the conclusion of its upcoming September monetary policy meeting, long-term interest rates have already priced in some of the impact of future easing. The average 30-year fixed-rate mortgage last week was 6.35% — the lowest since May 2023. As interest rates gradually and unevenly move lower in the quarters ahead, housing demand will improve in most markets and opportunities will expand for prospective home buyers currently waiting on the sidelines.
 
Home sales have picked up as long-term interest rates trend lower. Total existing home sales increased 1.3% to an annual rate of 3.95 million in July. This was the first monthly gain in four months, although the pace of sales is still down 2.5% from a year ago. Inventory remains lean at just a 4-month supply, although inventory levels are rising (up 19.1% on a year-over-year basis).
 
New home sales surprisingly increased 10.6% in July to an annual rate of 739,000, elevating the pace of sales 5.6% from a year ago. However, this gain was at odds with recent industry surveys, suggesting a downward revision is likely for the July data. 
 
New home inventory stands at 462,000 homes, down 1.1% from June but at a seemingly elevated 7.5-month supply. However, the combined inventory of both new and existing homes stands at a low 4.5-month supply. As this metric rises, the pace of home price gains will continue to slow. The Case Shiller Home Price Index has been trending downward for several months, declining from an annual rate of 9.76% in August 2023 to 1.89% in June 2024.
 
New research from NAHB examined several of the challenges home builders faced in recent years. For example, analysis of 2023 data found that it takes an average of 8.6 months to build a single-family home, up from 7.2 in 2015. Additional analysis explains why cost is a key barrier to adding entry-level housing. The data show that the median cost per square foot rises significantly as homes get smaller: from $132 per square foot for a home over 5,000 square feet, to $200 per square foot for a home under 1,200 square feet. 

And new labor market analysis finds that the share of white-collar workers in the construction industry is on the rise, while the share of trades workers has fallen from 71% in 2005 to 61% in 2022. Some view this as an indication of technology adoption. However, lackluster productivity gains for the sector during this period suggest the rising presence of white-collar workers is a result of the industry’s ever-expanding regulatory environment.