RubinBrown recently attended the NAHB International Builder’s Show in Las Vegas. As in prior years, the show is combined with the Kitchen and Bath Industry, International Coverings, and International Surface Event Shows bringing the overall attendance to over 100,000. The city was also hosting 60,000 participants from the largest gun collector’s show in the country while accommodating the night time filming of the new Bourne 5 movie. The local economy appears to be thriving as evidenced by a great deal new construction activity.
Here is what we learned:
Despite the woes of the stock market, the outlook for the Industry is very optimistic. With news of strong job formation, single family starts were up 10% in 2015. NAHB’s economist predicts the market will increase 18% in 2016 and a whopping 30% in 2017.
The top 4 concerns for the industry in a recent survey of Builders included:
1. Lack of available labor (more on this later)
2. Availability of lots
3 Federal and local regulations
4. Increase in building material prices
The economists also noted:
- Household formation increased by 1.6M in 2015, an over 50% increase from 2014.
- 30 year fixed rate mortgages are expected to climb to between 4 ¼ - 4 ½% by the end of the year.
- Millennials continue to baffle the industry. For the most part, they rent or live at home as they enjoy the flexibility. They have not entered the home buying market and appear not interested until they start a family. As a result, the “first time” market is dominated by existing homeowners.
- Housing appreciation was a robust 6% in 2015. Nashville (3rd) and Denver (8th) were two of the leaders in the country.
- 17 states have now reached previous price levels that peaked in 2006.
Cost Of Doing Business Study
RubinBrown assisted in the recently released NAHB Cost of Doing Business Study. Based on 2014 data, the industry reached its highest level of profitability since 2006 with an average net income of 6.4%. In fact, the top 25% performers in the study reported net income at an average of 11%.
Here are some additional highlights:
“Builder of Choice”
The buzz around the Convention was the lack of labor to build houses – everywhere. According to a Builder Partnerships study, the trades experiencing the most difficulty in keeping up with the growing volume are:
The delays experienced have increased the build time on a house by an average of 11-15 days. There are many ideas on how to improve efficiency, but builders who are best organized and communicate the status of the job are the suppliers and subcontractors most want to work with.
Other Items Of Interest
- With the upcoming 2016 election, NAHB has a lot at stake. There is a campaign to raise $3M for the upcoming election cycle to support pro housing candidates. Half has been raised to date.
- The recent tax extenders bill was a win for Housing. With its bipartisan support significant tax reform may happen after the upcoming election. With so many proposals out there, any effect to housing cannot be determined at this time.
Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.
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