Persistence and progress have been the overarching theme for residential construction builders in 2021. Like much of the world, the new construction industry is still navigating the upheaval from the short-term recession brought on by the Covid 19 pandemic. Builders are consistently finding innovative ways to construct new homes and meet the ongoing demand in the market.
Turning Obstacles into Opportunities
The real estate market has seen rapid growth in 2021. One-third of residential construction homes are sold before any building has begun. As a result, there is a shortage of over 5.24 million homes across the nation. Builders are tirelessly working to fill these gaps.
Builders continue to search for skilled trade workers as labor shortages persist in the construction industry. New data suggests that the unemployment rate dropped by four basis points to 4.2% as 210,000 new jobs were created in November.
Material costs have been fluctuating throughout the year, changing the budget and scope of projects. Both builder demand and supply chain issues have caused the prices of all materials and services to increase in cost.
Dr. Vikram Mansharamani, a global trend-watcher, recommends builders anticipate the future, manage risk, and spot opportunities. He states, “The just-in-time- lowest-cost architecture of supply chains is no longer the way to go. Trade wars and lockdowns brought up prices and even made it impossible to get product, so now you need alternate methods.”
There are several ways to navigate around supply chain issues:
- Look for ways to create automation and cut down on manufacturing time.
- Differentiate between end-user demand and actual consumption. Identify what materials are actually being used versus materials purchased from panic buying.
- Consider using materials that aren’t heavily relied on by most builders.
- Build strong relationships with alternative suppliers and begin sourcing from them.
- Secure access to flexible capital, so you can purchase materials as soon as they come available. At Builders Capital, our W.R.A.P. (Warehouse Revolving Asset Pool) loan offers the flexibility and accessibility to capital that allows borrowers to navigate around supply chain issues.
Residential Construction Builders Prevailing in the Market
As we come to the end of quarter four, builders are finishing the year strong. Builder sentiment continues to climb as it increased in December for the fourth straight month to its highest level since May. Homebuilders’ confidence perseveres as buyer demand remains high. Chuck Fowke, Chairman for the National Association of Homebuilders said,
“The solid market for home building continued in November despite ongoing supply-side challenges. Lack of resale inventory combined with strong consumer demand continues to boost single-family home building.”
New housing starts reached an all-time high in November at a seasonally adjusted rate of 1.679 million units. This was a growth of 11.8% from October of 2021. Single-family starts are forecasting to end the year 24% higher than the pre-Covid 2019 level, showing health in the market.
These statistics reflect the resilience and commitment of homebuilders across the nation. As supply-chain issues recede and labor shortages cease, builders are primed to see a multitude of growth and opportunity in 2022. At Builders Capital, we are continually impressed with the tenacity and perseverance of builders across the country.
We look forward to being your trusted lender while giving you access to capital to make your vision a reality in the year ahead.
About Builders Capital
Builders Capital is one of the nation’s largest private construction lenders., offering innovative financing solutions to a broad spectrum of developers and homebuilders, from bridge, fix-and-flip, and ground-up construction, to development and attached housing. The company maintains its headquarters in Puyallup, Washington, with sales offices in Boise, Colorado Springs, San Diego, Phoenix, and Orlando, among others.
Builders Capital’s management team brings to the business over 100 years of expertise in residential construction lending, home building, real estate development, and loan servicing. Brokers can access the portal at any time at my.builderscapital.com, and direct borrowers can get a rate in less than five minutes by using an innovative and automated GETMYRATE tool at MyRate.Builders-Capital.com