By Scott Brannock | Tidewater Homes
The year 2022 posed several unique issues within the homebuilding industry. Considering the number of people looking to relocate in Northeast Florida, it would seem that residential new construction has had a banner year in sales.
However, while sales were strong through the first and second quarter of this year, residential construction has now been presented with a new obstacle outside of the pandemic struggles from which we have yet to recover.
The new obstacle is not the continued labor shortage of qualified and skilled trades people, project managers or designers. It’s not the ongoing product shortages including garage doors, windows, appliances, wall and floor coverings or finishing fixtures.
The weekly fluctuation of pricing has been with us for a while. It makes it nearly impossible to properly price a home and is leading many builders to add and enforce escalation clauses within their contracts in order to keep their doors open.
The new obstacle may be the most difficult, compounding every challenge above into a perfect storm. Mortgage rates are the latest problem facing the building industry.
Increasing rates have drastically slowed the new construction sales market and strategies of nearly every builder, from production to semi-custom and custom homebuilding.
Since 2008, we have all been spoiled by extremely low interest rates. It was not uncommon to have them in the 2.5% - 4.5% range. With today’s current rates rising above 7% for a conventional 30-year mortgage, the affordability of the housing market is drastically declining.
This has caused most prospective buyers to pause their new home search and see where rates trend in 2023. Some are even canceling their new home search altogether and pursuing the remodeling route.
While all of these challenges seem overwhelming, it creates an opportunity for local builders to continue to revolutionize the market.
Scott Brannock is president of Tidewater Homes LLC