In this issue
- The pace of building has slowed?
- Builder survey: materials shortage is impacting everything and everyone
- Federal tax policy proposals
- Increasing lumber tariffs. Really?
- Housing Industry Advocacy fund – We need your support.
- HBA Member Savings Reminders
PS – if you are out of the office, reading this during well earned family time. Share your joy, reply and say hello.
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Why are homebuilders holding back?
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The cost of building the average home is rising. In fact, according to the Mortgage Bankers Association, the average loan size for a new home reached its highest level last month — $377,434.
Then there’s the worker side of the equation. “Our members are going to be competing with the energy sector, they’re going to be competing with the mining sector,” Brian Turmail, executive director of public affairs at Associated General Contractors of America, told Marketplace today.
It’s not that the demand isn’t there — new building permits haven’t taken as much of a hit — it’s that it’s hard to get going on a build right now.
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Statistics from May
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Single-family housing starts dropped more than 13% in April compared with March, according to the U.S. Census.
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Prices for new and existing homes are at record levels, and the increases are accelerating at the fastest clip in over 15 years.
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Roughly 15% of builders said they are putting down concrete foundations and then holding off on framing the house (technically, this counts as a “housing start” in the statistics, but it doesn’t create a house).
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Missed the Summer meeting recap from HBAT President James Reid? – Read it here.
Your State Association is developing a series of policies that will defend and advance the ability to build new homes. New construction is not always popular, and we must fight for our right to build a home, develop a community and provide good jobs for our tradesmen. We need your perspectives and input.
And of course, we are grateful to our sponsors who participated and made the event special.
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NAHB Survey:
Record Number of Builders Report Material Shortages
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Shortages of materials are now more widespread than at any at any time since NAHB began tracking the issue in the 1990s, with more than 90% of builders reporting shortages of appliances, framing lumber and OSB. Exactly 90% said there was a shortage of plywood, and nearly as many respondents (87%) said there was a shortage of of windows and doors, according to a May 2021 survey for the NAHB/Wells Fargo Housing Market Index (HMI).
The shortages are not only extremely widespread, but extremely broad-based. Of the two dozen items listed in the May 2021 survey, 12 were checked as being in short supply by at least 70% of the builders. In total, 16 were checked as in short supply by more than 60%, and 21 were checked as in short supply by more than 5%.
All two dozen were flagged as in short supply by at least 43% of the builders who purchase the item. In contrast, when the HMI survey last covered the topic in June 2020, fewer than 40% of builders reported a shortage of any of the listed products and materials. ++ Read the rest of the article on NHAB Now.
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NAHB, along with the major real estate trade associations representing both the commercial and residential real estate sectors, pushed back in identical joint statements to Congress. full details
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A new income tax rate of 39.6% for the top 1% of earners
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A new capital gains tax rate of 39.6% for the top 0.3% of taxpayers ($1m+ in annual earnings)
- An increase in IRS audits of those who earn $400k+
- Eliminate carried interest deductions
- Eliminate a tax benefit on appreciated assets known as the “step-up in basis.” Combining the estate tax, the new higher capital gains rate and the repeal of step-up in basis could bring total effective marginal rates as high as 61%
But another change would completely reshape real estate…
The tax loophole in question is known as ‘1031 exchanges’
As explained by The Wall Street Journal, this part of the tax code has existed since 1921 and allows investors to defer taxes on real estate gains, as long as the proceeds are reinvested in other properties within 6 months.
In theory, property taxes could be deferred indefinitely. The majority of 1031 exchanges are done by wealthy individuals, often pooling funds together to purchase apartment buildings or commercial real estate.
How much is it worth? Congress estimates that the loophole would save real estate investors $41B+ between 2020 and 2024.
The Biden proposal would eliminate 1031 exchanges
Supporters of the tax code say that deferred taxes are a source of funds for job creation and investment in local communities. Organizations representing farms and Asian-American hotel owners are among those lobbying against Biden’s tax change, per the WSJ. It’s too soon to tell how much of these tax proposals will become reality — but investors of all types are bracing for huge changes.
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Are you frustrated by the news out of Washington?
Help us do something about it. Contribute to the Housing Industry PAC so we can support to our Legislators who defend our industry and keep bad ideas from crossing into Tennessee.
Every $500, $250 and $100 contribution helps us reach our goal of defending a builders ability to provide new homes.
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HBAT’s legislative efforts help protect the business interests of the men and women who provide housing for Tennesseans. We closely monitor the issues affecting Tennessee’s home building industry, urging lawmakers to take action. When the legislature is not in session, these goals are carried out through the effort of our Housing Industry PAC activities.
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On the Bright Side:
Apply for Rebates Available to Home Builder Association Members
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NAHB has Additional Savings Programs for Business Savvy Members
Whether it’s a discount on a product or service or a more efficient way to operate, the smart business person is always looking at ways to cut costs and maximize returns.
Through agreements with more than 20 national companies, NAHB offers exclusive discounts on a variety of products and services that can benefit your business, employees and family.
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