Nashville sees spike in home renovations despite high construction costs
Contractor Eli Routh, president of the HBA of Middle TN Remodeler’s Council’s spoke to the Tennessean about the increase in renovation demand in the greater Nashville area. High costs of materials and labor have not deterred families looking for upgrades.
U.S. consumer confidence inched up in July, the highest level since February 2020 (pre-COVID). Households revealed spending plans rising, even as concerns about higher inflation lingered. “Higher confidence suggests that consumer spending should support robust growth in the second half of this year,” said Priscilla Thiagamoorthy, an economist at BMO Capital Markets.
More households intend to buy long-lasting manufactured goods such as motor vehicles and household appliances such as refrigerators and television sets, which should help to underpin consumer spending and manufacturing, the survey showed. Consumers were also keen to purchase homes. Households are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic.
The third straight monthly decline in new home sales reports by the US Commerce Dept. This followed news last week that permits for future homebuilding dropped to a nine-month low in June, while home resales rebounded modestly. Higher production costs are forcing builders to scale back, keeping supply tight and boosting home prices to the detriment of first-time buyers.
“Home builders continue to hold back on contracts for new homes given input cost and availability uncertainties, with significant uncertainty about what it will cost to build a house and when it can be delivered,” said David Berson, chief economist at Nationwide. “Until builder costs and supply-chain problems become less of an impediment, it is hard to see new sales picking up significantly in the near term.”
John Burns Real Estate Consulting reports permits and land purchases point toward an increase of supply over the next two years. Builders have been scooping up land since June 2020, and publicly traded home builders have increased their land holdings by 23% year over year, reaching the highest rate of lots controlled in more than three years. Compared to 12 months prior, builders paid for 30% more single-family permits in the last 12 months. JBREC says business for private builders has boomed as well.
Local HBAs in Minnesota filed lawsuits against two Twin Cities suburbs — Dayton and Corcoran — alleging they charged builders permitting fees in excess of $5.5 million beyond what state law allows.
Builders often point to fees charged by cities as a significant driver of rising home prices — among dozens of other costs — and complain cities increasingly charge high fees as a politically palatable way to raise money for unrelated city projects. They say this serves as a hidden tax on people who don’t yet live there.
But Minnesota state law requires that building permit fees must be “fair, reasonable and proportionate to the actual cost of the service for which the fee is imposed,” such as plan reviews and building inspections. In the case of Dayton and Corcoran, Housing First Minnesota claims the cities knowingly charged high fees to fund other services and is asking the court to order the cities return money to developers.
“There is no dispute regarding the need for inspections to ensure safety and durability in homes. However, that process cannot become a profit center for local governments. We must remember that any city engaging in this practice of gouging new residents through building permits, is adding to the state’s housing problems,” said Housing First Minnesota’s Executive Director David Siegel in a statement announcing the lawsuits.
