http://www.cnbc.com/2017/03/29/homebuilders-struggle-to-fill…
Found this interesting and possibly explain why prices are still rising and why supply isn’t keeping up with demand.
Contractors just cannot find the manpower to build faster.
Chris
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CNBC said in a piece about home sales that there was a lack of skilled labor and that prices of lumber and cement are soaring. If I heard correctly they said the lumber costs had risen 30% since the beginning of the year. Also a comment that a border adjustment tax would exacerbate the pricing.
Rob
Bringing this into context in regards to the builders like LGIH, I think it would be a good discussion on the effects of their business.
Does it hurt them or help then to right now have a situation where home builders could build more if they had the workforce to actually build the homes.
Does it give a false sense of actual demand. If there were thousands of more workers building, would the demand dry up. In other words is demand a result somewhat of a depleted workforce.
Chris
LGI Homes is Now Selling in the Sugar Pine Square Community in North Houston
5:30 PM ET, 03/29/2017 - GlobeNewswire
HOUSTON, March 29, 2017 (GLOBE NEWSWIRE) – LGI Homes, Inc. (Nasdaq:LGIH) announced it is now selling in its newest community in the Houston market, Sugar Pine Square. Conveniently located off FM 1960 in North Houston, this gated community of single-family homes offers residents easy access to many of Houston’s major thoroughfares, including I-45, Beltway 8 and the Grand Parkway.
Sugar Pine Square residents enjoy the scenic beauty and an abundance of outdoor activities found minutes from home at Meyer Park, Mercer Arboretum & Botanic Gardens, and Cypresswood Golf Club to name a few. Additionally, the community is just a short drive from many of the area’s most popular attractions, including Cynthia Woods Mitchell Pavilion, Wet ‘n’ Wild SplashTown, Willowbrook Mall, The Woodlands Waterway, Sam Houston Race Park and many more.
LGI Homes is building a variety of floor plans within the Sugar Pine Square community ranging from 1,300 to over 1,900 square feet. The one- and two-story homes include up to 4 bedrooms and 2.5 bathrooms. The well-designed plans offer something for every homebuyer, and select plans include options such as two separate walk-in closets in the master suite, window seats in the secondary bedrooms, and a large breakfast bar in the kitchen. Pricing starts from the $150,000s.
New homes in Sugar Pine Square are now selling. Interested homebuyers are encouraged to call (866) 694-1894 ext 1025 or visit LGIHomes.com.
Frank,
8% position with LGHI
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I work for one of the largest institutional/commercial construction companies in the US. My title is Director of Project Planning and Development.
The war for good, qualified talent in the building trades and for careers requiring a 4-year degree for roles in project management, cost estimating and scheduling has become the main bottleneck that limits revenue. There seem to be almost limitless opportunities to grow our business. Since the recession and downturn in our industry in 2008 through 2010, the number of people who left our industry and/or stopped attendeing technical/vocational school or college to pursue jobs and careers in our field has become significant.
If you are the parent of a high school student who is interested in a career in this field, wages and salaries from $55K to $155K depending on the job are commonplace. The challenge is that the industry can be cyclical. As someone in his 38th year of his career, I have weathered two significant downturns that I refer to as “character building opportunities.”
As I near retirement, it has been a great way to make a living and a stable way provide a good lifestyle for my family.
sjo
8 Likes
Chris,
Does it hurt them or help then to right now have a situation where home builders could build more if they had the workforce to actually build the homes.
LGIH could not build more houses if the workforce were larger. They are constrained by cash flow. So to the extent that supplying the demand-across the entire industry–is constrained by limited workforce, this helps LGIH as they will have a longer period of time to grow while the demand is pent up.
It also helps because the supply/demand imbalance jacks up housing prices which helps offset increases in material and labor costs and increases revenue. If there were more workers, there would be more demand for materials and higher material costs. On balance, more housing would lower house prices. Except that more houses would increase demand for land which can be the biggest cost so that would increase house prices. Simple, huh?
Just my opinion before first cup of coffee,
KC
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Cash flow is likely restricted, I agree.
However, when I was in residential construction, we were only restricted in our ability to build “spec” houses. We could get all the money needed for someone walking in and paying (because it was their money, not ours).
We were able to have construction loans at any one time to build “X” amount of spec houses. (My definition of spec here is starting construction on a home with no buyer). The degree of completion is irrelevant until the house was sold. If it sold when the foundation was in, that loan went off the limit we could build, thus allowing us to start another (if we chose to).
Any customer who had a loan, we could build as many as our schedule could handle.
By the way, here in the Boise/Treasure Valley area, the construction labor shortage is bad. Just a little ways west of here, the winter was brutal and there are literally hundreds of seriously damaged or collapsed structures. This is putting a much heavier load on the area, for both materials and labor and we already had labor shortages.
Lumber fluctuates significantly from region to region, and even day to day. Lumber, in residential, takes up a bigger slice of the building material costs than any other material (with exceptions of course, with exceptions) Even though lumber companies (I’m being general here, not pointing fingers) will jack up material prices on some event that doesn’t affect the northwest. For example, Hurricane Katrina jacked up prices here significantly, even though we don’t get any lumber from that area of the world typically.
Concrete is going up $6/CY on Saturday, from every concrete company I deal with.
Steel prices have gone up twice recently, about 4% each time. I expect more material price increases. Lots of increases. Soon. Now if I could only get somebody with even decent experience who actually wanted to work…
One of my jobs is to land work for the company. I turned down three strong prospects (of various sizes), yesterday.
7 Likes
Foolinthepen,
That is a MACRO back found. If you could post a write on METAR, that would be appreciated.
Cheers
Qazulight
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Back ground not back found
we were only restricted in our ability to build “spec” houses.
But that is about all LGIH does. They “maintain an inventory of move-in ready homes that are available for immediate sale”.
They complete homes in 45 to 75 days and close in 30 to 60 days. They had 895 completed homes and 742 under construction at year-end. The backlog was 466 homes (under contract to sell with mortgage approval). They use even flow, or continuous methodology. They project 4,700 closings this year. They have 4 months in inventory with about 5 weeks in backlog under contract. They do have a bulk contract for 156 homes not included and these might have separate financing–not sure.
So, I think definitely cash flow restrained.
KC
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Hi KC
I agree.
I am no expert on this, but my thought was, by taking your example of
They have 4 months in inventory with about 5 weeks in backlog under contract. ,
If they could increase that backlog of homes “under contract”, that would free up more of their own cash, enabling them to possibly purchase another property & expand their operations. This should allow them to have the same number of specs on the books.
In other words, the houses “under contract” are no longer considered “specs” and you are able to build another house.
Not all homes reach completion and are “ready to move in” before they are sold, of course. Some sell before a hole is dug for the footings, some when they are installing the flooring(and then the customer chooses a different material 
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