Builder Confidence Falters Slightly After Hurricanes

Last month’s massive storms in Texas and Florida caused a slight slip in the confidence index but experts say it’s only temporary

By Elizabeth Delehanty

On the heels of the United States’ withdrawal from the Paris Climate Agreement, our country has faced a series of unprecedented natural disasters. First, major home building and real estate hub Houston, Texas was devastated by flooding after Hurricane Harvey engulfed the area. The amount of rain the storm dumped onto the metropolis is mind-boggling; weather experts say over 40 inches of water filled the city. Houston received so much rain in such a short period of time that weather services had to add two new colors to color-coded rainfall maps to accurately illustrate the deluge. Our thoughts and prayers were still with Texas when Hurricane Irma struck Florida. Not long after, Puerto Rico was in shambles after Hurricane Maria, perhaps experiencing the worse damage of the three regions. While the damage in Puerto Rico won’t directly affect the United States, some economists predict an impending spillover effect from what may turn out to be the largest migration from Puerto Rico to the U.S mainland as people leave the destroyed island.

The back-to-back timing of these events was not only particularly devastating but also ironic given the recent exit from the Paris Agreement President Trump took. Despite warnings from climate change experts to the President, the White House confirmed last month that the storms didn’t change Trump’s stance regarding the withdrawal. “There has been no change in the United States’ position on the Paris agreement,” the White House said in a statement. “As the president has made abundantly clear, the United States is withdrawing unless we can re-enter on terms that are more favorable to our country.”

The managing director of ASCE, Casey Dinges (who recently gave our country’s infrastructure a D+) said in an exclusive interview with American Infrastructure magazine that we as a country need to start building for resiliency and longevity, for generations to come, not the immediate. Sage advice for the home building industry and one we should heed despite slipping builder confidence. Given this blow to two of the country’s biggest housing markets and Trump’s nonchalant attitude about the legitimacy and time sensitivity of climate change, it isn’t surprising that the NAHB reported a decrease to 64 points in the confidence index in September. But it appears that the slip is temporary. The Federal Open Markets Committee (FOMC) noted that Hurricanes Harvey, Irma, and Maria, will have direct impact on the economy. “Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term.”

NAHB officials are also optimistic. Chairman Granger MacDonald, who’s a home builder and developer from Kerrville, Texas said, “The recent hurricanes have intensified our members’ concerns about the availability of labor and the cost of building materials. Once the rebuilding process is underway, I expect builder confidence will return to the high levels we saw this spring. We are playing close attention to the communities affected by these hurricanes, and are helping them start on the rebuilding and restoration process,” Robert Dietz, NAHB Chief Economist, cited ongoing job creation and rising consumer confidence as evidence that the housing market will continue to make a steady recovery throughout the remaining months of 2017. “Despite this month’s drop, builder confidence is still on very firm ground,” he said.

Also on firm ground are housing production starts, which continue to rise steadily. Single-family production rose 1.6 percent in August to a seasonally adjusted annual rate of 851,000 after a downwardly revised July reading. Year-to-date, single-family starts are 8.9 percent above their level over the same period last year. “This month’s report shows that single-family starts continue to move forward at a gradual, consistent pace,” said Dietz. “The three-month average for single-family production has reached a post-recession high, but the months ahead may show volatility given that the building markets affected by Hurricanes Harvey and Irma represent about 14 percent of national production.”

Another bright spot last month was Professional Women in Building Week which was celebrated from September 18-22 and highlighted the contributions women make to the construction industry. “It’s important that women understand they have a place at the table in this industry, we hope to help facilitate that,” said Juli Bacon, chair of the NAHB Professional Women in Building Council and owner of JB Consulting Systems and Bacon Maintenance Services. “We are seeing some great examples across the country of how women are increasing their presence and role as leaders in our industry.”

Whether economic or natural disaster, there’s no question that we can persevere and recover when we come together. Let’s keep going.

Elizabeth Delehanty is an Assistant Editor for Builder and Developer magazine. She may be reached at elizabeth@penpubinc.com.

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