Low Margins and High Standards Make It Tough

points to 4.67 percent in the second quarter from 4.34 percent in the first quarter.

“Tight inventory conditions and rising construction costs are factors that are holding back housing and putting upward pressure on home prices,” Noel said. “Meanwhile, tariffs on Canadian lumber imports into the U. S. are further eroding housing affordability. Builders are struggling to manage these costs to ensure pricing does not outpace expected gains in wage growth.”

“Demand for housing is increasing, but financial pressures are posing a challenge,” said NAHB Chief Economist Robert Dietz.

“Rising household formations, along with a strong economic expansion in the second quarter that has fueled job growth, will support housing demand in the second half of 2018,” he said. “However, growing trade war concerns and the expectation of higher mortgage rates are additional headwinds negatively affecting housing affordability.”

Georgia No Exception

For the most part, Georgia is following the national trend. Housing affordability dropped for all three metropolitan statistical areas (MSAs) tracked in the HOI. For the Atlanta/ Sandy Springs/Roswell MSA, affordability dropped from 70.5 percent in the first quarter of 2018 to 66.1 percent in the second quarter. In the Gainesville, GA, MSA, affordability decreased from 66.3 percent in the first quarter to 61.7 percent in the second quarter. Affordability was also down in the Chattanooga, TN, MSA –which includes part of Georgia –from 73.8 percent to 67.8 percent.

“Georgia is no different from the rest of the country when it comes to the availability of entry level homes –there is definitely a shortage and it appears to be getting worse,” says Bobby Cleveland, president of the Home Builders Association of Georgia. “One of the reasons for this, I believe, is that the cost of construction of entry level homes is disproportionately affected by the costs of government regulations. Whether it is the availability of land (zoning), the cost of utility hook-ups (water and sewer) or other ‘impact fee’ type charges.”

Herbert Homes, in Augusta, GA, is successfully selling to the entry-level buyer, but it’s not easy. “If you don’t own the land, it can be nearly impossible to get the numbers to work,” says President Mark Herbert.

“We’re a developer and a builder, so … I can be a little bit better at managing costs,” he says.

“For example, a builder that has to buy a lot is probably going to pay $50,000 for a good site. Then the builder has to put in at least a $300,000 house to maintain its margins,” Herbert says.