What's Up @ MSBIA 4.23.18

The building industry is driven by economics and lives by projections of where the economy will be in the coming months and years. Last week, Meyers Research held their FRAME seminar in Miromar Lakes, Florida. As always, the staff at Meyers Research were stellar in their presentation, presenting current information on economic indicators such as the gross domestic product, employment rate vs permit ratio, building permits, commodity tariffs and net migration.
 
What most of us want to know is when the next slow down in construction will be. None of the usual indicators are in place to depict a slowdown. Indicators like higher interest rates, oil prices and higher levels of debt are traditionally those indicators, along with a higher rate of GDP. Currently our GDP is 2.2%, unlike 3.8% under Clinton. Other possible indicators of a slowdown are an overabundance of deregulation, credit crunch, asset bubbles, over inflation, national policy issues and a stock market crash. None of these are a current consideration, and in addition, there is no sign in the drop of permit applications, slowing of manufacturing, or a decline in savings overall.
 
Another strong indicator that a slowdown is not imminent is a high employment rate vs permit ratio, or E/P, and our E/P is only 0.70. What is becoming a dire issue is the lack of competent labor pool. Nationally, immigrants are the bulk of our workforce, and non-farm job growth has not kept pace with the demand. We have to work harder to train our high school students, so they can have good jobs and help our industry grow.
 
As many of you know, the Sarasota-Bradenton-North Port metro area is in a boom for building permits. According to Meyers, our metro area had 8,839 total permits last year, which single family accounted for 71%, or 6,275 permits. This is impressive for our area, but we are still 70% below the previous peek of permitting prior to the great recession.
 
What we do need to be aware of is the continued dispute over materials used in the construction industry that are affected by tariffs. The current tariffs in place on Canadian lumber and Chinese steel are driving up prices on those commodities by as much as 20% since the first of the year and could send the deficit up to as much 30% by the end of May.
 
So, what does all of this mean? It means that we are still in recovery mode from the great recession. Net migration to Florida and other “sand states” is over 1.5% nationally, with upwards of 1,000 emigrants to our great state every month. In the Sarasota-Bradenton-North Port metro area, new home buyers are paying 40% more for a new home vs existing, which is an 11% increase in median price recovery from the peak of the recession.
 
With only 2.3% months of supply of ready to move in homes on the market, this is still a sellers’ market.