Author: hbarockford

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Nobody Asked Me But… Housing to Become Less Government & More Market Driven

By Dennis Sweeney, Executive Vice President HBA of Rockford

The incoming administration has made its stance on inflation clear: deregulation will be the primary tool to address it. Another potential strategy might involve cutting government waste and inefficiency, which could reduce spending and the deficit—provided that the savings aren’t redirected elsewhere. However, this approach will be harder to execute. Congress often prioritizes spending as a way to demonstrate its effectiveness to voters. In closely contested elections, incumbents typically highlight tax dollars and government programs brought to their districts in campaign materials. Rarely, if ever, do candidates claim success by avoiding spending taxpayer money.

As of this writing, no announcement has been made regarding the next Secretary of Housing and Urban Development. A well-connected friend shared that Bill Pulte, a prominent figure in the national homebuilding industry, is vying for the role. Pulte, who represents the large-scale, publicly traded housing sector, brings deep industry knowledge. However, such major players can sometimes overlook the burdens of regulations since their size allows them to absorb the costs more easily than smaller builders constructing 10–20 homes annually. Regulations drive up costs, creating barriers to entry, which in turn reduces competition. Historically, housing affordability has been driven by two factors: the cost of land and strong competition for new home buyers.

Two areas of deregulation could have an immediate impact on housing: energy and banking/lending. Federal energy mandates dictating how new energy-efficient homes must be built have proven both inefficient and costly. While some energy requirements have been rolled back due to implementation challenges, the damage to new home construction has already been done. Meanwhile, the housing finance industry is still grappling with the lingering effects of the Toxic Asset Relief Program and the 2008 housing crisis. There is room to ease banking regulations in ways that don’t encourage reckless lending or home buying.

The pent-up demand for housing is well-documented. By cutting regulations, reducing inflation, and lowering the cost of homebuilding, the stage could be set for a housing boom.

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Nobody Asked Me But… It’s “Never Let a Crisis Go to Waste” Time

By Dennis Sweeney, Executive Vice President of HBA of Rockford

Back-to-back hurricanes have slammed the southeastern United States. Hurricane Helene brought catastrophic 1,000-year flooding inland to the Appalachian Mountains in Georgia, South Carolina, Tennessee, and North Carolina, and next, Category 5 hurricane Milton delivered catastrophic storm surges to the west coast of Florida south of Tampa. The entire Gulf coast of Florida got hit by one or both.

The mud hasn’t even dried and the blame game for the destruction that could have, would have, should have been prevented if only governments at all levels had implemented stricter building codes and land use codes is starting. In North Carolina, home builders are a major political force and their opposition to code proposals that would increase the cost of housing is now under attack. Never let a crisis go to waste when you can advance your policy agenda. There are no codes that are going to protect a conventional, brick, stick, block, metal, etc., built house from a Cat. 5 Hurricane, the 1,000 year flood, an F-5 tornado, or a 8.0 earthquake. The force of nature is to level everything; some events are faster than erosion.

What has been occurring for the past few years in the areas that have been repeatedly hit by catastrophic storm damage is that private sector market forces are determining what gets rebuilt and where. Insurance companies are pulling out of states with high storm claims experience. Homeowners with the financial means to do so are self- insuring, or,
raising their deductible to a higher level to make their insurance more affordable. Those with a mortgage and unable to obtain or afford insurance are trapped; it’s a buyer’s market if you have cash and can self – insure.

Florida has one of the strictest builder licensing procedures in the United States. Builders have to prove they know what they are doing, at least on paper. If the houses that were destroyed do get rebuilt, they will now have to meet the current building codes, not the code when it was originally built. The same is true for North Carolina. And, if the lenders
will not make a loan or the insurance market will not insure a new house in that location for an affordable premium, then the free hand of the market place and not the iron hand of the government, has made that decision.

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Builder’s Scramble Golf Outing a Big Success!

We had a great turnout at the 2024 Builders Scramble at PrairieView Golf Club! ⛳️ It was a beautiful day on the course, and what better way to end the day than with a delicious steak dinner.
Thank you to everyone who came out for a day of golf and camaraderie. A special shout-out to all of our sponsors who make this event possible. Congratulations to all the contest and door prize winners—we hope you enjoy your prizes! 🏆

The 2024 Builders Scramble Golf Outing was held on Monday, September 9th at the PrairieView Golf Club in Byron, IL. PrairieView is a challenging 18 hole layout. Following golf, a ribeye steak dinner was served in the air conditioned PrairieView Pavilion featuring full bar beverage service with the best customer service staff you will ever meet. Following dinner, contest prize winners were announced and door prizes compliments of the hole sponsors and generous donations by HBAR members were handed out.

SCHEDULE:
10:00 AM – Registration
11:00 AM – Shotgun Start
5:00 PM dinner & awards program in the Prairie View Pavilion, w/ comfortable indoor & outdoor seating & full-service bar

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Housing Affordability: A Cost & Supply Problem

By Dennis Sweeney, Executive Vice President of HBA Rockford

The affordability of housing for a new single-family home, a duplex, or a condominium has little wiggle room. The cost of the house begins with the cost of the land, reducing lot sizes and increasing housing density has a limit. I refer to the builder in Georgia who commented about affordable housing: “They cost just as much to construct as any other house; the only thing that makes them affordable is the subsidies to build them or live in them”.

The current cost to build a new house with the amenities buyers expect in a new house in this market, according to local builders, is in the range of $270 per square foot plus the lot. So, the popular 1,800-square-foot ranch house is now at $486,000 plus a lot. There are not many first-time home buyers with the down payment and the income for a new $486,000 house. To complicate the supply issue, existing home owners are already living in comparable homes with lower (affordable) assessed market values (lower property taxes) at lower interest rates (3%–4%) and aren’t going to sell to move to a much more expensive house with higher taxes and a higher interest rate.

The 2021 national median value of new homes was $429,205, and the median value of homes purchased by a first-time buyer was $271,445. First-time home buyers do not buy new homes.

More than half of recent buyers put no more than a 20% down payment on the homes they purchased. Around 18% of all buyers purchased a home without a down payment in 2021; 50% had a down payment of 0 to 20%; and only 16% put more than 20% down. First-time buyers had relatively smaller down payments. Approximately 82% of first-time home buyers put no more than 20% down, including the 18% of home buyers with a zero-down payment.

Housing affordability will continue to be an issue until mortgage rates and building costs drop enough to entice existing home owners to sell and move up into a new home. That is how building new housing solves the affordability issue.

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Nobody Asked Me But… Is Rockford Affordable?

By Dennis Sweeney, Executive Vice President of the HBA of Rockford

Affordability starts with the cost of land. This market starts with that positive advantage.

The median home list price in Rockford is $152K, and 86.5% of homes are priced below $250K. The condition of these “affordable” houses may be why they are so affordable. Buy existing for under $250K, but then spend $50K more to clean it up and make needed repairs. That’s the rest of the story. One reason houses here are more affordable is because property taxes are so high, which keeps home prices down. If buyers could transfer $100, even $50, from the property tax portion of their monthly payments to the principal and interest portion of their payments, they could purchase more houses, new and existing, and they would.

What puts the Rockford market in a better, positive light is that it is a city with good infrastructure and more robust business and manufacturing economic activity than Flint, MI, and Youngstown, OH. I have been to Youngstown, OH, a couple of times for college football games. Lincoln Ave. in Youngstown is similar to Harlem Blvd. and National Ave. in Rockford. The last time I was there 2006-2007, many of the houses on Lincoln Ave. had plywood covering their windows and doors. That is a depressing sight, leaves a lasting impression, and definitely pulls down the cost of what was once very nice housing. It hasn’t gotten that bad here yet.

There are many elements to our affordability. Such as the previously referred-to property taxes. Which makes people from out of state arrive thinking that they can buy a $250K house. But when they see the property tax bill, they have to change their home buying budget. That $250K deal comes with an asterisk and some important small print.

Illinois is losing its population. Fewer people means less demand for houses, which creates lower prices. The aging population is often in a mortgage-free home, and if they do sell, it’s to move to a friendlier retirement state for weather and taxes, or into a retirement facility.

How these market factors balance out impacts our affordability.

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Article Building Industry HBA Members

Nobody Asked Me But… Housing Regulations Create Market Dysfunction

By Dennis Sweeney, Executive Vice President of HBA of Rockford

The United States boasts of its free market economy which encourages and stimulates innovation, competition and market driven efficiencies were supply meets demand. This market driven economy was very successful in the roaring 80’ and 90’s for housing production. The Rockford, IL housing market was an excellent example of this competition as it was one of the most affordable housing markets in the entire nation while producing 1,000’s of homes each year by 100’s of private contractors for first time new home buyers up to executive new home buyers. There are Parade of Homes plan books to prove it.

The growing costs of government regulations and fees has created a dysfunctional housing policy “ax knot” which is going to be very difficult to untie. Sometimes the only way to undo it is with an ax.

Here is the short list of regulation grievances through the years starting with school impact fees, excessive connection fees, land use and zoning requirements, septic system requirements, and environmentally driven federal building code mandates (mandatory EV charging station wiring), are some of the most costly. All of these, combine to push the cost of new housing higher, dampening demand, and then, the lack of new housing supply, pushes the cost of existing housing higher. Winnebago County property owners received their new property value assessments last week. The cost of housing is going up.

As has been pointed out in previous articles the past few weeks, the United States is 6.5 million housing units behind household formations. This lack of housing supply for the housing demand should be met by the housing industry in the market place because there is money to be made. However, it has become apparent that the housing industry is not confident that it can profitably build those needed housing units where they are needed. Uncertainty has a dampening effect on home building.

Which brings me to the article on page 2 that the FHFA is considering rent regulations and controls to keep rents affordable. Given the history of rent control policies at the national and local levels, it’s difficult to understand how they expect this to be the solution for solving the most pressing housing problem – not enough housing units. The uncertainty in the market and the regulatory costs have led us into this policy “ax knot”. Rent controls are not going to encourage the construction of sorely needed housing units that would be impacted by such a policy.

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Housing starts: Construction Numbers Slip in June After a Bullish May

By: Gabriella Cruz-Martinez

Housing starts, which include new single- and multi-family units, decreased to a seasonally adjusted annual rate of 1.434 million units in June, according to the Census Bureau, down 8% from May’s revised rate of 1.559 million units. That was 8.1% below a year ago and under the 1.480 million units economists had predicted.

New construction was up a whopping 21.7% in May over April.

Permits to build were at an annualized rate of 1.440 million units in June, 3.7% below May’s revised rate of 1.496 million units, with modest increases in applications on the single-family and multi-family sides. The figure came in lower than the expectation of 1.500 million.

The shortage of previously owned homes for sale has given homebuilders an edge in today’s market, as they’ve continued to ramp up construction of new units in recent months. But that may not last.

Rising costs of imported raw materials such as aluminum, softwood lumber, and steel could cause delays in new builds, the National Association of Home Builders (NAHB) found.

“The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers,” NAHB chief economist Robert Dietz wrote in his Eye on Housing blog.

Single-family housing starts in June dropped to a rate of 935,000, 7% below May’s revised estimate of 1,005,000. On the multi-family side, starts in June were 482,000, also down from approximately 624,000 from the month prior.

At the same time, building permits for single-family home construction rose to a seasonally adjusted annual rate of 922,000, up 2.2% from May’s revised rate of 902,000.

Building permits for multi-family homes were at a rate of 467,000 in June, down from approximately 542,000 the previous month.

New construction has become a larger part of today’s housing market. More than a 33% of homes on the market this spring were new construction, the NAHB estimated. That share is historically 13%.

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Don’t Get Scammed: Hire a Qualified Contractor

By Dennis Sweeny, Executive Vice President of HBA Rockford

There are hundreds of legitimate, ethical contractors in business around Northern Illinois. Unfortunately, there are also scam artists who pose as legitimate contractors. These “fly-by-night” operators often show up in communities impacted by natural disasters to scam distressed home owners into paying for shoddy repairs or work that they will never show up to perform, or, perform poorly and then disappear.

Here are some warning signs to look out for:

  • Doesn’t have license, if required, and insurance. All professional contractors should be insured and able to show their certificate proving such insurance. Although all states do not require licensing, contractors in states requiring licenses should have it and be able to provide a copy. Roofing contractors are licensed in Illinois.
  • Asks you to sign anything before you’ve hired them. If they want you to sign an “estimate” or “authorization” before you’ve made the decision to hire the contractor, look out. They may be trying to get you to sign what is an actual binding contract.
  • Doesn’t write contracts. Professionals have clear contracts that outline the job, process, the cost, and helps clarify how problems will be managed. If you don’t have a contract, you are not protected when something goes wrong. Don’t hire anyone who tells you a contract “won’t be necessary.”
  • Requires cash or payment in full before starting the job. Shady contractors demand cash and then run with the money. Many home owners have been stranded by paying in full up front. A deposit towards materials is common, but only pay it once you have a contract signed by both you and the contractor. It’s also suspect you’re asked to pay cash to a salesperson instead of a check or money order to a company.
  • Vastly underbids all other contractors. They may have the best price, but that doesn’t guarantee the best work. Such contractors may cut costs on quality, which can end up costing you more when you have to have the substandard work redone.
  • Offers “special” pricing. If you’re told you’ve been “chosen” as a demonstration project at a special, low price, or you’re told a low price is good only if you sign a contract today.
  • Cannot provide customer references. Professional contractors should have current references they can provide from current and past clients — and you should be able to reach those references, not just an answering machine.
  • Difficulty contacting the contractor. Professionals have a physical office, mailing address, phone, and email. They should respond to your queries in a timely manner. Make sure you can verify the contractor’s business address.
  • Tells you to obtain the building or remodeling permits. Professional contractors go to the city or county offices and get the permits for their work themselves. Asking the home owner to do it is a sign that they are not a legitimate contractor.

Do your research and choose someone you feel comfortable with. If your city or state requires contractors to be licensed, look them up on the licensing website even if you’ve seen a piece of paper that looks like a license. Verify they don’t have a record of consumer complaints lodged with your local Better Business Bureau. You can also call the Home Builders Association of Rockford, 815 962-1148, for a list of their member contractors in your area.

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What Past Recessions Tell Us About the Housing Market

By: Keeping Current Matters

It doesn’t matter if you’re someone who closely follows the economy or not, chances are you’ve heard whispers of an upcoming recession. Economic conditions are determined by a broad range of factors, so rather than explaining them each in depth, let’s lean on the experts and what history tells us to see what could lie ahead. As Greg McBride, Chief Financial Analyst at Bankrate, says:

“Two-in-three economists are forecasting a recession in 2023 . . .”

As talk about a potential recession grows, you may be wondering what a recession could mean for the housing market. Here’s a look at the historical data to show what happened in real estate during previous recessions to help prove why you shouldn’t be afraid of what a recession could mean for the housing market today.

A Recession Doesn’t Mean Falling Home Prices

To show that home prices don’t fall every time there’s a recession, it helps to turn to historical data. As the graph below illustrates, looking at recessions going all the way back to 1980, home prices appreciated in four of the last six of them. So historically, when the economy slows down, it doesn’t mean home values will always fall.

What Past Recessions Tell Us About the Housing Market | Keeping Current Matters

Most people remember the housing crisis in 2008 (the larger of the two red bars in the graph above) and think another recession would be a repeat of what happened to housing then. But today’s housing market isn’t about to crash because the fundamentals of the market are different than they were in 2008. According to experts, home prices will vary by market and may go up or down depending on the local area. But the average of their 2023 forecasts shows prices will net neutral nationwide, not fall drastically like they did in 2008.

A Recession Means Falling Mortgage Rates

Research also helps paint the picture of how a recession could impact the cost of financing a home. As the graph below shows, historically, each time the economy slowed down, mortgage rates decreased.

What Past Recessions Tell Us About the Housing Market | Keeping Current Matters

Fortune explains mortgage rates typically fall during an economic slowdown:

“Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.”

In 2023, market experts say mortgage rates will likely stabilize below the peak we saw last year. That’s because mortgage rates tend to respond to inflation. And early signs show inflation is starting to cool. If inflation continues to ease, rates may fall a bit more, but the days of 3% are likely behind us.

The big takeaway is you don’t need to fear the word recession when it comes to housing. In fact, experts say a recession would be mild and housing would play a key role in a quick economic rebound. As the 2022 CEO Outlook from KPMG, says:

“Global CEOs see a ‘mild and short’ recession, yet optimistic about global economy over 3-year horizon . . .

 More than 8 out of 10 anticipate a recession over the next 12 months, with more than half expecting it to be mild and short.”

Bottom Line 

While history doesn’t always repeat itself, we can learn from the past. According to historical data, in most recessions, home values have appreciated and mortgage rates have declined.

If you’re thinking about buying or selling a home this year, you can make the best decision by working with a trusted real estate professional. That way, you have expert advice on what’s happening in the housing market and what that means for your homeownership goals.

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No One is Talking About the Elephant in the Room : Energy Code Requirements


By Dennis Sweeney, Executive Vice president

HBA of the Greater Rockford Area

I read an article about adaptive office building reuse, and it caught my attention because 1) our members have done similar and related (school) reuse projects in Rockford, and 2) it mentioned building codes as an obstacle to affordable residential conversions, although it only mentions one requirement—the bedroom window.

Over the past two decades, the once-local residential building code has become a national code driven by the Model Energy Code and green energy and zero carbon footprint policy objectives. As a result, market forces for energy consumption and conservation have been replaced by energy consumption and savings code mandates.


The first such mandate that had an impact on my thinking about this was when the ARC’s Great Home Give Away raffle house had to add insulation to the interior foundation walls, resulting in insulation and installation costs that were not budgeted for. Then there are the three air exchanges per hour mandate for new homes. (With pressure to lower it in every code cycle) There’s pressure to get a certificate of occupancy, requiring houses to be so airtight that you have to pull in outside air to operate modern gas furnaces and water heaters, appliances that will be on the radar to be eliminated as carbon fuel users.

This air exchange requirement has made the traditional wood burning fireplace obsolete. There may eventually be an energy code requirement to mandate their conversion to a ventless fireplace as a condition of a housing sale. This would be an energy version of a clear water inspection.


Finally, the excessive insulation requirements result in increased structural building costs due to the extra volume of insulation product. There is a lack of new insulation technology that would achieve the requirements with less product. HBAR member Bill Carlson of Carlson Roofing commented to me, “We’re making money the new fashion way, government mandates.”

I have no quarrel with those who want to build a zero-carbon footprint house, and neither will the builder. The issue is that they are mandating everyone must do the same. With the amount of known natural gas reserves, it makes no economic sense to impose this in the United States. Listen to the builders who have been in business, survived the recessions, and built hundreds of new homes. They know what they are doing and how to give buyers the best, affordable, energy-efficient product for their housing dollar. Then if you want to, you can always pay for more.