Homes by WestBay Bayshore model at North River Ranch

John A. Neal Speaks to Short Supply in the Building Industry

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Business Observer, July 2, 2021 TRENDS Section

By Amanda Postma, Staff Writer

Frustration soars as homebuilders develop strategies to combat the ongoing inventory shortage. ‘We plan far ahead of need,’ one developer says.

Frustration seems to be a consistent tone of the current housing inventory situation across the region. Homebuilders and consumers alike are becoming increasingly frustrated as inventory shortages hover.

Yet despite the daunting challenges, some homebuilders and community developers have figured out ways around the shortage. It includes being nimble with strategies and flexible with suppliers and partners. And it also includes taking some deep breaths as wait times, from windows to walls, grow as much as fivefold.

John Neal, the president of Lakewood Ranch-based Neal Land & Neighborhoods, is one of many who has noticed the impact the low inventory is having on customers. “We’re trying to meet that need,” Neal says. “I think the best community is one with neighbors from all different levels of housing.” His goal is to build di-verse housing neighborhoods so customers are able to stay within the same neighborhood throughout different stages of their life and just move within.

That’s the strategy he’s taking at North River Ranch in Parrish, north Manatee County, where the firm is building Neal Land & Neighborhoods. “The responsibility of Neal Land & Neighborhoods is to help people moving be able to with the lowest amount of frustration,” he says.  To combat the shortage and keep frustrations low, Neal Land and Neighborhoods has developed a strategy. The firm does this by providing standing and to-be-built inventory for customers. (John Neal’s father, Pat Neal, is the top executive at Lakewood Ranch-based Neal Communities, one of the more prolific builders in the region, and the firms work together on some projects.)

Standing and to-be-built inventory are both types of homes that have either been built or are in the process of being built so customers won’t have to wait so long, whereas a custom-built home would take quite a while — in some cases, more than a year. The community developer is also staying highly organized and keeping up with a schedule, which allows it to order materials ahead of when they’ll need them. “I think this is the only strategy that is sustainable,” Neal says.

David Weekley Homes Tampa Division President Mike Foster calls the inventory shortage “interesting.” The company was already preparing for an influx of new residents in Florida during the pandemic. “We were able to keep up until the new year,” he says. “Then there was a mad rush.” Since then, the division’s strategy has been to actively slow down the sales pace. “We’re hoping to give manufacturers a chance to catch up,” Foster says. This strategy won’t be sustainable long term, but for now, it’s what’s working for the homebuilder. The company also switched its focus on consumers in January 2021 to buyers in the backlog. Houston-based David Week-ley Homes, focusing on new construction in markets nationwide, has Florida locations in Tampa, Sarasota, and Orlan-do. It’s one of the homebuilders working with Neal Land & Neighborhoods to build the North River Ranch neighborhood in Parrish. David Weekley Homes has move-in and pre-paneled homes already available in the community.

Homes by WestBay VP of Sales and Marketing Brian Bullock, meanwhile, says the inventory shortage is really affecting everyone. Riverview-based Homes by WestBay is, with $347.7 million in revenue in 2020, is Tampa Bay’s largest private new homebuilder. “The pace homes are selling is exceeding how quickly we can replace lots,” Bullock says. Homes by WestBay has been careful to not release homes for sale all at once. It’s focused on releasing a few at a time.

Despite the low inventory levels, the company has seen an increase in buyer traffic. “For the most part, we’re selling at a faster pace,” Bullock says. “We’re doing more than we have done in the past, but we’re not doing as much as we could,” Bullock says a common strategy for a lot of builders is to begin working on homes before even selling them. These builders are selecting everything that goes into the homes so they can manage and control potential delays.

JUST A CYCLE

Although Neal admits the inventory shortage is a problem, he also says it’s nothing new.
“The inventory shortage is big news right now, but it’s an ordinary cycle in Florida,” he says. “This time in the cycle is where more experienced builders will prosper, and the new builders will struggle.”
Each part of the housing cycle has a trigger. The current triggers are high employment and low mortgage rates. Additionally, Neal says that with Florida being a natural migration and retirement destination, the state continues to grow at a speed that homebuilders aren’t able to keep up with.

Currently, Neal says inventory is well below what will last the industry six months and what housing experts consider a balanced market. With homebuilders having to cross certain barriers to produce more inventory, the process has slowed way down. Neal Land & Neighborhoods, for example, recently had to wait two years to gain approval for one neighborhood.

According to Bullock, sup-ply inventory has fallen from a comfortable four to six months down to half of a month’s supply. When it comes to competing for materials, he says that large homebuilders, given economies of scale, have the upper hand. “We’re already seeing builders being more aggressive at building up supply,” he says.
Foster advises builders to be good partners, over-communicate, share detailed plans, and study growth by county. “It’s a tough situation for small builders,” he says.

NOT THE ONLY SHORTAGE 

The inventory shortage isn’t the only thing keeping the industry up at night. Homebuilders are having to deal with a supply shortage as well — which seems, in some ways, harder to combat. “The shortage of building supplies is just one element,” Neal says. When the supply is low like this, Neal says the people it hurts the most are those working in the service sector due to the impact that low supply puts on affordable housing. Currently, his biggest worry is that the lack of supply will result in higher prices for consumers.

Neal says all builders are feeling the pricing pressure — that’s the nature of inflation. With demand for supplies up, the prices are also going up, which means builders will have to increase their prices as well. Neal Land & Neighborhoods is focused on refining its efforts to maximize efficiencies and product supply the market demands, Neal says. “We plan far ahead of need,” Neal says. “We work within the community and work well with team members.” The company also uses local companies when it can to purchase supplies.

With the supply shortage affecting available housing and pricing, Neal says he continues to use builders who focus on supply. He’s also on the lookout for attainable and affordable housing. But even with this strategy, Neal says a little help from the government would be appreciated. “I want the government to focus on the role of helping us produce supply in a timely manner,” he says of the role the government can play in ensuring housing is affordable.

“This is an important factor in the government’s efforts to make housing affordable but is not discussed often as a solution,” Neal adds in an email. “While our local governments and their staff do a tremendous job, the role they play in keeping housing affordable is often overlooked.”

Foster will tell you the average time it takes to build a house is normally four months. Now, he says, it’s almost seven months.
The most significant supply impact is the lead time difference — the time it takes a product to be delivered after placing an order. Most specifically, Foster notes it’s been tough securing truss and window orders. Both supplies went from a four-week lead to a 22-week lead, he says. Going from one month to five months in sup-plies would be a nightmare for any industry. “Beyond the frustration of trying to do our job, it’s extremely frustrating for home-buyers,” Foster says. “It may get worse before it gets better.” The company is looking at different ways of trying to get through the window delays. Partial shipments of windows allow the builders to board up the rest of the windows safely so that they can continue with other parts of the homebuilding process.“We’ve eliminated some frustration by only offering homes that have already been started,” he says. The company offers to-be-built homes and inspiration packages. The in-spiration packages are design options provided by the company’s professional design consultants.

 

 

About Neal Land & Neighborhoods
Neal Land & Neighborhoods is a Manatee County-based land planning and community development organization led by John A. Neal. By partnering with highly reputable builders and large-scale landowners in Southwest Florida, Neal Land & Neighborhoods leverages its innate understanding of land planning and development to establish thriving, sustainable, livable, and ecologically sensitive communities throughout Manatee, Sarasota, and Hillsborough counties. Neal Land & Neighborhoods currently owns or controls several thousand acres of land entitled for more than 9,000 future residential homes and the supporting mixed-use commercial and retail. To learn more about Neal Land & Neighborhoods, current, and future projects, visit https://www.nealland.com/.