When the price of lumber spiked to almost $1,700 per thousand board feet this spring, it sent shockwaves through the homebuilding industry.
“The lumber line item is the largest number in the brick and mortar of the house budget, and to have that go up over 300% in a 12-month period was unheard of and very concerning,” said Nat Hodgson, CEO of Southern Nevada Home Builders Association and executive director of HomeAid of Southern Nevada. “With the volatility and unpredictability of pricing, builders had a set price per lot they anticipated years ago when they decided to move forward with that product, and by the time they ordered the lumber, it was anywhere from $15,000 to $90,000 more than they had in the house budget.”
It has since dropped back closer to pre-pandemic levels (though still nearly double the price), but the impact was jarring, nonetheless, and the repercussions could be felt in the Southern Nevada housing market for some time.
Hodgson discussed with Vegas Inc the effects of the pandemic on housing, homebuilding trends in the Valley and the water supply, among other topics.
Do you have any recent news you’d like to share?
Our industry and our association are ever-changing. We’re working harder than ever to educate policymakers on all levels about their impacts on house pricing. As we face record-breaking cost increases at the lumber, materials and labor levels, any additional fee increase, new regulation or delay in municipality processing timeframe just makes the supply-demand factor harder. Many, if not all entities, utilities and departments have moved to online processing, which has increased our cycle times. In some cases, what used to take hours over the counter now takes anywhere from one to two weeks.
I really want to take a moment to give credit where it’s due to the home builders in this valley. It hasn’t been an easy time this past pandemic year, and the amount of challenges they’ve collectively been able to overcome, while keeping this very complicated machine running, is truly remarkable.
Whom do you admire and why?
Bill Pulte. I’m fortunate enough to have worked for Pulte Del Webb for 18 years and oversaw the construction and service of over 40,000 homes. Bill was a true leader and entrepreneur who started by doing remodels and then started building the entire house while securing personal loans himself — truly starting from the bottom and working his way up on his own. Ten years after he started, he officially became a production builder and over the next 60 years, he took the company public and became the nation’s largest homebuilding company for many years, and is still in the top four in the nation. Bill stayed personally involved in the company and when you walked into his Michigan office, he would have faucets and cabinet door samples all over his chairs and desk. He never lost his attention to detail.
Demand for homes has outstripped supply for quite some time in the valley. Can builders catch up anytime soon? If not, is Nevada at risk of pricing people out of affordable housing entirely?
I do not see builders being able to keep up with demand soon for a few reasons, one of which has been the lack of skilled labor, which is both a short-term and a long-term nationwide issue. We are generations behind in workforce. Second is the supply chain issues we have been experiencing since the start of the pandemic. There are too many products and materials to list that we have had and are still having issues with. Processing times continue to go in the wrong direction from when the builders buy the dirt, all the way through putting a slab in the ground. Lastly is the artificial lack of supply of land, and we have builders paying in the eight-figure range for land zoned for “eight (homes) to an acre” that they will only be allowed to build five to an acre — $10 million for a 10-acre parcel means a 50-lot subdivision. That’s a $200,000 starting price just for the raw dirt and does not include vertical or horizontal costs of construction.
What’s the next hot spot to build on in Southern Nevada? And is there an untapped area that you think has been wrongly ignored and would like to see developed?
With land constraints, many builders are looking at both infill development and we’ve seen a huge increase in permits pulled in North Las Vegas. Ten years ago, I could count the number of builders in NLV on one hand. Now I don’t know of a builder who isn’t already out there or looking out there. We’re also seeing a ton of builders move into the condo and apartment space because of land challenges. But now you run into added regulatory challenges and NIMBYism — not in my backyard. People would rather see no development in their area than development, unfortunately, and that’s hurting our supply-demand equation again.
How did the pandemic change your outlook on the industry?
Wow, not only did we have to think outside the box, but we needed to figure out how to build and operate while following all the new OSHA and CDC life safety guidelines. Our builders and trades made me very proud when they took on the challenge, and we took it very seriously. We set a national example in our “safety stand downs” and were able to eliminate COVID-19 exposure and spreading rates to less than the countywide average.
What’s one trend in homebuilding that you’d like to reverse?
When we say the word trend and homebuilding here in Southern Nevada, I kind of laugh. We have either had too much demand for what we could build, not enough demand for what we are building, prices so low that it was hard to make enough capital to fund the next land deal, or are breaking records for the fastest price escalation to the fastest price drop. From 1993 to now, we have been like an erratic heartbeat. The past five years have been the most stable and predictable homebuilding market I have experienced in my 29 years, but timeframe challenges from the Bureau of Land Management to municipalities to utility meter sets increase the length of production from start to finish — from what was a year to 15 months, to now ranging 18 to 24 months — and that makes it a challenge to move homeowners in on time.
What about a trend you’d like to bring back?
This is a tough question. In my opinion, it used to be more “fun” to be a part of the homebuilding process. We are the last man-made product, and we provide the American dream, but with the ever-changing business environment, additional regulation, social media, and quick litigious nature of some folks, it’s a tougher business than ever. I often wish the same spirit and operational efficiencies from many years ago still existed today.
What’s something too often misunderstood about the industry?
One question I get asked frequently, as other home-related industry associations in town often talk about this, is whether or not builders are “holding back” on houses. There are a few things I want to clear up on that front.
People need to keep in mind that toward the beginning of the year, our projections and number of permits pulled, and houses sold put us near the 15,000 or 16,000 range. However, we cannot build that many houses with our current labor and lack of material issues. We could sell those, probably more, but builders have pulled back because that’s what is ultimately fair to the customer. No one would go to a grocery store that’s sold out of produce and pre-pay, hoping they’ll get delivered sometime soon. That unpredictability isn’t fair for Nevada families who are selling their houses, moving their kids into new schools, and uprooting their lives. Our builders take closing delays very seriously. We sell the homes we can put our reputation behind — building on time and at the agreed-upon price.
If you could change one thing about yourself, what would it be?
Slow down, embrace life and focus on what I do have instead of what I do not have. Similarly, focus on what is going well instead of what isn’t.
What is the best business advice you’ve received, and whom did it come from?
Two quotes come to mind here. Bill Pulte himself said, “If you want to be successful and the best you can be, then surround yourself with people who are better than you in areas that aren’t your expertise. And don’t feel threatened by it.” Then there is my former local Pulte Division president back in the early and mid-’90s, who would quote the “Caddyshack” line: “The world needs ditch diggers too.” Steve Petruska did go onto to become Pulte Homes COO back in the mid-2000s. He was truly a supporter of mine and I consider him a close family friend today.
What do you say to people who are concerned that the water supply can’t keep up with population growth, and that Southern Nevada shouldn’t keep building homes?
I get this question daily and I think it stems from lack of education on our water system in Southern Nevada. We lead the nation in water conservation and have since mid-2003. We have not installed turf in front yards since 2003. Over 98% of our builders since the turn of the century have homes on city or county sewer, not septic. This means over 90% of the water used in new homes is indoor use and is returned to Lake Mead for re-processing. This is called return flow credits. As a region, we receive over 100% for our water allocation, meaning our 300,000 acre-feet of water per year from the Colorado River is not negatively affected.
The largest challenge we face — besides lack of conservation from neighboring states that are depleting the lake — is consumptive water use. Think anything consumed and not recycled — turf, water running down the valley gutters that is not returned and lost forever. New homes are not the issue, capturing that wasted water from older areas is, and we work constantly to support the SNWA’s innovative water-saving techniques whenever we can and incorporate that technology into our new homes and communities.
If you could change one thing about Southern Nevada, what would it be?
I would like to see each of our cities and Clark County work closer together. We are geographically so close, unlike other areas in the nation. To cross the street and feel like you are in a different state is a challenge sometimes for both our industry and homeowners.
What’s the biggest issue facing Southern Nevada?
Las Vegas residents’ usage of consumptive water and the amount of “non-functional turf.” Taking a good hard look at how we are trying to mitigate climate change and implement sustainable practices at all levels. This goes for greenhouse gas emissions reductions, energy policy and water conservation policy. Continuing to target just new construction in many of these discussions is short-sighted. We should focus on ways to strategically implement these programs to leverage federal dollars and should put in common-sense changes that move the needle for the 850,000 existing homes, not just the 11,000 or so new homes built each year that already utilize the most water-efficient fixtures and build to the most stringent building code in the world. New homes also have the lowest power purchase needs and in some cases are 50% lower than homes built just 20 years ago.
What are you reading right now? Or binge-watching?
“Yellowstone” has been very addicting. I do miss the series “Homeland,” but I think that’s over.
What is your biggest pet peeve?
People who lie or lack integrity. I can handle mistakes, issues, not knowing, but cannot tolerate lies or lack of integrity.
What is something that people might not know about you?
I’m a huge open book and share everything. I don’t think there’s much left unknown. I’m an auto mechanic by trade, went into aviation and then ended up in homebuilding. Not a usual career path, but in every one of my fields, I have always maintained a no-nonsense attitude and will pick up the phone and talk to anyone.