Economic Headwinds:  Where are we as an industry?

For the Season 5 launch of our Couture & Construction Podcast, we were joined by a roundtable of leaders in the design and build industry to discuss an important and topical issue at the moment, the state of the economy in our industry.

The 2020 pandemic and Nashville’s seemingly unstoppable growth brought a housing boom and Nashville currently ranks #6 for fastest housing construction. The pace is fast, demand is high, but with labor shortages, supply chain issues, and inflation, where do we actually stand as an industry? To answer these questions and more, Textures’ founder and C&C host, Andrew Denny, spoke with Brady Fry, Owner of Fry Classic Construction, Duane VanHook, 2022 President of the Home Builders Association TN and Associate Professor in the School of Concrete and Construction Management at Middle Tennessee State University, and Shane Holt, experienced Real Estate professional and Director of Sales & Marketing for Botsko Builders.

What are the biggest challenges we’re currently facing in the design and build industry?

“We have the same problems that everyone else has got…supply chain issues, inventory problems, labor problems, and it happens in all parts of our state,” states Duane VanHook. While Nashville’s market continues to be hot and shows no signs of slowing down, we still have the same issues the rest of the state and nation are currently facing. In particular, “labor shortages are killing everybody, and that problem started over 20 years,” says Duane. To solve this problem our guests all agreed education is crucial right now. Brady Fry suggests, “we just need to do a better job of putting our message out there, identifying these kids, and getting them into our field. It’s critically important.” Andrew shares a stat he’s been seeing recently in the news, “Home building accounts for nearly 18% of our GDP, so almost a fifth of what we produce as a country is tied up in home building. That speaks to the fact that there’s a big pie for people to come in and be a part of.” Although these challenges we face are not insignificant, Brady, Duane, and Shane all agreed that the industry will have to learn to adapt to the changes and modify our businesses accordingly.

What’s the impact of inflation on our industry?

Shane Holt, experienced real estate professional, is continuing to see contracts signed to build regardless of what the interest rates are, but at what point will inflation cause people to pause? “I think it’s going to be an education for all of us, we’re going to see a lot, it’s going to be interesting,” says Shane Holt. On the other hand, Duane VanHook has seen inflation previously during the Carter administration and he shared that it can cause bad habits such as getting overloaded with credit. His prediction, “What I see happening, the inflation here in the housing industry, has already outpaced the person who’s lived here all their life. It’s outpaced their income; it’s outpaced anything they do. They can sell great, but can they turn right around and afford to buy a new home with the new market prices?” Brady Fry thinks “inflation rates are going to slow down the first-time home buyer market.” But “the buzz I’ve been hearing and the zeitgeist around Nashville is the developers are buying less. They’re not lowering their prices yet, but these guys that have been buying 40 & 60 lots a year, they’re not buying them that fast,” Fry says. So while the first-time home buyer may be huritng, there’s more opportunities for the luxury client who wants to build a custom home find some space.

Supply chain issues – how bad are they currently? Are they here to stay?

The guests agreed they’ve seen container issues and production shutdowns. There have been adjustments made and moves to new products to adjust to the supply chain problems. Yet, they all had a positive outlook and looked for the silver lining. Brady Fry shares, “I think it’s required us to build teams that have specialized departments. We have a full time estimating and purchasing department. So, now we’re having to build a little more sophisticated operations to build under these circumstances.” In many ways, the supply chain issues have caused the build and design industry to force improvements such as making their businesses and operations smarter, creating more appealing jobs to entice the labor market, and better education for the client(s) on the process and lead times.

Labor shortages. Where do we stand? How will this affect our industry, not only in terms of general labor, but also the future of the artisan/craft side of the business?

Labor shortages are one of our industries biggest problems, especially when it comes to the future of our business. And, particularly with skilled artisans as Duane comments, “our complication with the artisan/craftsmen is a lot of them are aging out,” and we aren’t replacing them. Education, starting with the parents, about the industry and how it’s not just “digging ditches” is a start, and with social media we now have tools to educate and promote the jobs to students. “You see Instagram, you see guys out there that are trying to make the trades cool again,” remarks Fry. There are people within the industry trying to solve this problem including guest, Brady Fry. He’s rolling out a nationwide program to help solve the labor issues by recruiting allies to help and anyone interested in being in the trades or are currently in the trades and have ideas to help, you can email [email protected] to get involved.

How do you see the future of the design & build industry as we stare down the possibility of another recession?

Bloomberg Economics says there’s close to a three-in-four probability there will be a recession by the start of 2024, so how might this affect future of design and build? (source) Duane VanHook says, “we’re already in an artificial recession,” and Brady Fry comments, “recessions are inevitable…they happen, they’re always gonna happen.” With the knowledge that a looming recession will cause change and the industry will continue to be in flux, businesses must be aware and focus on figuring out how to get through the next cycle. Shane Holt takes the positive outlook, “I think challenges make us be better business people.” This is an industry of passion and if you love what you do, you’ll work through how to solve these challenges. “You have to love this industry to be in it. When things are going really good, there’s no better place to be. But when things are going really bad, there’s no worse place to be. You have to love it,” remarks Duane VanHook.

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