A Louisiana builder shares why homes in his area are in short supply
Homebuilder Randy Noel (far right in the photo above) of LaPlace, Louisiana, 20 miles west of New Orleans, is building an average of 40 homes a year.
“ is probably the best year we’ve had in 10 years,” Noel, 59, says.
Nationally, new home sales are at the highest level in nearly a decade, but the supply of houses is still below what many economists consider “normal” in the housing market — six months’ worth. The latest numbers show the supply of new homes nationwide at 4.3 months, while that of existing homes is 4.7 months, according the Census Bureau and the National Association of Home Builders, respectively.
Noel, a custom-home builder, explains he’s building as many homes as he can and has about 10 homes in various stages of construction at any given time.
While some builders cite high costs as the reason for a slower building pace, especially for affordable homes, Noel’s supply problem is a shortage of lots in southern Louisiana. In his view, banks are more reluctant to purchase and develop lots than they were before the recession.
“They’re much more willing to lend when they know that the minute you build the house, you’re going to sell it and pay off the construction loan,” Noel, second vice chairman of the National Association of Home Builders’ board, says.
As a teenager, Noel was involved in his father’s construction company, and became vice president of that company before branching off to form Reve Inc. with Bill Bourgeois. Noel has been through many ups and downs in the industry. In particular, the devastation from Hurricane Katrina in 2005 and Hurricane Isaac in 2012 created heavy demand for new construction.
With business booming, Noel has decided to purchase lots and tear down the homes on them. Lot prices comprise about 20 percent of the cost of Noel’s homes, which he describes as four-bedroom, 2.5-bathroom “move-up” properties.
“If someone owns a home and it’s too small, because they have children and need something bigger or they prefer a different school district, they’ll sell their home and buy my home,” Noel says. “That’s kind of where the country is in terms of the market right now.”
His customers can choose from nine home styles on his website and often bring him modifications from images they find on sites like Houzz. His homes typically sell for $230,000 to $300,000 and include popular features homebuyers want these days, such as granite counters, hard-surface floors, stand-alone bathtubs, and large showers.
For first-time buyers looking for starter homes, the prices of the homes he builds can range from around $185,000 to $210,000, but he says that’s “rare.”
“It’s so hard getting costs low for the couple coming out of college. These days, they’re not making the same money they used to make,” Noel says.
Still, with interest rates near historic lows, many of Noel’s customers are finding it cheaper to buy than to rent, he says. But the region’s limited inventory of lots is driving up prices, he says.
“If more lots become available, the price of lots would go down,” Noel says. “That’s going to happen in the next 24 months.”
Skilled Labor in Demand
Another factor affecting some of the region’s builders is the struggle to find skilled labor.
With the exception of some specialty work like cabinetry, Noel says he hasn’t encountered that problem.
“[Hurricane] Katrina hit and the whole country was in a recession, so a lot of labor descended on us. A lot of people stayed,” Noel says, including painters and bricklayers. “They’ve been abundant here.”
One contractor he knows has a large, full-time staff, but that can be supported only when you’re building 200 homes a year or so, Noel says. Noel’s firm has five employees, including himself and his partner. The remainder of Reve’s crews are subcontractors.
When area workers in other industries lost their jobs, they could take on the trades and “suddenly they become entrepreneurs,” Noel says. “It’s an easy way to own your business. It’s the American way of life.”