As homebuilders continue to work through the COVID-19 outbreak, some fear the virus could snuff out demand for new houses next year – if it hasn’t already.
Although some builders are heading into the summer construction season with a backlog of work, others say the effects of the coronavirus pandemic could delay construction by months and wipe their peak building months off the calendar.
To be sure, the decline isn’t being felt in all corners of the industry yet.
Martin Kirchner, who owns La Crosse-based Kirchner Custom Builders with his brother Anthony, said COVID-19 hasn’t upended his 2020 building season, which is booked solid. The company primarily builds custom homes worth $750,000 or more for wealthy clients.
But if demand drops off and clients stop signing contracts for next year, his company may need to take any job it can find – from small commercial projects to remodeling jobs.
“People are still going to need decks repaired,” Kirchner said. “In great times, we don’t take those jobs. If we’ve got to do that in order to keep the doors open, so be it.”
Across the state line in Minnesota, Todd Polifka, of Custom One Homes, wonders if the housing industry has already lost this year.
“This is one of the worst possible times for us,” said Polifka, as he surveyed a house he is building in Inver Grove Heights, a suburb of Saint Paul.
Because of social-distancing rules, builders like Polifka are having a hard time using open houses to sell homes. They also can’t easily get supplies ranging from lumber to doorknobs and kitchen sinks.
Staggering work shifts
Although the construction industry continues to work during the pandemic in Wisconsin and Minnesota, builders are taking precautions to prevent the spread of the virus.
Brian McKee, president of Madison-based Midwest Homes, Inc., said supervisors are using a laser thermometer to take the temperature of workers before they enter a jobsite. Crews are also following social-distancing requirements, sanitizing their hands often and wearing protective gear.
So far, none of his 30 employees have fallen ill with the virus. Neither have his subcontractors or suppliers.
“It’s been fortunate that construction has been an essential business,” McKee said.
On a job site recently, Polifka of Custom One had just two workers framing roof trusses. Other workers, though, were told not to come.
To maintain social distancing, Polifka staggers work shifts. Instead of having carpenters, plumbers and electricians all in a house at once, he’ll have the come one crew at a time.
The harm wrought by the virus, Polifka said, will last long after the pandemic has passed.
That’s because homebuilding is slow work — it can take as long as 18 months to put up a new house and sell it.
Brad Boycks, executive director of the Wisconsin Builders Association, said although many homebuilders in the state will have a backlog of work to rely on this year, demand may dry up by 2021.
“I think by and large a majority of our members had a list of things that they were able to work through with the safer at home order,” he said.
Boycks is hopeful the virus will pass soon, and demand for new construction will rebound.
For Krichner Custom Builders, in La Crosse, there are some early signs that demand for new homes could suffer from a prolonged shutdown. One of Kirchner’s clients, a doctor, took a 30% pay cut recently and pushed construction of a home he’d hired Kirchner from this spring to the fall.
“That’s what I’m afraid 2021 is going to look like,” Kirchner said. “For my customers, if the economy is terrible and the market’s in the tank, the only people who are going to be building these kinds of homes are the independently wealthy.”
Other builders may be feeling a downturn more abruptly
“It could be a lost year, at least for some of us,” said Howie Zetah, president of the Builders Association of Minnesota.
He said that as the stock market sinks and unemployment soars, even customers who can afford new homes will get jumpy.
“I had two homes, all ready to start, and they decided to wait,” said Zetah, owner of Zetah Construction in Bemidji.
He predicted a drop of 15% to 25% in 2020.
A rebound, but when?
McKee, of Midwest Homes, said he had two projects delayed this spring. But three or four other new projects could make up for those delays.
“It’s three pretty solid leads, that’s kind of tracking on with what we’ve seen this time of year,” McKee said. “It has been a nice surprise that we’ve seen the interest.”
McKee acknowledged that the Madison housing market is likely to be more stable than elsewhere in the Midwest. The University of Wisconsin-Madison, large hospitals and state employees make the fast-growing city more recession-proof than many places.
“We don’t see the big highs and we don’t see the big lows,” he said.
Meanwhile, Tom Wiener, owner of Twin Cities-based Cardinal Homebuilders, Cardinal Realty and Cardinal Remodeling, said his new homes are now going to be delayed by up to five months.
Wiener is cutting back from the 20 homes he was planning on this year to 15. His real estate business is down by the same amount, about 25%. Remodeling, though, is steady, he said.
He predicted that the industry would rebound, if interest rates stay low. But he wouldn’t guess when.
Housing First’s Siegel also sees the possibility of a bounce-back — under the right conditions.
He wants cities to ease zoning restrictions to allow more affordable construction.
“Let’s relax some of these city ordinances, the 90-foot lots and three-car garages,” he said. “Let builders build what buyers want.”
When will that happen? In time to save 2020?
“My gut tells me we are going to come out of this relatively soon and be pretty healthy,” he said. “But I have been wrong before.”