The supply chain crunch for US homebuilders may ease as China's ailing property market slows, says the CEO of a $4 billion investment portfolio

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The supply chain crunch for US homebuilders may ease as China's ailing property market slows, says the CEO of a $4 billion investment portfolio
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  • A sustained slowdown in Chinese property development could prove helpful for US home builders, the CEO of RealtyMogul tells Insider.
  • Cooling housing starts in China should free up materials that are in short supply, said the investment platform's chief, Jilliene Helman.
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The slowdown in China's massive property sector - highlighted by the debt crisis at developer Evergrande Group - may hold a silver lining for builders in the US wrestling with shortages of construction materials, says the CEO of a $4 billion real estate investment platform.

While struggling with more than $300 billion in liabilities, Evergrande appeared to have staved off default again over the past week. But its near collapse has underscored the cooling in China's $52 trillion property market, which is twice as big as America's residential housing market and accounts for about 30% of China's GDP. For example, output in construction industries reportedly shrank by 1.8% in the third quarter, according to China's statistics bureau.

"If development in China slows considerably, I think that there could be an advantage to the US in that it will free up construction materials for US builders," Jilliene Helman, CEO of RealtyMogul, told Insider.

"So it should speed up developments, enable new inventory to come to the market faster and hopefully bring supply and demand into greater equilibrium which can help to solve our affordable housing crisis in the US."

The Los Angeles-based crowdfunding platform offers access to institutional-quality real estate investments, and there are more than $4 billion in deals on the site.

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The US housing market remains tight with inventory for starter homes at a 50-year low. Meanwhile, widespread disruptions in global supply chains have cropped up in the construction industry, making it challenging to secure building materials.

"It's lumber … it's appliances, it's paint, it's drywall, countertops, cabinetry," said Helman, noting that her firm invests in apartment units that are getting flooring and electrical upgrades. "It's challenging to get the same level of raw materials … than it was 12 months ago. It's just a totally different world. And as a result of that supply crisis, you're seeing costs go up."

Building materials prices have climbed 12.2% so far in 2021 compared with a 4.5% rise over the same period in 2020, according to the National Association of Home Builders' Eye on Housing blog, which monitors data from the Labor Department.

China is a powerhouse of manufactured goods, both in producing and consuming construction supplies like textiles, furniture and flooring. And if China is using less of that supply, there should be more available for exports, said Helman.

"I think that the US being the largest importer of Chinese goods and materials could be in a position to benefit from that," she explained, "because China's consuming less of that supply in their own domestic market."

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But in addition to supply shortages, rising costs for US homebuilders also stem from a labor shortage, Helman said.

The construction industry needs at least 2 million workers over the next three years to keep up with demand for new houses, according to the Home Builders Institute, a nonprofit partner of the NAHB that provides training for the industry.

But despite the housing sector's current woes, which also include a possible interest rate increase by the Federal Reserve next year, Helman said there's still "tremendous bullishness" about the US market.

That upbeat view comes from discussions RealtyMogul has with its 220,000 members. But Helman also has seen it all first hand, as she's been involved in underwriting more than $5 billion of real estate, according to the company's website.

"We started with a $110,000 duplex in Compton, and one of the last deals we worked on is a $110 million development deal in the heart of Miami," she said. "So we've come a long way."

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