It’s not just lumber prices that are plaguing homebuilders.
The National Association of Home Builders reports that material shortages are now more widespread than at any time since it began tracking the issue in the 90’s. Overall, more than 90% of builders report shortages of appliances, framing lumber and OSB. Exactly 90% said there was a shortage of plywood, while 87% said there was a shortage of windows and doors, according to a May 2021 survey for the NAHB/Wells Fargo Housing Market Index (HMI).
At least 70% of builders reported 12 items as being in short supply. Sixteen items were listed as in short supply by more than 60% of builders. Twenty-one items were checked as in short supply by more than 5%. All two dozen items tracked by the HMI were listed as in short supply by at least 43% of the builders. June 2020, when the HMI survey last covered the topic, less than 40% of builders reported a shortage of the listed products and materials.
The share of builders listing shortages increased by at least 27 percentage points on all 23 items. Often, that percentage was much higher. For instance, the percentage of builders reporting a shortage of OSB jumped from 9 to 92 percent. Plywood, framing lumber and copper wiring also saw shortage percentages increase by 70 points or more.
In 2020, the HMI didn’t include appliances because finding them hasn’t been an issue for builders. However, NAHB added the item this year, and the organization discovered that 95% of builders reported a shortage of appliances in May 2021. That was the highest shortage percentage recorded on any item since NAHB began systematically collecting the information.
Materials shortages are affecting wide swaths of the CRE community.
Even though the demand drivers for almost all commercial real estate are prime to rapidly rise, construction will likely be curtailed by extreme building material price increases, said Marcus & Millichap’s John Chang in a recent investor outlook video. Materials prices have skyrocketed this year, with lumber up by 90%, steel and copper up 50, and overall materials up 17.2% over the norm.
And even at those prices, materials are hard to come by. Orders don’t show up in time or show up as partial deliveries after extensive delays, stalling projects for weeks. These supply shortages are also compounded by a lack of skilled labor: the construction unemployment rate is now 7.7%, down from more than 16% a year ago, and construction wages are up by 3% during that same time frame.
“Even though 335,000 new apartments, 325 million square feet of industrial space, and about 53 million square feet of self storage space are scheduled for completion this year, it’s increasingly likely deliveries will fall short,” Chang notes.
About Real Estate Intelligent Marketing (REIM):
REI Marketing is an innovative Real Estate Marketing Company that offers distinctive real estate services to developers and multifamily investors. We are a vibrant, dedicated team of industry professionals with international experience in marketing and multifamily investment.