Homebuilders are struggling to get basic materials like wood and steel, slowing projects and driving up costs, just one example of the supply chain issues that are troubling the U.S. economy and propelling inflation to levels not seen in 40 years.
While house prices in the The United States jumped more than 18% in October 2021 compared to the previous year, and these trends are expected to continue in 2022Widespread supply chain issues and bottlenecks at ports have led to major delays in home improvement projects – from furniture and appliances to windows and doors, and even raw materials like wood.
Keith James, a managing partner with Coalition Properties Grouptold Spectrum News that the delays were taking a toll on his business: “I have about six weeks left for the windows, we ordered the windows about two months ago and they haven’t arrived yet.”
In an interview with Spectrum News, James walked through a home improvement project in Washington DC, which is nearly four months behind schedule, still missing granite countertops, windows and cabinet handles, among other amenities.
Moreover, it is not only the availability of materials, but also the ability to deliver them.
“The shipping issues we’re having from China, Germany and overseas have been a huge issue and caused a lot of delays,” James said. “Even to the point of product shipping routes.”
James’s contractor, John Paul Joy, said he had never seen such delays before: “It’s very frustrating in terms of ordering materials and getting everything to work.”
“We’re also waiting for windows, doors, things like that, we’ve been pushed back for several weeks,” Joy said. “For us, we can’t pre-order them because they’re all specific sizes for the projects we’re working on.”
Shortages and delays are also helping to drive up prices, James said: “Where we would pay $2.60 for lumber in 2″ x 4″ dimensions, it now costs $6.84.”
That said, building material prices have actually started to fall: according to the Bureau of Labor Statistics Producer Price Index (PPI) released in August, building material prices have risen 19.4% over the past 12 months. But in December PPIreleased earlier this month, that figure has fallen sharply, although it is still higher than pre-pandemic numbers.
While those numbers are down, James’ construction project is $26,000 over budget.
“I tell my clients that properties that cost $300,000 last year are going to be 350,000 this year and 400,000 next year,” he said.
Adding to the problems facing home builders, the United States Canadian lumber tariffs more than doubled in November. The Biden administration has said Canada unfairly subsidizes its lumber industry, making it difficult for U.S. lumber companies to compete. This decision was welcomed by American lumber producers, but decried by economists and the Canadian government.
“Right now there is no trade agreement with Canada,” said Jerry Howard, president of the National Association of Home Builders. “It’s in a dead zone. Prices are unpredictable, supply is unpredictable.”
A bipartisan group of lawmakers sent a letter last month urging President Joe Biden to appoint a supply chain czar to address issues like these, despite appointing John Porcari to serve as port envoy to the supply chain disruption task force White House supply.
In an interview with Spectrum News last month, Porcari said goods move faster through the ports of Los Angeles and Long Beach in California, which handle 40% of the country’s imports.
“These two ports are much smoother. Goods move faster,” Porcari said. noted. “As Americans, we have become accustomed to the operation of our freight transportation chain without having to think twice. During the pandemic, we discovered that we did not have that luxury.”
Still, the National Association of Home Builders supports the idea of a supply chain czar.
“It should be short term, look at the problem, recommend solutions, implement solutions,” Howard said.
Until then, developers like James say they continue to lose money every day. Before the pandemic, he said, this home improvement project could have been completed in a month. Now it shouldn’t be finished until mid-February.
“My first mortgage payment was due in October, so I’ve been paying a mortgage on this property since October and it’s not even done yet,” James said.
James said setting appropriate expectations was key when working with customers, urging patience in the face of supply chain issues.
“If we meet with a builder and a builder says ‘oh, you can be in this house in six months’, we say to our client, I know they say six months, but usually right now it’ll take you 8-12 months to get into your home,” James said.