Demand for building materials delays construction at Cy-Fair

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Contractors in the Greater Houston Area are facing material shortages. (Andrew Christman/Community Impact Journal)

Due to an increase in demand for building materials, 71% of contractors said they faced a shortage of supplies needed to complete projects, and 82% said fluctuating costs had affected their activity, according to the quarterly U.S. Chamber of Commerce Commercial Construction Index report released. March 18.

Rising costs and a shortage of wood, steel, copper, paint, plastic, sheet metal, windows, appliances and other products have caused construction delays locally and beyond, said Mike Dishberger, CEO of Houston-based Sandcastle Homes and a former Greater President of the Houston Builders Association.

“A lot of companies thought last year when COVID[-19] hit in the spring that business would fall in residential construction,” he said. “Instead, the opposite has happened. People had nothing better to do, I think, than to stay home and decide whether they want to buy a new house or renovate it. So, demand has exceeded supply, and when that happens, prices go up.

For example, Dishberger said plywood cost $7 per sheet in April 2020 and reached as high as $50 per sheet in June. A recent copper shortage has driven up the price of its electrical equipment by 25%, he said. Dishberger said he’s seen costs rise in the past, but never this much.

A slight rise in timber prices started last summer, but other products began to run out late in 2020, and the trend continued into the new year as supply channels could not respond to the request.

Affected buyers

In addition to delaying the construction process, Dishberger said some homebuilders have included escalation clauses in their contracts, giving them the ability to increase costs as materials become more expensive. However, manufacturers do not want to increase their costs to the point where consumers can no longer afford their products.

“Builders normally work on a margin like a lot of businesses, so you would think they’re making a lot more money this year,” he said. “Well, it probably isn’t, because costs are rising faster than they can raise prices. The buying public will not accept a 25% increase in house prices.

Kadie Sellers has lived in a Willowbrook-area flat with her husband for nearly two years and said they went ahead with buying their first home earlier this year as she finished her graduate school.

The young couple had reserved land and chosen a floor plan in February with plans to build a house near the highway. 290 and the Grand Parkway later this year. Sellers said the cost of the house rose by $60,000 due to a shortage of building materials in May, when they finally agreed it was not the right time to build.

“I don’t want to lose equity in a home,” she said. “We wanted to invest in something that will grow, and since we’re seeing this spike, we don’t want it to drop again all of a sudden. Then you paid all that money for a house that’s not worth what you paid for.

Builders told the couple that materials, from lumber to shingles, joists and fixtures, were all out of stock. They looked at other cheaper homes but decided they didn’t want to settle on such a large purchase, she said.

Future prospects

Demand is also outstripping supply in the existing home market. Sellers said many homes sell as soon as they are listed.

“Hopefully we’ll see a change because it’s getting a bit impossible for a lot of people to buy a home right now, especially people my age who are thinking of buying their first home,” Sellers said.

Dishberger said he expects to see high costs for several more months, and he doesn’t expect costs to ever drop to pre-pandemic levels.

“Until they have found supply channels where they have materials that cross the country by rail, truck, boat – however they get here – and the employees work for do so, the problems will persist,” he said. “If the price gets too high, some [builders] going to say, ‘I’m not going to start any more houses [because] I can’t earn the money I need.

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