Pandemic-induced delays in delivery of construction materials drive up costs | News


The lumber supply and demand headaches caused in large part by the pandemic are expected to continue to impact construction for the remainder of this year and perhaps part of next, causing delays and financial hardship for builders and homebuyers.

Nonetheless, people are still flocking to Hood County, even though shortages of lumber and other building materials have added thousands of dollars to the cost of their home or forced them to downsize their dream home. .

Some in the industry say they have been sold out for months or have so much business that they are not accepting new clients at this time.

Donny Couto of Couto Homes said his business is booked with new customers until the end of August.

“There’s an abundance of customers,” he said. “Interest rates help. They are able to obtain historically low rates, close to 3%, unheard of. Some of them may justify pulling the trigger to build a new house.

According to Couto, the COVID-19 pandemic that has led to backlogs has fueled an already large influx into Hood County, considered one of the fastest growing counties in the nation by the U.S. Census Bureau. He believes the pandemic has led to the realization that many jobs can be worked from home, prompting a “great herd to the suburbs” across the country.

People find Hood County appealing for several reasons, he said. Taxes are “reasonably low”. The schools are good. The county is close to the Metroplex and about an hour’s drive from DFW Airport. Granbury, although growing, still has “small town charm” and along with the lake there are leisure activities.

“The quality of life is dramatically better here,” said Couto, who started building custom homes in Hood County in 2001, following in the footsteps of his father, Al Couto. “You can work from home and have an acre of land, which continues to be very popular, for a lot less money than other areas.”

Casey Wallace, chief operating officer of Henson Lumber, which employs about 60 people at its Cresson plant and its Cresson retail store, expressed a similar view.

“We have so many people coming from out of state,” he said. “I think with this pandemic, Texas has a lot of appeal in terms of the cost of living. It’s a new world with the pandemic. Many people will continue to work from home.

Henson is struggling to keep up with demand, Wallace said. For now, the company is not taking on any new customers as it focuses on meeting the needs of existing accounts.

“Business is very strong,” Wallace said. “It’s strong for us, it’s strong for all manufacturers. The big problem is the supply side to get the product.

Windows are taking 6 to 12 weeks longer due to backlogs, he said, and there are also delays with other things that are considered carpentry, such as doors and interior trim.

“Builders aren’t able to finish homes in the time they’re used to” because they can’t get certain items quickly, Wallace said.

Although those looking to build on an acre or more may find the land price to be reasonable, the tip of the wood has added an additional $24,000 to the cost of the average new single-family home since last April, according to the National Association of Homebuilders. . The additional costs are even higher for larger homes and those with higher-end amenities.

“It’s crazy. The prices are just off the charts,” Wallace said.

The Henson executive explained that when COVID-19 hit, sawmills and related businesses laid off and laid off employees on the assumption that demand for their product would drop dramatically. Instead, the opposite happened.

“People were staying home and spending money on home improvement projects because they couldn’t travel,” he said. “When the sawmills were supposed to be running at full capacity, they weren’t. When they tried to get back up to full capacity, they struggled.

Wallace said that as factories fell further and further behind, prices rose.

The cost of the Waferboard, or Oriented Strand Board (OSB) wood panel product — “one of the big items used in new construction” — has risen more than 300% since the hit of COVID-19, Wallace said. .

Couto said copper, concrete and steel rebar are also seeing “significant increases”, and there are sometimes delays with the fixtures, which are often made overseas.

“Everyone is in the same position,” Couto said of fellow homebuilders across the country. “Everyone is facing some sort of supply chain problem.”

Couto said that a year and a half ago, a $400,000 house built by his company would involve about $35,000 in lumber. Today, that same amount of lumber costs more than $80,000 – and continues to rise, proving to be “a headwind” forcing some customers to delay construction or downsize their homes.

Will Steed of Will Steed Homes, who has been building custom homes in and around Hood County for 22 years, said one thing most people don’t realize is how badly bank appraisals are affected. .

“For homeowners who need construction loans to build their homes, their new construction valuation has been lower than the actual cost of building the home since the timber crisis began in mid-2020,” said he declared. “It made it harder for homeowners to get loans and for some it made financing quality construction out of reach.”

Steed said that in some cases the houses are 30% higher than they would have been if they had been built a year ago.

“The higher material costs are not at the builder level, they are at the producer level, so we as builders and owners have to deal with some unpleasant consequences of these higher prices when it seems that producers are happy to maintain the status quo,” he said.

Steed continued, “As far as my business is concerned, we will never sacrifice structure or energy efficiency, so we must redesign luxury items such as outdoor kitchens and fireplaces to make up at least some of the difference. Instead of constructing these elements during construction, we lay out the raw elements for later addition. And until we can produce more lumber and more skilled labor or meet demand, I fear costs will continue to remain high.

Couto said his business is currently “eating” between $15,000 and $18,000 per home. He explained that prices are locked in once a client has signed a contract, but the cost of materials continues to rise during the construction process.

“We’re very busy, but that’s not necessarily reflected in our bottom line,” he said. “We are taking considerable financial hits.”

Wallace said supply chain issues have caused some companies to resort to “force majeure”.

Force majeure is a clause included in commercial contracts to eliminate liability for natural and unavoidable disasters that cause disruption and an inability to fulfill obligations.

In addition, the United States is dependent on other countries for many products used in the lumber industry and these countries are “mightily battling” COVID and lagging behind in production, which has led to a sharp increase in costs, Wallace said.

“We’re in allocation on so many items that we’ve had to stop taking new business,” he said. “Construction remains robust with new or resale homes selling quickly and sometimes above asking price.”

According to LBM Journal, which describes itself as the leading media company serving lumber yards, building material distributors, wholesalers, manufacturers and service providers, during a four-week period that spanned ended March 21, 39% of homes in 400 U.S. metro areas sold above their list price, “an all-time high and 1.9 percentage points higher than a year earlier.”

Wallace said: “With the struggling supply chain in our industry, the current pace of supply and demand cannot be sustained. Demand needs to stop for about a month to allow supply to catch up. Realistically, that won’t happen, so I don’t see prices dropping in the foreseeable future. »

Steed is more optimistic. He hopes things will improve before the end of the year.

“I know the National Association of Home Builders is pressuring the current administration to get suppliers and factories to increase production, and I sincerely hope they succeed,” he said. “I also hope that the administration will consider further reducing the tariffs on Canadian softwood lumber that were put in place in 2017. With inflation looming and interest rates rising, we could also see demand pick up. his breath later this year.

Early voting for the spring primary begins Monday, February 14


Comments are closed.