Builders report material shortages, higher prices
Homebuilders are having trouble ramping up the supply of new homes to meet the demand. Rising prices and shortages for some materials are a problem.
Here’s another reason builders are having a hard time meeting the demand for new homes: shortages of key building materials.
According to recent surveys of members by the National Association of Home Builders and the National Lumber and Building Materials Dealers Association, builders and lumber dealers are seeing shortages of lumber and wallboard. They also report rising prices for materials.
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"Supply constraints are one of the barriers to a more robust recovery," NAHB chief economist David Crowe said in a news release. "The shortages and price increases reported by both home builders and lumber dealers are particularly concerning given that the current rate of construction is still far below what would be considered normal or necessary to meet underlying demand."
About 22% of builders reported shortages of oriented strand board, 22% reported shortages of wallboard, and 18% reported shortages of framing lumber or plywood.
Even more dealers reported shortages. A total of 36% reported shortages of framing lumber, 27% to 28% reported shortages of oriented strand board and plywood, and 12% reported shortages of wallboard.
While the shortages are not as acute as they were in 2004 and 2005, when builders were producing twice as many new homes, builders are seeing more shortages of many products than they saw in 2011 or 2012.
Builders reported a 5.17% increase in the cost of materials in the last six month, while lumber dealers reported price increases of 10% or more.
"While a nascent housing recovery is underway, as reflected by the modest increase in sales by dealers, it’s clear that the ongoing material shortages and price increases being reported by dealers continue to be a cause for concern as we move into the latter half of 2013," Michael O’Brien, president and CEO of the lumber dealers’ group, said in a news release.
In addition to suffering shortages and rising prices of materials, builders are having a hard time finding skilled labor and, in some cases, lots. Land prices also are rising.
"We’re seeing somewhat of a bottleneck," Michelle Meyer, senior U.S. economist at Bank of America, told Bloomberg. "Higher costs are one reason home construction is not rebounding faster."