- Home builders can't find basic materials they need to complete the backlog of construction projects.
- The NAHB claims that in 2021, more than 90% of builders reported delays and materials shortages.
- Redfin says the number of available homes for sale will decline to historic levels in 2022 because of this delay.
Home builders can't find basic materials like lumber or steel, which is delaying — and increasing the price of — the construction of 5.24 million homes now needed to meet the demand of this year's buyers.
Home Depot, and maybe even Congress, is here to save the day.
The National Association of Homebuilders (NAHB) says that in 2021, more than 90% of builders reported delays and materials shortages. Plus, new taxes from the Biden administration have also driven prices higher. Amid historic-high demand for homes, retailers like Home Depot are investing billions to serve a market in crisis. Even with these investments, builders have become so concerened, they are seeking help from Congress. Home builders fear the bottleneck could make the crisis worse as demand doesn't seem to be slowing down anytime soon.
In the cycle of supply and demand, this is bad news for buyers worried about continued bidding wars and a lack of options. Redfin says November marked an all-time low for available housing and predicts the number of available homes for sale will decline to historic levels in 2022.
"The low inventory is driving up housing prices and reducing affordability across the nation," Redfin Chief Economist Daryl Fairweather told Insider. "When inventory is low, the market becomes more competitive, leading to bidding wars that drive up housing prices."
Expensive materials mean expensive homes
In November, the Biden administration slapped tariffs of nearly 18% on Canadian softwood lumber producers that import to the US, doubling the rate of the Trump administration. The US accounts for 75% of the value of those exports from Canada, so economists predict additional costs and supply constraints.
Random Lengths, an information center for the wood and products industry, confirms that as of December, the price of framing lumber jumped $1,000 per thousand board feet, marking a 167% increase since late August. The CEO of Tata Steel, T.V. Narendran, told CNBC that steel prices are expected to trend above $600 per ton in the coming years.
In the meantime, lumber prices have nearly tripled in the past four months, according to a study from the NAHB. The organization calculated that as a result, the price of an average new single-family home has climbed by more than $18,600 while nearly $7,300 has been added to the market value of the typical new multi-family home.
"Despite the increase in sales, housing affordability remains a major concern," said Danushka Nanyakkara-Skillington, NAHB assistant vice president of forecasting and analysis. "With building material pricing, the challenge for builders in 2022 will be to deal with higher input costs while making sure home prices remain within reach for American home buyers."
Builders take their concerns to Congress and the private sector offers help
NAHB Chairman Chuck Fowke said that Congress can help get homes built faster.
"Policymakers need to work on supply chain improvements and controlling costly inflation," Fowke said. "Addressing lumber tariffs would be a good place to start."
In 2021, NAHB CEO Jerry Howard and senior staff met with lawmakers from the Domestic Policy Council, National Economic Council, and the Office of the Vice President to discuss various concerns including, mill capacity issues, mill worker shortages, and housing affordability.
While a resolution is yet to be made, Robert Dietz, NAHB's Chief Economist, says that policy makers will play a pivotal role in creating a solution. He added that "housing affordability fell to a decade-low during the third quarter of 2020, and as interest rates are expected to rise this year, housing affordability will be under additional pressure in 2022."
"Inflation will be a top economic challenge for 2022 and 2023," Dietz told Insider. "While monetary policy will tighten, policymakers can also help fight inflationary pressures by improving supply-chains. Doing so will reduce costs, such as construction costs for new homes and apartments."
In the meantime Home Depot plans to help builders get quicker and cheaper access to materials by investing as much as $1.2 billion in supply-chain facilities over the next five years.
"The professional contractors represents approximately 45% of our total sales," Home Depot told Insider. "Our pros sales growth outpaced our DIY customers in Q3 and pros continue to tell us that project demand is strong and their backlogs are robust and still growing."
Backloags of unfinished building projects may be a good thing for Home Depot. Home builders and buyers, on the other hand, would prefer to have sufficient materials to get those projects completed quickly.
Are you a homebuilder having trouble getting construction materials? Or a new homebuyer whose construction project is delayed? Reach out to this reporter at email@example.com to share your story.