Soaring building material costs are causing delays for area home builders
Building material shortages linked to the pandemic have pushed the cost of materials to historic highs, causing delays for home builders and further inflating house prices.
The delays come as masses of new residents flock to Southwest Florida and have spiked prices in the resale market that have helped the median home price surpass $ 400,000 for the first time. in the history of the region.
Builders and economists agree that the shortage will eventually ease as new suppliers emerge and COVID-19 lockdowns are lifted. But no one can be sure when this will happen.
Pat Neil, CEO of Neil Communities, has been building homes in the area since 1970. He said the current supply shortages are reminiscent of 1976 and 1977.
âI was a lot younger then and a lot shorter,â he said. âI did a much better job today.
At the time, Neil remembers buying two shipments of drywall, but he didn’t receive them until two years later – and they were saturated with water.
While this year’s supply shortage has been difficult, Neal said that due to long-standing supplier relationships and experience dealing with similar issues, his business has been successful.
For example, a component needed to finish swimming pools has become almost impossible to find. His purchasing team located a supplier in Mississippi with the coveted material, so Neal sent trucks there twice.
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It has since temporarily moved to a more expensive and superior substitute that is easier to find.
âAll of our homes have been affected in one way or another,â Neal told the Sarasota Herald-Tribune. “Every morning there is a madness that they (the purchasing department) will have to go and solve.”
The supply crisis cost Neal Communities $ 1.2 million in unexpected costs, he said. When the price of lumber exploded to nearly $ 1,800 per 1,000 board feet, the average cost of lumber for a home jumped $ 24,000.
Lumber prices returned to a more normal range on Friday morning, according to Nasdaq Inc., but other areas of the supply chain are still struggling.
Hot-rolled coil steel, used in garage doors, has increased from $ 492 per tonne in July 2020 to over $ 1,800.
Neal said every day a project waits for materials will cost his business $ 200 in overhead. For the house plans priced at around $ 350,000, the cost of materials and labor increased by nearly $ 30,000, he said.
A house that Neal Communities is finishing this month has been sold under a contract drawn up in December or January.
To get things like garage door springs, windows and paint, he said, âWe’ll pay anything to meet the schedule. ”
“Throughout the supply chain”
Without windows, home construction projects can come to a halt as interior finishes are left unprotected from the elements.
It usually takes 12 to 15 weeks to order windows. As the supply chain stumbled, it grew to around 30 weeks.
PGT Innovations, Florida’s largest window manufacturer and Sarasota County’s largest employer, has had to deal with these supply chain issues.
Regarded as an essential business by the state, the company was not required to shut down its manufacturing plants.
But COVID-19 has forced the company to reduce the number of employees at its manufacturing plants from around 50 to around 35, said Jeff Jackson, CEO of PGT Innovations.
Meanwhile, demand for windows has exploded, leaving home builders and renovators to compete for limited stock.
To complicate matters, the Texas frost took two of the three largest producers of resin offline – a component used to make window glass.
âEvery manufacturer has done something,â Jackson said of COVID-19 protocols. âEveryone had to stop and take a look at what they did. “
PGT employs 2,500 workers in Sarasota County, plus 2,000 in South Florida and Arizona.
While things have opened up in Florida, allowing PGT to reduce the number of workers at its manufacturing plants to pre-pandemic levels, many manufacturers in Europe have not fully opened up.
Jackson said he ordered machines for his company’s factories from European suppliers.Typically, it takes three or four months to receive the equipment. It has been eight months since he placed his order and still has not received it.
âYou see this all along the supply chain,â he said. “It just flows downstream to the builders.”
Jackson said PGT is slowly catching up. The company hosted 15 career fairs this year and hired up to 500 people. PGT also opened a new manufacturing facility in Fort Myers.
“Something is wrong there”
Economists have varying predictions about the lingering impacts.
Jack McCabe, CEO of McCabe Research and Consulting, has been involved in the real estate industry for nearly four decades, successfully predicting the latest recession to rock the housing market.
âWe’ve never seen supply chain issues like this in my life,â he said. “Never have so many increases in so many industries at the same time.”
McCabe said many countries have experienced total shutdowns and some are still not back in production. Because of this, he said it would be impossible to say how long the disruption could last.
âI don’t think anyone can predict what’s going to happen next,â he said.
McCabe again believes that the price spikes in Florida over the past year have created an “overheated market” that is not sustainable. Noting the state’s history of boom-bust cycles, he said price increases in Florida are driven by all-cash buyers.
“There is something wrong there,” he said, adding that “the variables are all there” for the region’s property market to be headed for a “pretty rapid decline”.
âWhen it starts,â McCabe said, âI couldn’t tell you. “
Sean Snaith, director of the Institute for Economic Forecasting, was more optimistic about the supply chain.
He expects problems to resolve themselves in “a few quarters” instead of “a few years”.
He spoke of the 1970s and the supply chain problems created by the oil embargoes that caused the disruption of that time.
Markets adjust, Snaith said, and buyers and sellers will adjust as well.
âPermanent changes versus temporary events are often predicted but not revealed,â he said.