More problems face our nation than we seem to have solutions for at this time. Its now affecting everyone in every industry.
Material scarcity has made planning and constructing our active adult communities very unpredictable.
For a few months, it was lumber. Then it was windows. Appliances have been a challenge this whole time. Now it looks as though lumber is disappearing again, along with several other essential materials.
What does this mean for you if you’re looking at one of our communities?
What does it mean for our economy and the price of housing?
Planning For Success in an Uncertain Market
If you aren’t aware of the shortages in the market right now, you must be living under a rock. It’s funny, but people’s true colors really start to shine when faced with the challenges we’re facing. Lately I’ve been hearing story after story of customers going berserk like when a shopper at a department store chews out the employees because their favorite makeup isn’t in stock.
Right now, in the construction industry, we’re facing a lot of shortages as well. Everyone seems to believe that the lumber has fully recovered, but as recently as last week, Utah had run out of sheeting material, again.
I went to buy a pool pump yesterday for a job, and they said that I was number 243 on the waiting list, and that they are getting only about 10-15 in each month.
As I talk with electricians, HVAC contractors, and even excavators, the pipe and basic materials that they need to run sewer, conduit, and ducting are out and backordered throughout Utah. Most of these subs are trying to stock up, but their reserves are quickly disappearing, and they are warning of more slowdowns due to a lack of materials, parts, both things as simple as wire, or as complex as furnaces.
I recently read an article online from a large investment banker that suggests that these shortages are short term, and we’ll be back to normal before we know it. However, with everyone I talk to in our industry, I get the feeling that we’ll be lucky to overcome our shortages by the end of next year. It wouldn’t be surprising at all, if this lasts into 2023.
Consequences and Strategy
The first and most likely consequence of shortages, from a simple economic standpoint, is that prices will continue to go up. This whole year, the construction industry keeps getting hammered with larger price increases. Even last week, I was told that a bunch of the metal I needed was going up another 25%! That’s a lot, especially considering that this isn’t the 1st or even 2nd such increase.
We also noticed this effect happening on the market for houses. During the Summer, people were bidding houses up to levels we’d never seen before. The supply was low, so the price went high. The problem is, that not everyone can continue to afford such high prices, and since wages are slower to react, we’ve started to see a decrease in demand.
However, the decrease in demand is still being offset by the increased supply, meaning that while the market for new homes has stabilized, the price is not coming down.
Wages are creeping up though. Skilled, and even unskilled labor costs are jumping up there. Today, $18 an hour can’t even hire you an employee who knows how to read a tape measure.
While the market price for homes has stabilized somewhat, yet the cost of materials to build homes is still climbing, this is going to start hurting the bottom line for many contractors. I wouldn’t be surprised if many of them start slowing down and seeing if they can wait out these supply chain issues until either their material costs start going down, or until wages catch up and they can continue raising the price of their homes.
As for us in Leisure Villas, we’re continuing to build as best we can. We do anticipate delays in the months and years ahead, but we’ll keep doing our best to push forward. After having been sold out for so long, we finally do have some homes available for sale, though none that are ready to move into at this time. If you’re interested in any of our communities, please talk with one of our sales staff to see where and when we have availability. You’ll need to be quick though. Usually we sell out within a couple of weeks of opening up a new building.