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Builders Change Tactics to Cope with Supply Shortages

It’s hard to estimate a new home’s completion date if flooring, lumber and appliances are hard to get – or how much it will cost to build a home until after they arrive.

CHICAGO – Builders say a shortage of supplies – including appliances, hardware, flooring products and lumber – impacts the timelines and costs of their projects, and they’ve had to find ways to pass those costs on to customers. Builders also report difficulties getting air conditioners, refrigerators, washing machines and other appliances for new homes.

Production and supply chain disruptions from the early days of the coronavirus pandemic are lingering, causing prices to escalate.

Nearly half of builders surveyed in July by Meyers Research reported supply disruptions; 80% of 300 division presidents nationwide in a survey in the last week of August said supply challenges likely will impact their 2021 sales plans.

“When flooring is delayed, we have to rework our schedules to allow for other things to progress, or we have to put the home on hold and wait for the material or reselect something that is available at the time,” says Jon McReynolds, Garman Homes division president in Raleigh, N.C.

Rises in lumber prices have added an average of $16,000 to the price of a newly built single-family home since April, according to the National Association of Home Builders. In response, McReynolds says Garman increased prices at the community level and adjusted lot premiums higher.

Some builders reportedly use escalation clauses in contracts so that customers will have to pay for extra costs if prices rise by a certain percentage.

To help offset some of the rising costs, Meritage Homes is scaling back its upgrade options for new homes, offering only a few product collections at the same price point. For example, Meritage used to offer 56 dishwasher options, but now it offers only six that tend to be well-stocked.

“We’re going to have a lot more success in being able to procure those dishwashers, for example, than we are some of [Whirlpool’s] slower-selling, more expensive models,” Steve Hilton, chairman and CEO of Meritage Homes, told Builder. “That goes on and on for every component of the house, whether it’s door locks, plumbing, fixtures, carpeting or tile.”

Source: “Rising Costs and Material Shortages Could Deter Housing’s Boom,” BUILDER (Oct. 1, 2020)

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