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Supply Chain Issues Pushing Remodeling Costs Higher

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Supply Chain Issues Pushing Remodeling Costs Higher

Supply chain issues are slowing delivery of key building materials and increasing costs.

By Chuck Fowke December 10, 2021
Labor Shortage
Labor Shortage
This article first appeared in the Nov/Dec 2021 issue of Pro Remodeler.

While supply slowdowns have yet to dampen confidence in the market, remodelers are seeing the effects in the cost of projects, and some expect rising prices to push them out of potential jobs.

The Remodeling Market Index

In the most recent NAHB/Royal Building Products Remodeling Market Index (RMI), the reading of 87 is a sign of positive residential remodeler sentiment for projects of all sizes and is five points higher than its third-quarter 2020 reading. RMI is based on a survey that asks remodelers to rate various aspects of the market as “good,” “fair,” or “poor.”  Responses are converted to an index that lies on a scale from 0 to 100, where a number above 50 indicates a higher share views conditions as good rather than poor.

One of the components of the index, the Futures Indicators Index, includes the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects. The backlog of remodeling jobs climbed eight points from Q3 2020 to 85. In addition, 57% of respondents reported having slightly raised prices for projects over the last six months, with another 28% indicating a significant price increase, due in part to higher materials costs.

We've been pushing Congress and the Biden Administration to resolve the issue by temporarily removing tariffs on lumber and other imported building materials. 

Several factors have contributed to the higher costs. Domestic producers of lumber, steel, and concrete reduced production early in the pandemic, and many were slow to respond to demand when the residential construction industry got back into high gear. At the nation’s ports, shortages of dock workers, inadequate storage capacity, and administrative bottlenecks have disrupted the flow of goods. Raw materials used in roofing, insulation, PVC piping, windows and doors, and countless other products are sitting on ships waiting to dock. Even after the products move through the ports, a long-standing shortage of truck drivers compounds the problem.

Cause For Concern

And throughout the pandemic, strong consumer demand for appliances and other items used in remodeling projects has heightened competition for scarce resources.   

NAHB recognizes that supply-chain failures harm members and hinder growth in the residential remodeling market.

We’ve been pushing Congress and the Biden administration to resolve the issue by temporarily removing tariffs on lumber and other imported building materials, alleviating bottlenecks at the nation’s ports, and seeking solutions to persistent delays in truck and rail transportation

Lumber prices have dipped from their all-time highs hit earlier this year, and concrete prices have also declined, but the average price of goods used as inputs to residential construction is up nearly 14% year to date, according to the Bureau of Labor Statistics Producer Price Index, more than triple the rate of core inflation. Key materials used in remodeling, including plywood and oriented strand board (OSB), saw some of the most meteoric gains in prices this past year, with the latter up more than 500% at one point over the summer.

Experts at NAHB remain focused on educating policymakers on the extent of the supply chain problem and working to find solutions. Find out more about NAHB’s efforts, as well as business strategies to lessen the impacts of supply shortages, at nahb.org/supplychain.

The pandemic has brought unprecedented challenges to our nation and our industry. NAHB is working to help our members navigate those challenges and come through stronger than ever before.

RELATED: The Real Effects of the Labor Shortage

written by

Chuck Fowke

Chuck Fowke is NAHB's 2021 Chairman of the Board, and a Tampa, Fla.-based custom home builder with 40 years of experience in the home building industry. 

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