By Nathalie Voit
Global supply-chain bottlenecks are forcing some builders to turn to substitutes for materials in scarce supply. Shortages of core materials from wood panels to insulation boards have left many construction companies torn between putting a project on indefinite hold or paying higher costs for alternative suppliers, the Wall Street Journal reported.
Fueled by the ongoing post-lockdown demand for new housing that began late last year, many companies are choosing to bear the higher costs rather than wait for planned supplies, according to the Journal.
“It’s unprecedented. I’ve been in the industry for 30 years and never seen anything like this,” said Parker Young, president of Straub Construction in Shawnee, Kan.
Young was forced to take on $20,000 in additional costs for a project after he switched to different insulation materials. Young said the materials he normally uses were impossible to obtain on time after a series of storms in Texas had thrown off production.
The deficit in construction materials is related to ongoing labor constraints stemming from the global public health crisis. The disruptions also stem from a series of bad storms in the South that halted the production of key building components in manufacturing states like Texas and Louisiana. Most recently, heavy port congestion at major U.S. ports has contributed to the delay.
Adding fuel to the fire is a historically hot housing market. According to the S&P CoreLogic Case-Shiller National Home Price Index, which tracks average home prices across major U.S. cities, the cost for an average new home in the U.S. rose 19.7% between July 2020 and July 2021, the highest annual jump in home prices in the index’s 34-year history.
To avoid missed sales and a backlog in projects, property owners and developers industry-wide are opting to pay the extra cost for alternatives.
“The owner might pay more for the concrete to avoid the uncertainties of the steel,” Roger McCarron, chief executive of Project Management Advisors Inc., a Chicago-based real estate consulting company, said regarding uncertainty surrounding the availability of some core materials like steel, which have recently been subject to severe shortages and price inflation.
But not all materials have viable alternatives, the Journal reported.
According to a survey in May by the National Association of Home Builders, over nine in 10 builders reported shortages of appliances, framing lumber, and oriented strand boards (an engineered wood panel). Another nine in 10 reported shortages of plywood, windows, and doors.
“It used to be whack-a-mole, and you would whack one thing, and the other one would pop up,” Deepa Raghavan, a Wells Fargo housing market analyst, said of the supply shortages. “This is like six of them coming out, and you can only whack two at a time.”