Labor And Material Shortages Increase The Average Home By $36K

The perfect storm.

As the housing market gets sparer, potential buyers are turning in high numbers to new construction, but various issues are making those homes more costly than before.

Framing lumber prices have declined in recent weeks, but the overall prices of wood products, steel mill, copper, drywall, and gypsum used in the home building continue to soar. Supply chain problems delay projects and raise costs even more. Lumber can not come down from Canada anymore, and builders have to wait for equipment to show up.

Besides that, there is also a land grab going on as builders try to find dirt for their clients. The price per single lot is up 11% this year compared to last year because demand is so high and supply is low. Unemployment is low, yet we can not find people for the job site or office. The stimulus money and extended unemployment insurance have discouraged folks from working.

Such price increases have added $36,000 to the average price of a new single-family home and nearly $12,000 to the average cost of a new multifamily home, according to the NAHB.

The NAHB joined a virtual discussion hosted by the White House to discuss how rising lumber and building material prices harm home builders, home buyers, and the economic recovery.  “The volatility in the lumber market is pricing hundreds of thousands of potential home buyers out of achieving the American dream of homeownership,” said Sens. Jerry Moran. “Supply chain shortages caused by the pandemic have driven up the price of building and buying homes, and the threat of increasing countervailing duties on certain lumber imports from Canada threaten to exacerbate the situation.”


So what can you do?

New Labor Bill Aims to Ease Workforce Shortages

Rep. Lloyd Smucker (R-Pa.) has re-introduced the Workforce for an Expanding Economy Act, legislation that would help ease the worker shortage in the construction industry by creating a market-driven visa system to help employers find more laborers.

What to do with projects ongoing

  • Review owner contracts for potential clauses. There may be slim toe holes for arguments but generally little relief for cost increases.
    For the owner, it is a matter of managing the G.C., for the contractor, it is a matter of managing the subs; for the subs, they need to need to do their best to deal with the industry as they are at the mercy of the supply chain.

What to do with projects you have not started yet
How do you sign a contract for costs that you do not know what they will be three, six, twelve months down the road?

Managing the Risk of Labor and Material Shortages and Cost Escalation

Escalation Clause for Lumber Materials: NAHB recommends including an escalation clause in contracts that indicates if lumber prices increase by a certain percentage, the customer would be required to pay the extra costs.

However, the construction site is not the only area in home design that is having shortages. Millions of Americans are frustrated by long wait times for appliances and furniture, causing many to look for alternative solutions. Here is a  guide that explains some of these solutions and what to expect in the months ahead.

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