Lumber supply and demand headaches caused largely by the pandemic are expected to continue to impact construction for the remainder of this year and possibly. be a part of the next, causing delays and financial hardship for builders and home buyers.
Nonetheless, people are still flocking to Hood County, even though shortages of lumber and other building materials have added thousands of dollars to the cost of their homes or forced them to downsize their dream home. .
Some in the industry say they’ve been full for months or have so much business that they’re not taking on new customers just yet.
Couto Homes’ Donny Couto said his business booked new clients until the end of August.
“There is an abundance of customers,” he says. “Interest rates help. They are able to obtain historically low rates, close to 3%, which has never been seen. Some of them may justify pulling the trigger to build a new house. “
According to Couto, the COVID-19 pandemic that led to arrears fueled an already large influx into Hood County, considered one of the fastest growing counties in the country by the US Census Bureau. He believes the pandemic has led to the realization that many jobs can be created from home, which has caused a “big herd in the suburbs” across the country.
People find Hood County attractive for several reasons, he said. The taxes are “reasonably low”. The schools are good. The county is convenient to the Metroplex and about an hour’s drive from the DFW airport. Granbury, although growing, still has ‘small town charm’ and, along with the lake, there are leisure activities.
“The quality of life is considerably better here,” said Couto, who began building custom homes in Hood County in 2001, following in his father’s footsteps, Al Couto. “You can work from home and have an acre of land, which continues to be very popular, for a lot less money than in other areas.”
Casey Wallace, chief operating officer of Henson Lumber, which employs around 60 people at its Cresson plant and Cresson retail store, expressed a similar opinion.
“We have so many people coming from out of state,” he said. “I think with this pandemic, Texas has a lot of interesting things in terms of the cost of living. It’s a new world with the pandemic. A lot of people will continue to work from home. “
Henson is struggling to keep up with demand, Wallace said. At this time, the company is not accepting new clients as it is focused on meeting the needs of existing accounts.
“Business is very strong,” Wallace said. “It’s strong for us, it’s strong for all manufacturers. The huge problem is the supply side of getting the product. “
Windows take 6 to 12 weeks longer because of the backlog, he said, and there are also delays with other things that are considered joinery, like doors and interior trim.
“The builders are not able to finish the houses in the usual time frame” because they are not able to get certain items quickly, Wallace said.
‘OFF THE CARDS’
While those looking to build on an acre or more may find the land reasonably priced, Pointe du Bois has added an additional $ 24,000 to the cost of an average new single-family home since last April, according to the National Association. home builders. The additional costs are even higher for larger homes and those with more upscale amenities.
“It’s crazy. The prices are just off the charts,” Wallace said.
The Henson executive explained that when COVID-19 hit, sawmills and related companies laid off and laid off workers on the assumption that demand for their product would drop dramatically. Instead, the opposite has happened.
“People stayed home and spent money on renovation projects because they couldn’t travel,” he said. “When sawmills had to run at full capacity, they weren’t. When they tried to get back to full capacity, they had a tough time. “
Wallace said that as factories fell further and further behind, prices skyrocketed.
The cost of the Waferboard, or oriented strand board (OSB) wood product – “one of the big items used in new construction” – has increased by more than 300% since COVID-19 hit, has Wallace said.
Couto said copper, concrete and steel rebar are also seeing “significant increases” and there are sometimes delays with the devices, which are often handed over for inspection.
“Everyone is in the same position,” Couto said of his fellow home builders across the country. “Everyone faces some sort of supply chain problem.”
Couto said that a year and a half ago, a $ 400,000 house built by his company would involve about $ 35,000 of lumber. Today, that same amount of lumber costs over $ 80,000 – and continues to rise, turning out to be a “headwind” that causes some customers to delay construction or reduce the square footage of their homes.
Will Steed of Will Steed Homes, who has been building custom homes in and around Hood County for 22 years, said most people don’t realize how bank ratings are affected.
“For homeowners who need construction loans to build their homes, the appraisal of their new construction has been lower than the actual cost of building the home since the start of the lumber crisis around mid-year. 2020, ”he said. “It made it harder for homeowners to get loans and for some it made quality construction finance out of reach.”
Steed said that in some cases the houses are 30% higher than they would have been if they had been built a year ago.
“The higher material costs are not at the manufacturer’s level, they are at the producer level, so we as builders and owners have to deal with some unpleasant consequences of these higher prices when it seems like producers are happy to maintain the status quo, “he said.
Steed continued, “As far as my business is concerned, we will never sacrifice structure or energy efficiency, so we have to rethink luxury items such as outdoor kitchens and fireplaces to at least make up part of the difference. Instead of building these elements during construction, we set up the rough ones for later addition. And until we are able to produce more wood and skilled labor or reduce demand, I fear the costs will remain high. “
TAKE A HIT
Couto said his business is currently “eating” between $ 15,000 and $ 18,000 per house. He explained that prices are locked in once a customer signs a contract, but the cost of materials continues to rise during the construction process.
“We’re really busy, but that doesn’t necessarily reflect our bottom line,” he said. “We are suffering tremendous financial consequences.”
Wallace said supply chain issues have caused some companies to accept a “force majeure”.
Force majeure is a clause included in commercial contracts to remove liability for natural and unavoidable disasters that cause disruption and inability to fulfill obligations.
In addition, the United States is dependent on other countries for many products used in the lumber industry and these countries are “grappling with violence” with COVID and lagging behind in production, which has resulted in a sharp increase in costs, said Wallace.
“We are on an allocation on so many points that we have had to stop taking new business,” he said. “Construction remains robust with new or resale homes selling quickly and sometimes above asking price.”
According to the LBM Journal, which describes itself as the leading media company serving lumber yards, building material distributors, wholesalers, manufacturers and service providers, over a four-week period that s Ended March 21, 39% of homes in 400 US metropolitan areas sold above their list price, “a record high and 1.9 percentage points higher than a year earlier.”
Wallace said, “With the struggling supply chain in our industry, the current pace of supply and demand cannot be sustained. Demand must stop for about a month to allow supply to catch up. In reality, this won’t happen, so I don’t see any price drop for the foreseeable future. “
Steed is more optimistic. He hopes things will improve before the end of the year.
“I know that the National Home Builders Association is lobbying the current administration to get suppliers and factories to increase production, and I sincerely hope they will be successful,” he said. I also hope the administration will consider further reducing the tariffs on Canadian softwood that were put in place in 2017. With inflation looming and rising interest rates, we may also see demand pick up. blows later this year.