Even as homebuilders work to bridge the gap between housing supply and demand, the imbalance that surfaced in 2021 appears to be rolling right into 2022. In November 2021 (the most recent data available), the supply of homes for sale nationwide as a percentage of occupied residential inventory remained near historic lows at 1.19 percent.
That means just 119 in every 10,000 homes were for sale, much lower than the historical average of 2.5%, according to HousingWire Magazine. “Homebuilders responded to the shortage of homes for sale, accelerating new home construction, even as they face severe supply-side challenges, including rising building material costs and supply-chain bottlenecks, a lack of affordable lots, and difficulty in finding skilled labor,” First American’s Mark Fleming writes.
“Many of these supply-side challenges facing builders existed prior to the pandemic but have worsened considerably over the course of the pandemic,” he adds. “However, the underbuilding and resulting accumulation of housing stock ‘deficits’ relative to growing housing demand preceded the pandemic by several years.”
Fewer Homes on the Market
The ongoing supply chain and material shortages haven’t helped the situation much and in fact have exacerbated the housing shortage on some fronts. With everything from semiconductors to electronic components to lumber being in short supply at some point during the year, the bottlenecks found their way into the housing supply chain. This, in turn, throttled growth in new construction and reduced the number of homes available on the market.
Existing construction suffered similar issues last year and continues to remain in short supply in 2022. According to the United States Department of Housing and Urban Development (HUD), the US was between five and 6.8 million housing units short going into 2022, with much of the dearth concentrated in the affordable housing sector, RISMedia reports.
Ongoing Hiring Struggles
The persistent labor shortage is in part to blame for some of the supply chain shortages that are impacting the housing market right now. Better Homes & Gardens says sawmills in particular have struggled with production amid ongoing staffing issues. This has not only pushed lumber prices higher, but it has also throttled the sawmills’ ability to meet demand for their products.
“Producers are attempting to boost productivity at mills, but most are experiencing manpower shortages,” one industry expert told BH&G. “Factories have been disrupted by outbreaks of COVID-19 among production personnel. Mills have a hard time finding new employees as well.”
The publication says that the cost of transporting lumber has also increased in recent months thanks to rising fuel costs and the truck driver shortage.
“Like other industries experiencing labor challenges, the trucking industry has been struggling to find qualified drivers and has had to increase the wages it pays,” BH&G adds. “All of these pressures are reflected in the sticker price for lumber.”
Managing Higher Prices
Despite the ongoing challenges and promises of more obstacles in 2022, homebuilder confidence remained high going into 2022, according to CNBC. Builder sentiment in the single-family housing market rose one point to 84 in December, on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Anything over 50 is considered positive, and that was the fourth consecutive increase, CNBC adds.
“The increase comes despite concerns over inflation, supply-chain disruptions and an ongoing labor shortage,” it says. “Prices for wallboard, steel, aluminum and plastic construction products rose sharply in November, according to the producer price index.”
Thinking Out of the Box
To companies that are working through the current housing supply chain issues and planning ahead for the rest of 2022, Georgia Tech’s Pardis Pishdad-Bozorgi suggests exploring innovative and alternative delivery methods; laying out their plans early in the building process; and ordering critical supplies well in advance.
Companies should also factor their logistics and transportation approaches into those early planning sessions, knowing that issues like port congestion, container shortages and labor constraints are also making it harder for goods to get from point A to point B in an affordable and timely manner.
With steel and bar joists both in short supply right now, Pishdad-Bozorgi also tells companies to think about whether they should pay more for a more innovative or even greener (e.g., those that are salvaged from an existing structure) materials instead.
“We may have used certain products just because we always used them,” he said, “but when it comes down to multidisciplinary team brainstorming on other alternatives, the industry can explore and find solutions that may work that they may not have experienced before if it were not because of these constraints.”
Antonio Soda, Head of Vertical Market, Industrial, Region Americas, DB Schenker said, “Every element of the home construction supply chain is at stress point right now, from raw housing materials to tools required for construction, to interior design, control devises and home appliances. The demand is high, so the industry needs experts on the logistics side to forward plan and help meet client expectations. That’s what we specialize at DB Schenker.”