HOUSTON – (By Ken Pinto for Realty News Report) – As home sales in Texas and beyond continue to outpace the homebuilding industry’s build capacity, demand has also spurred huge bottlenecks in construction. bottleneck in the construction supply chain, resulting in skyrocketing costs, decreased material availability, and general delivery days.
According to the National Association of Home Builders, building material prices in March 2022 were up 20.4% year-over-year and 33% since the start of the pandemic. Beyond the reported increase of more than 200% in lumber, copper wire increased by 565%, aluminum wire by 207% and steel plate by 89%.
The pressure on the supply chain is extremely broad and goes well beyond material expenditure. Allow me to illustrate:
Houston is home to 92% of U.S. petrochemical production that was crippled by the power outages and sub-zero temperatures that battered the state in February 2021. Texas’ petroleum industry is,more than a year later, just beginning to feel relief. Oil is not exclusively a source of energy for heating and fuel. Many petrochemical by-products used in construction include paint, acrylic stucco, plastic pipe, house wrap, vinyl windows, grout, composite countertops, switch cover plates, toilet seats, roof shingles and anything made with an adhesive (wood flooring, plywood, composite siding, cabinets and doors). Although capacity has been restored at petrochemical plants, an allocation still exists to sort out the backlog and continued high demand.
Material price increases are further exacerbated by long lead times. What was predictable is no longer. The previous lead time for window orders was 7-10 days and now it is 12-30 days. weeks. Garage doors could be turned in a day, but now in three months. As a result, construction of new homes, previously plotted from foundation to completion over a period of 95 working days or six months, is now 8-12 months.
Resolving a single bottleneck only will not change the final result. Efforts to resolve them are heroic, but none will be successful until past approaches are changed to create a more sustainable path – something unfortunately cannot be done overnight. Other related concerns include:
- Shipment Blocked: Shipping containers, now hard to find, are also limited in availability as many containers are stuck in the wrong place (in other countries, on ships, trains, or stuck in ports or customs), disrupting the supply chain and global trade. . Even previously used containers considered as waste have been recycled in swimming poolshydroponic gardens or mini-houses.
- Access to axles: Equally hard to find are the axles used to transport a shipping container via trucks. Trucks and truck drivers are not only in short supply in the US (60,000 fewer than needed), the shortage is exacerbating supply chain tension and pricing finished goods/materials, costing even more to the consumer (and the manufacturer) in time and money. . In China, the situation is worse. To secure a truck, Chinese manufacturers have to enter a queue with long waits to advance in line and more delays to get a reservation on a container ship. Once these ships arrive in a US port, they wait for unloading for more than two weeks. Even ports operating at capacity are struggling to find space – playing Tetris with newly arriving containers and those scheduled to leave the port.
- Unhappiness at work: People too, whether crew members on a container ship, truck drivers in the United States, factory assembly line workers or dock workers, play an important role in success. or supply chain failure. The start of another COVID lockdown in China shut down factories that supply components and finished goods destined for America. These same challenges exist in the United States where factories are understaffed, even after several rounds of wage and benefit increases.
Even with a cascade of challenges facing them, some builders are managing to keep homebuilding rolling in 2022 like they did in 2019. The difference? In addition to doing things that make them a better customer (fast checkout, easy to deal with, polite, no order changes after submission), they communicate the SKU (stock keeping unit code) request upstream and secure the inventory long before the need asking resellers to set aside stock for them as they arrive, ensuring they have the products they want, when they need them.
I am often asked: “When will everything go back to the way it was? My guess is never. Our industry has changed and homebuilders with the best supply chain management strategies will have the edge over those who continue to order only when they need to. The winners will be those who study delivery times and schedules, strengthen relationships with suppliers and dealers, and predict consumer product demands using historical data, to forecast and plan ahead.
May 2, 2022 – Report on real estate
Ken Pinto is a 40 year veteran of the home building industry and the author of “How much does the milk cost?”
Feature: The Supply Chain Crisis
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Photo: Courtesy of the Port of Houston