Home builders

Lumber shortage is a crisis for Michigan home builders and their customers

However, he said, “we have defined the exact wood requirements on a (house) package, and we are not ordering exactly what we need.”

Small builders would feel the supply squeeze sooner, Neubecker said, and could face longer construction times if they cannot source materials.

On the other side of a lumber purchase, Mans Lumber receives lumber allowances from its suppliers based on the size of its business and annual sales, said Doug Mans.

“There is only a limited amount of product that we can order, although we want more,” he said. Le Mans places limits on purchases, he said, “which I have never had to do before”.

Seek help from the government

The situation is the number one agenda item for the National Association of Home Builders, as it features a virtual lobby day for members with their local representatives in Congress on May 3.

The national trade association signed a March 12 letter to US Secretary of Commerce Gina Raimondo asking her to examine the lumber supply chain, “to identify the causes of high prices and supply constraints, and to seek immediate remedies that will increase production ”.

“The potential for housing and construction to grow and run the economy is limited as long as wood remains expensive and scarce, and the ramifications for job growth are significant,” said the letter, which was also signed by 34 other national industrial groups representing real. real estate, financial and non-profit organizations.

Filka, of the Michigan Builders Group, said he believed the situation would not be resolved without the attention of the federal government. Its members are speculating on “price gouging and collusion,” he said, although they could not find evidence of it. However, trade issues between the US and Canadian lumber industries have persisted for years, Filka said, and any political solution is likely to come at the federal level.

In Michigan, cost increases are keeping housing affordability – from rental to new construction – in the spotlight, Filka said, as new bipartisan housing legislation is introduced, including measures that would create accessible housing neighborhoods and expand neighborhood business areas.

The average price of new construction in Michigan was $ 330,000 in 2019. In comparison, the median household income that year was $ 59,584, which is enough for a person with no other debt to buy a home in that year. price of about $ 220,000.

“The biggest problem in our industry is creating the ability to have new, workable housing options,” said Neubecker of Robertson Brothers.

“You just can’t continue to pass the costs on to consumers,” he said. “People buy houses with monthly payments. As you increase the prices, you are able to sell to a smaller and smaller group of potential residents.

Rising costs over the past year have had a direct impact on low-to-moderate-income homebuyers in Michigan, said Katie Bach, spokesperson for the Michigan State Housing Development Authority.

“Due to the rising costs,” said Bach, “buyers who may have had the idea of ​​purchasing new construction find them out of reach.”

These buyers, in turn, look to existing homes, but also encounter skyrocketing prices there. The average 2020 selling price statewide was $ 220,916, a 12% increase over the previous year due, in part, to a half-drop in listings at the start of the year. the year.

“The wood price problem is compounded by the current seller’s market, which is experiencing extremely low inventories and multiple buyers bidding on most properties, with sellers accepting cash offers and exceeding list prices for their homes. “said Bach.

People who look at the lower end of the market find it difficult to “compete in this type of real estate environment”.

No one in the construction industry knows how much lumber costs will go up, or when they will start to go down.

“It’s not sustainable,” said Kligman of Superb Custom Homes. But as more supplies become available, prices are expected to stabilize, he said.

In the meantime, builders are drafting contracts with indexation clauses to cover possible further increases in lumber and hope prices stabilize this year.

“It’s not a normal market right now,” Filka said.


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