Home builders

Overcoming challenges: Homebuilders continue to manage backlogs, high material prices

While homebuilders have been dealing with project backlogs for most of last year, local businesses expect demand for new home construction to not decline in 2022.

The challenges posed over the past year to residential builders were many, said Tyler Bussell, co-owner of Bussell Building Inc. Material price increases, labor availability and harsh winter weather conditions at first quarter of the year all contributed to what Bussell called “by far the toughest residential construction year” the company has had in its 22-year history.

Bussell said the company is mostly caught up in its backlog, but was briefly behind by nearly 70 homes last summer. Material availability and prices, particularly for lumber, which reached an all-time high of $1,670.50 per thousand board feet in May 2021 – an increase of approximately 35% over the rate current – ​​were a major contributor. As costs rose, it was difficult to get materials and contractors on site. It was a circumstance he said the company had never encountered to this degree.

“It got to the point where I was offering to pay the contractors more than I had ever paid and they still turned me down,” he said, adding that many had told him they had to. struggling to find enough staff to handle their heavy workload.

These ingredients led to missed project deadlines, Bussell said.

“It was something we never did. We always met our deadlines,” he said. “If we were late, it would be by a week or so. months behind closings.

Bussell said the company managed to scale up in the second half of the year to complete 119 homes. However, this is at the low end of its annual average, which has already reached 140, he said.

Be patient
The housing backlog for Ryan Green, owner of First Choice Custom Homes, is on a much smaller scale. While his 12-year-old company builds fully custom homes for clients with a staff of six, the project typically totals between 12 and 20 homes a year. Last year it fell below that average to 11 homes, largely due to supply chain issues.

He pointed to the wait time for windows as a major factor in the longer lead time to complete a project. What used to take two to three weeks to receive now stretches to three to four months.

“We have to order windows as soon as we sign a contract,” he said, noting that the houses he builds typically cost between $400,000 and $800,000. “Then we wait many more times for the windows at the time of rough inspection when we are ready for insulation and drywall.”

Like Bussell, he said various factors were delaying completion dates.

“Part of it is the supply chain,” he said. “It’s partly because our contractors are so busy that it’s hard to get them on schedule and getting there and making sure they’re done in a timely manner.”

Green stresses his clients’ patience, noting that it currently takes First Choice eight to 10 months to build a home. That’s up from an average of five to eight months two years ago.

Lumber prices are making it harder to price homes, builders say. After lumber hit a record high in May, it fell to $456.20 in August. However, it is now back above $1,100, according to financial data and software firm FactSet Research Systems Inc.

“We try to keep our customers informed and be as close as possible,” Green said. “There is so much price volatility that it could potentially be higher.”

Bussell said he doesn’t expect lumber prices to improve for 2022, but he doesn’t know where it will hit its next peak.

“Our response to this is very different from last year,” Bussell said of the supply chain and pricing issues. “We stay ahead of things. We always take pre-sold homes but we limit the number of what we take. We don’t want to put buyers in a position to be disappointed.

Patience is also a message sent to those who contact the Home Builders Association of Greater Springfield, said general manager Dori Grinder.

“Demand is still very high,” she said, noting that builders, suppliers and owners are all frustrated with supply chain and pricing issues. “While honestly it has been the weirdest two years anyone has ever seen in their career, it has still been fantastic for business.”

New home sales in the United States posted a solid advance in November, boosted by buyer demand, low inventory of existing homes and low interest rates. Sales of newly built single-family homes rose 12.4% from the October total to a seasonally adjusted annual rate of 744,000. That’s the highest rate in seven months, according to data from the U.S. Department of Housing and Urban Development and the US Census Bureau.

Additionally, the median selling price rose to $416,900 in November from the $408,700 posted price in October. That’s an 18.8% year-over-year increase.

Median prices in Springfield jumped 12.9% from a year earlier to $197,500 in November, according to Realtor.com.

Grinder said the continued rise in home prices is a source of frustration for HBA. This is a reflection of the rising cost of supplies driving up house prices, she said.

“The pinch happens with first-time home buyers. They are going to be out of the market,” she said. “There’s just a higher percentage of people who won’t be able to buy because of the prices. It’s incredibly frustrating.

New Year’s boost
Although snow and record cold temperatures that hit the Ozarks last winter contributed to delays for homebuilders, Bussell said abnormally warm weather in December boosted his business.

He said the company has foundations completed or underway on about 75 homes and nearly 40 framed homes now in the Springfield area.

“That puts us in a really good position for the spring,” Bussell said, adding that he expects to top 150 units this year, which would be a company record.

Despite strong demand, the region’s largest single-family home builders, according to research by the Springfield Business Journal, built 413 homes in 2021, down one less than a year earlier.

Green said First Choice was aiming to build 15 to 18 homes this year – a number he admits could be affected by ongoing supply chain issues.

“I keep thinking it will stabilize and go back to normal. But it seems to me that until they solve the supply chain problem, we are going to face these challenges, ”he said, noting that significant delays continue at the ports of US shipping. “We could face these challenges over the next two years, and we’re sort of planning accordingly.”