Labor risk gets deserved attention as home builders' No. 1 "keeps-me-up-at-night" issue, but not the kind of builder who does the trades work him or herself.
After all, there are a lot of builders who aren't general contractors who bring in 25 or so types of subcontractors to assemble and install materials and products into every new home. Many builders are, in fact, multi-skilled crafts and trades men and women, who actually build the house, maybe calling on services of a brother or cousin the electrician.
Or maybe a builder discovers something rare in the stick-built, site-built world of home construction: progress. An example of that you can find here, where Journal of Light Construction contributor Matt Risinger explores benefits of an off-site-on-site hybrid solution from building supply company BMC, called Ready Frame. Risinger notes:
While precut studs are standard items, a Ready-Frame package now adds the rest of the framing members, bundled, labeled, and off-loaded in order. ... the framing site gets eerily quiet—devoid of saws running and only the sound of nail guns popping off—when using Ready-Frame.
At least when it comes to the framing trades, there's potential here to mitigate labor risk.
Still, a new pain point has arisen, and builders expect it will inflict a whole new level of challenge to their efforts to keep home price tags at a level that can continue to be compelling for long pent-up would-be home buyers. Materials costs.
Questions added to the National Association of Home Builders monthly NAHB/Wells Fargo Housing Market Index survey this past December asked the sample universe of builder respondents to rank 10 "problems" that bedevil them in order, from worst to least worst. Aforementioned, labor risk got the top spot, followed by access to reasonably priced, developed lots. But the factor that shot up from a "less significant" issue in 2016 to a Top 5-ranked one, building materials prices, actually jumped by 25% in intensity, year on year. That's the biggest jump, year to year, of any of the 10 most significant sources of challenge.
Within 60 days, some of their worries burst across the Maginot Line from the fuzzy future to the ready-for-primetime present, as costs for lumber leapt the fences of normal seasonal increases, not a good thing when labor capacity's already stressing input costs, and interest rate increases are doing a heavy number on monthly payment psychology among potential buyers. The NAHB writes of the lumber price hike this way:
Negotiations on a new softwood lumber agreement between the United States and Canada ground to a halt at the end of 2016 and likely are stalled pending the results of an investigation into unfair import practices requested by the U.S. Lumber Coalition.
Any further negotiations on a resolution between the two countries are expected to be on hold until confirmations of a new Secretary of Commerce and a new U.S. Trade Representative.
That leaves home builders – and their customers – caught in the middle and probably looking at price hikes: The Random Lengths Framing Lumber Composite price jumped from $366 on Feb. 3 to $391 on Feb. 10, the greatest weekly gain since August 2003. By Feb. 17, it was up to $405.
Craig Webb, editor of BUILDER sister title ProSales, observes that what's typically a "go-away-in-May" issue could possibly--for four well-outlined reasons--have become a chronic "age of lumber price hikes." Webb writes:
A variety of factors make it likely that we’re entering a multi-year era in which the cost of wood will keep rising for quite a while.
The now-expired Softwood Lumber Agreement challenge could easily be eclipsed amidst the threat of a new raft of border taxes and tariffs attaching to goods and services American builders have grown accustomed to relying on on both the northern and southern boundaries of our national enterprise, not to mention the eastern and west coastlines.
There's got to be an awful lot of consumer spending power growth and an busload of de-regulation to offset the potential hit to costs on both the labor and materials fronts.
The issue here is, stay engaged at all levels, both local and national, with the issues and policies that impact all your "raw materials": people, land, and building products and materials.
