The housing industry is still experiencing the spending frenzy that started in the past year due to historic low mortgage rates.
Throughout 2020, despite the economic recession and global public health crisis, about 6.5 million homes were sold across the United States. More households took out loans or used their savings to fund major home renovation projects.
The demand was so high that it left many contractors very busy. Now that life is returning to normal thanks to widespread vaccination, the demand for new homes and renovation services has slowed down, but it remains high.
In fact, many contractors are facing backlogs, and homeowners have to wait a long time to start and complete their remodeling projects.
Trouble in the Industry
Builders have been very busy in the past two years. While the U.S. and the rest of the world imposed movement restrictions to curb the spread of the virus, construction was deemed essential and, therefore, permitted to operate. Yet, so many factors have slowed activity in the construction sector.
First, there was a problem of material shortage. Because of border closures, infection outbreaks, and pandemic restriction, with increased demand from all over the world, basic building materials such as steel and lumber became harder to procure.
There is also an ongoing shortage of skilled workers in construction, a problem that was exacerbated by the pandemic. This started years before when, during the Great Recession, construction laborers walked away to find jobs in other fields. The waning interest in jobs in construction and an aging workforce has led to a “crisis.” News reports revealed that the U.S. needs to hire 740,000 more construction workers per year over the next three years to meet the demand.
These factors are preventing builders from accelerating project completion. Because there is so much demand for building and renovation, their current staff cannot respond to every call. While it is easy to find heavy equipment such as backhoe loaders for sale, the material used to build structures and the people who will operate these machines are hard to come by.
A Long Waiting List
A study from May 2021 revealed that almost 50 percent of all home improvement projects across the country had been delayed. Many companies are struggling to keep up with the surge with home improvement projects, and backlogs have been piling up.
Homeowners can expect two months of delay on average before home improvement projects begin.
However, they can be stalled halfway through even when projects have started. The supply shortage continues to be a problem for most parts of the world. And it is not just building materials. Common household appliances such as refrigerators, washing machines and dryers, heating and air conditioning systems, and others are also experiencing shortages due to the scarcity of computer chips.
Contractors have had to pause work on one project and switch to another in the meantime because of a lack of materials. There is a long waitlist, too, for the delivery of appliances. Homeowners may have to wait a month or more for their dishwasher to arrive.
Unfortunately, the supply chain is hard to predict. No one can foresee whether new shipments of building materials and home appliances will arrive or disappear from shelves. Contractors cannot schedule their activity around which materials and appliances are currently available.
The demand and the shortage of supplies lead to one thing: raising costs. Different building materials have, in the past year, soared in prices. Lumber, for example, is a basic component for every home project, but using it will add tens of thousands to the final cost of the remodeling.
Homeowners should expect to wait more and pay more for their major renovation projects. As companies struggle to keep up with the high demand with limited staff and building supplies, contractors will have to ask more. There is nothing that contractors can do. The projects will be delayed, and the cost will be higher than normal because of factors that no one can control. In some cases, companies had to absorb the sudden increase in material costs.
Experts are not optimistic that the shortage will improve anytime soon, both in labor and in supplies. The pandemic is still raging in many countries worldwide, and the lack of people who want to work in construction remains low.
The construction industry was in a unique position where the demand remained high throughout the pandemic. However, contractors are struggling because of shortages in materials and labor. Homeowners will experience long delays and higher costs for home renovation projects for the foreseeable future.