Published October 26th, 2021 at 6:00 AM
Demand for housing has skyrocketed during the pandemic, but homebuilders and remodelers haven’t caught up because of labor shortages and long wait times for raw materials, tripling the timeline of some housing projects.
As people transitioned to working from home and avoided going out in public early in the pandemic, interest in housing spiked. Americans wanted additional space and other upgrades as more of their lives shifted to their homes.
In the initial demand surge, the estimated number of active homebuyers increased by 67.8% from March to June 2020, according to the Federal Reserve Bank.
Demand remains strong today. The Case-Shiller Index, which measures U.S. home prices, saw record annual growth of 19.7% for July, the latest month for which the index is available. It marked the fourth consecutive month that annual growth in home prices set a new record.
Larry Wigger Jr. is a University of Missouri-Kansas City supply chain management professor and has managed large residential developments. He said the pandemic shift to more time spent at home ignited an increase in demand for a wide range of reasons.
“(People) wanted home offices, they wanted to entertain, they wanted outdoor play spaces, they wanted a different home, they wanted to live in a rural community and get out of the urban centers,” he said. “All this is driving home construction activity, whether it’s new homes and new communities because people want to relocate, or whether it’s simply remodeling.”
While homeowners and homebuyers have lined up to remodel existing homes or purchase new ones, they have been forced to wait for months to start and finish projects, in part because the supply of housing isn’t catching up. That shortage predated the pandemic, but it has grown since the onset of COVID-19.
There was already a supply shortage of 3.84 million homes at the beginning of 2019, according to Realtor.com. The supply deficit increased to 5.24 million by June 2021, a jump of 36.4% in two years.
Labor shortages are partially to blame for housing supply not catching up to demand.
Wigger said there are shortages at multiple levels of the homebuilding supply chain, including truck drivers and workers who help package and transport products for the house.
Further down the supply chain are laborers like carpenters and electricians who use those products to construct homes. There haven’t been enough of those workers for the last decade.
Wigger said one reason for these shortages is a growing cultural trend in the U.S. of valuing white-collar jobs and degrees from four-year colleges, which excludes trade workers like carpenters, electricians and plumbers.
“We haven’t held up good, honest, hard work — which sometimes involves manual labor — with the respect and dignity and esteem that we should,” Wigger said.
Meanwhile, homebuilders are getting older. A youthful workforce can be a sign that an industry is built to have a steady stream of labor in the future, but the average age of construction workers is climbing. It increased from 36 years old to nearly 43 years old between 1985 and 2015, according to a study from the International Journal of Environmental Research and Medicine.
Orie Hemme, a sales and business consultant at Columbia-based homebuilding company Hemme Construction, said it has been difficult to find younger workers.
“When your average age is that high, you just don’t have the young people coming in to replace people who are retiring,” Hemme said.
While skilled labor shortages are making it harder to build and renovate homes, waiting times for materials are also causing delays. The housing supply chain has been hit hard by the pandemic and labor shortages because it is inter-connected with a wide range of industries and products.
Anthony Ross, a University of Missouri management professor who specializes in supply chain management, uses the hypothetical of a homebuyer needing a wood plank for a beam in a house to show the complexity of the housing supply chain.
In the first step, lumber companies go to a forest and extract the wood and take it to a lumber mill.
“And then you have further downstream supply chain participants that take that process log and then cut it into different sizes, different formats, even treat it to prevent different types of infestations,” Ross said. “Then you have trucks that then move that lumber again to maybe a distributor or a wholesaler of lumber.”
After that, the wood still needs to be purchased by the homebuilding company and shipped out to the house as a beam.
When a single participant is disrupted in this process, it leads to inefficiency and longer wait times for materials.
The Associated General Contractors of America’s annual workforce survey, released in September, showed 88% of contractors are experiencing project delays.
Hemme said that a project that took three months before the pandemic takes around nine months today. For instance, Hemme said, his company is dealing with shortages in cabinets.
“Those are taking 16 to 17 weeks on a lot of the cabinets, and we switch manufacturers, but then so does every other builder in the United States,” Hemme said. “And then that manufacturer gets bogged down, and then it goes from an eight-week lead time to (12 weeks).”
Barry Roewe owns TrueSon Exteriors, a Columbia-based housing contractor. He said windows used to take three to five weeks to ship, but that changed virtually overnight.
“The next day we get an email, and it’s 16 weeks,” Roewe said. “So what do we tell our customers?”
Roewe said suppliers limited their inventory and product diversity in order to reduce wait times and reduce costs. However, contractors scaling down their range of products limits choice for homeowners and homebuyers.
While homebuilders like Hemme and Roewe said they are confident that waiting times for raw materials will decrease as the pandemic winds down, experts expect the skilled labor shortage will continue to be a problem.
To counter this obstacle, Roewe said he has hired more builders as full-time employees and worked to establish relationships with subcontractors.
“We have relationships with (our) subcontractors to where they almost work primarily for us,” Roewe said, “so we can control their schedule a little bit more than the traditional subcontractor.”
Roewe said he has approached hiring with a philosophy of over-recruiting to make sure his company can keep up with workers leaving and demand increasing.