It is no secret that there are major supply chain affecting an abundance of materials, including critical residential construction materials. These homebuilding shortages have made national headlines due to their impact on the economy and the housing market, and homebuilders and renovation companies have a backlog of projects due to increased demand with the added pressure of not often finding basic materials needed to complete the project.
The National Association of Home Builders says that in 2021, more than 90% of builders reported delays and material shortages and there is no indication that conditions will improve significantly in 2022. The delays and shortages are not just for a handful of items but several including but not limited to wood paneling, framing lumber, metal trusses, windows, appliances and more. What does this mean for today’s homebuyers and their expectations?
Knowing what you want for finishes, such as countertops and cabinets, is beneficial before calling a contractor because these items can have a big impact on the project’s cost. It is much easier and smoother for a contractor to write a bid with solid decisions made by the homeowner. Additionally, the building industry as a whole has been forced to plan in advance to avoid last-minute rushes for products or products arriving when they cannot be installed.
It may be necessary to try alternative materials or finishes based upon availability, cost, and lead time. Ultimately it comes down to communication between the homeowner and contractor to assess priorities, whether it be meeting a time deadline or staying on budget.
Perhaps it was wishful thinking that the cost increases seen in the first half of 2021 would drop significantly; however, basic materials included in renovation projects such as drywall and paint have increased respectively at 7.5% and 14.5%; in the first 5 months of 2022, which is 23% - 50% over the prior year. Therefore, it is important to anticipate higher costs in today’s market. With inflation rates at their highest in decades, consumers can expect to see increased costs on several materials versus just a few. In January 2022, the consumer price index (CPI) was up 7.5% over the prior year, the largest increase seen since 1982.
It is not uncommon that renovation timelines are delayed due to factors such as backlogged city permit requests, a shortage of subcontractors, or backordered materials and shipping delays. For example, where it used to take six to eight months to build a home, now it takes eight to 10 months. These delays are consistent amongst renovation projects as well.
Milissa Malloy is an AVP, Strategic Business Relations Manager, Chubb Personal Risk Services.
The opinions and positions expressed are the authors’ own and not those of Chubb. The information and/ or data provided herein is for informational purposes only and is not a substitute for professional advice. Insurance coverage is subject to the language of the policies as issued.