Just like resale, the new homes market is seeing increased demand resulting in low inventory.
With that increased demand, builders are experiencing supply chain issues, labor and material shortages, rising material costs, and increased processing time from the cities for plan approvals and permits.
As representatives of the builder, our job is to set the expectation for the buyer and the buyer’s agent. Here are two common questions in relation to that issue.
- Why is it taking so long for my buyer’s house to be completed?
Pre-pandemic, production builders might have offered 120-day delivery timeframes. Those timeframes have increased to 210 days. For one, the permitting and plan approval process with the municipalities are taking longer. What used to be a two or three-day process is now a two-to- four-week process, at a minimum. Calling in an inspection for the next day is no longer an option. Rather, plan for three to nine days.
As if that wasn’t enough, it is taking longer to receive the supplies and materials needed to build the house. Here are just a few examples of increased lead-times for materials:
- Windows: 15 to 20 weeks
- Appliances: 16 weeks (One builder told me of a four-month wait for Viking appliances!)
- Cabinets: Eight weeks
- Trusses: Five to six weeks
It might be frustrating for your buyer when the builder requires them to make all their selections before their house breaks ground or to learn the builder has already made the exterior color selections. We understand making personalized selections is the fun part of building a new home.
However, if the builders wait for the buyers to make the selections, it delays the process. We understand your buyer might want to make changes during the construction process. I’ve said this to buyers so many times, I hear myself say it in my sleep. Every time your buyer wants to make a change, the process STOPS. One minor change causes a ripple effect scheduling the trades, not to mention increasing delivery time. If your buyer wants to change their cabinets, the builder must place a new order, which means eight more weeks added to the delivery date.
- Why can’t the site agent tell me a price today for a house starting in three to six months?
According to a recent article published by the National Association of Home Builders (NAHB), the cost of lumber is up more than 300% since April 2020: “A year later, based on Random Lengths prices reported on April 23, 2021, the fully phased-in costs have risen to $48,136 for the softwood lumber products in an average single-family, and $17,220 for the products in an average multifamily, home.”
Lumber supply levels fell as a result of Covid restrictions limiting production from the sawmills. Meanwhile, home renovations and increased builder production from a lack of available home inventory raised the demand for lumber.
If your buyer’s house was already under contract last spring and under construction, there’s a good chance the builder “ate” that cost increase. Builders are adjusting their pricing to stay in line with the rising material costs. If they don’t, they will be out of business.
The site agents would love to nail down pricing for your buyer, but their builders might not be in a position to give them pricing. Some of the builders I’ve spoken with have said they would not release pricing until they are ready to order lumber and know their lumber costs.
NAHB is urging the Biden administration and lawmakers to find remedies to boost production and end the tariffs on Canadian lumber imports. Lumber isn’t the only supply issue. Builders are feeling price increases from window, appliance, and plumbing suppliers as well.
An April 2021 Zelman & Associates homebuilder survey reported nationally, “64% of communities now limiting sales” while builders “regain more visibility into costs and margins while preventing backlogs from getting too far extended.”
We are in this together. We’re adjusting to the new cycle times and rapid price increases. It is our job to set the expectation with you, our much-valued buyer’s agents, and your buyer. At some point, things will settle down and we’ll be bugging you to bring your buyers to our sites.
By: Monique McClellan
Chair New Homes Council, Hampton Roads Realtors Association
Research Manager, Residential Data Bank
Realtor & Sales Manager, Rose & Womble Realty Co.