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Product Shortages Causing Builders to Raise Prices, Preorder

It’s no secret that building materials are in short supply and the price of lumber and other supplies has increased significantly. In May 2021, the National Association of Home Builders (NAHB) surveyed builders in its annual Housing Market Index. Builders reported an average price increase for building materials of 26 percent from the previous year. That percent increase shatters the previous record of a 6.1 percent increase in 2017.

In a follow up survey in June, NAHB asked single-family builders how their businesses have reacted to the price increases and supply shortages. Nearly 62 percent of respondents said they were raising prices on their homes and 59 percent have moved to pre-ordering materials. Other top responses included implementing price escalation clauses, waiting late in the building process to list spec homes and engaging in cost-plus pricing.

The survey also found that 17 percent of homebuilders are considering switching to steel instead of wood framing because of the costs. 16 percent of respondents said they are considering switching to structural insulated panels, 14 percent to insulated concrete forms and 8 percent to concrete masonry.

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