Residential Real Estate

Demand and challenges soaring: Construction industry tries to keep up with housing market despite rising prices and supply chain shortages

By Charity Brandsma, posted 3 months ago

Amid the pandemic for the past two years, one of the many industries facing a
myriad of changes and challenges is the construction industry. 

Though the demand for homes continues to grow, construction businesses are hit on all sides, dealing with rising prices of materials, delays in imported materials and a shortage of laborers to get jobs done.

According to the National Association of Homebuilders, in their December 2021 survey, the cost of building has risen and become a serious challenge for 96 percent of builders, the majority of whom predict the problem to continue into the year 2022. Because the rise in material costs has not changed the demand for new builds, it continues to create a backup of construction orders.
The Fayetteville area boasts much movement in the housing industry with Fort Bragg bringing in new families who go through seasons of buying, selling and building. Though the housing industry tends to thrive in this area, the past two years have brought an incredible increase in demand.
Likely the cause of interest rates being historically low, the building industry has worked tirelessly to try to meet the greater influx of new construction requests – a challenger easier said than done. Unfortunately, prices of materials have also risen,
making the cost of new construction much greater than in the past.
Though price changes don’t seem to deter many people from their pursuit of a newly built home, it has been a marked change for construction companies, creating an unpredictable future for the home market. At some point, the cost of building
a home may outweigh the perceived value of the home. Wells Alderman, co-owner of A&G Residential, explains the housing demand, showing the specific abnormality in the Fayetteville area.

“First off, there is still a high demand and low inventory right now. In the Fayetteville MLS there should be about 3000 active listings, and right now [they’re] under 500. So, there is no inventory,” he said. “One of the biggest reasons for that is that interest rates have been historically low – lower than they’ve ever been ... Everyone wants to buy a house, and when everyone wants to buy a house and there's no inventory, we can’t build fast enough. That’s been the case for the past 18 months. We are the busiest we have ever been this month.”

While this demand would normally be a positive point, it has exacerbated an already challenging time where everything, from parts to permits, is experiencing delays. The issue is seen at an international and national level, as delays in construction parts vary weekly but force construction companies to wait on any further project progress until those parts can be shipped.
The NAHB surveyed builders in May of 2021, and found 95 percent responded, acknowledging a severe appliance shortage -- the highest seen since 1990. The shortage would include framing lumber, plywood, windows and doors. These “supply

chain bottlenecks,” as the Association of General Contractors calls it, has taken its toll, leaving builders with little they can do to fix the delays.
Alderman further explains the problem, indicating it is not just supplies themselves but even the permits to begin building which are backlogged, pointing to the lack of
employees available to do the larger amount of work in permit offices.
“There is more building going on right now, so the more building the more work. They are bogged down just like everyone else is bogged down. Everyone is out because COVID is going through their office,” he said.

Alderman went on to explain on a larger level how, in his view, COVID has been a huge reason for delays in materials and lack of employees on
the job.

“COVID has caused the majority of the problems. It just trickles down from there because plants and manufacturing facilities are shutting down. It’s caused delays in materials.... When you usually have X number of people on the job in the trade, it’s

now cut in half. In a nutshell, any- thing that everyone is dealing with in COVID applies to us,” Alderman explained.
Earlier this month, Alderman shared with Greater Fayetteville Business Journal that, between the shortage of workers and rising costs of supplies, it can take eight months to build a house now. Laying the foundation of a house, he gave for an example of the rising costs, has increased from approximately $12,000 to $30,000.
Ken Simonson, the AGC chief economist explained in a recent report, “Contractors are struggling to fill positions as potential workers opt out of the labor market or choose other industries. ... In addition, soaring materials costs and unpredictable delivery times are delaying projects and holding back employment gains.”

The Associated General Contractors of America released an analysis showing construction employment going down by 5,000 jobs between December 2021 and January 2022, while the hourly pay actually rose.
The current delay in parts isn’t a singular issue to construction but can be seen in the lack of cars filling car sale lots and the rise of even certain food prices. Anything
being imported comes at the risk of great delay, and it would seem business owners and customers alike are learning to live within the new unknown.
The great question for many as they continue to wade through the uncertainty of unprecedented times, is when will it end. With no answer obviously remaining, the greater Fayetteville area must continue to adapt to a slower pace of life, accepting delays in most areas of the housing industry.
Wells Alderman’s parting words on the subject are simple: It’s the world we live in, and we must continue to patiently live in it together.

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