Anyone who has ever owned a house or has thought about remodeling is in for some sticker shock.
High demand and low supply have driven construction and metals prices through the roof. A volatile market seems to be demolishing the hopes of many buyers seeking to purchase, construct, or renovate a home this year. Originally expected to rise at the beginning of this year, housing starts fell from 1.615 million units to 1.580 units since April 2021. Projected completions have fallen by half.
Construction is unable to keep up with supply and demand.
What’s causing this slowdown?
Limited metals and construction materials
As the pandemic gained momentum, many Americans fled the cities and headed to the suburbs for larger outdoor spaces and square footage. Notably, they sought to include a home office that would accommodate their telecommuting.
With demand high and productivity low, construction materials and metals became a sought-after commodity. Even now, gaping holes in productivity exist because of supply chain disruptions here and abroad.
Increased construction material and metals prices
In many instances, rising material costs have made building unfeasible.
The cost of copper, for example, has increased 16% this year. While some homebuilders have decided to forego using copper for ornamental installation, they still use it for building wire, tubes, fittings, and valves. Major appliances like air conditioners, heat pumps, dishwashers, refrigerators, and washer/dryer sets also use copper. The average 2100-square foot single-family home uses a whopping 439 pounds of copper.
Rising construction costs have also made builders reconsider whether to forge ahead or wait out the high prices, letting them eventually fall closer to pre-pandemic levels.
An average newly constructed home can cost an additional $30,000 to build, compared to last year.
The impact on jobs
As the construction industry begins to stabilize, the price of materials will likely decrease as basics such as lumber, steel, and other building materials grow in availability.
The construction industry lost more than a million jobs in the first quarter of 2021. Nonresidential construction, nonbuilding infrastructure jobs, and volume have dropped. However, thanks to residential spending, residential construction has been adding back thousands of jobs each month because the volume is up 14%.
Savvy construction workers may find themselves jumping between nonresidential and residential projects. It’s a shift that could position workers to keep up with the fluctuating demands of today’s world.
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