Though the housing market faces intense demand, smaller contractors are not reaping the benefits that production builders are. With supply chain disruptions and record-high building materials prices, larger builders can protect themselves from price volatility while smaller ones cannot, says Robert Dietz, chief economist at the National Association of Home Builders. Lennar reported a 61% increase in second-quarter earnings, reports the Wall Street Journal. On the flip side, one small contractor from Detroit says it usually works on 10 projects at a time. It has just two at the moment.
“These are the best of times,” Stuart Miller, executive chairman of Lennar, told analysts last week.
“New-home construction cannot ramp quickly enough to fill the void of the production deficit that has persisted over the past decade,” he said. “Land, labor and supply chain are all limiting factors in the drive to meet current demand. So supply is short and is likely to remain that way for some time to come.”
The surge in demand led to shortages in supplies like roofing materials, appliances and copper wiring. Lumber futures prices in May were more than four times higher than usual, though they have cooled more recently.
Will Alphin, founder of REdesign.build, a high-end design-build firm in Raleigh, N.C., said a quote on a steel package used to be good for 30 days. Now, it is sometimes relevant for only 24 hours. “We’re constantly in motion trying to figure out how to navigate through these things,” Mr. Alphin said.
He said it will take about 12 months to determine whether the demand boom benefited his company. “Will it affect our bottom line as we end up being able to do less work over the course of a year? I don’t know the answer to that yet.”
He said it will take about 12 months to determine whether the demand boom benefited his company. “Will it affect our bottom line as we end up being able to do less work over the course of a year? I don’t know the answer to that yet.”