The NAHB is warning the industry that a shortage of key building materials could jeopardize continued record levels of new home construction in the United States. According to July 2004 results of a NAHB quarterly survey of 250 home builders nationwide, the sector is experiencing shortages of cement, gypsum wallboard, OSB, steel framing, and insulation materials. “Rising wholesale prices of building materials have added $5,000 to $7,000 to the cost of building an average new home, and construction delays caused by supply shortages could translate into further cost increases,” Jerry Howard, executive vice president and CEO of Washington, D.C.–based NAHB, said in a press release announcing the survey results. “Left unchecked, these factors could result in serious disruptions to the housing market.”
Bottlenecked by high demand in Asia and restrictive import duties on Mexican products, cement loomed as the most immediate concern to NAHB, with 41 percent of survey respondents indicating a shortage in their markets. However, short supply of products more common to the pro supplier arena, including gypsum and OSB, is also raising eyebrows among NAHB members: Twenty six percent of survey respondents indicated gypsum shortages in their market, an increase from 11 percent of respondents in October 2003.
“Our volume statewide in Colorado is still steady, but in talking with dealers around the country I know there are some markets that have been in an allocation situation really for the entire year,” confirms Doug Ideker, vice president for Denver-based Gypsum Products, a three-unit drywall specialty distributor serving the front-range builder market in Colorado. “Nationwide, the manufacturers are bumping up against capacity, and I think if we see any additional acceleration in housing permits we could have a problem.”
In the Midwest, Livonia, Mich.–based Livonia Building Materials has yet to feel a tight squeeze on wallboard supply. “We're moving a fair amount of gypsum in our market,” says Mark Wilke, owner of the 16-unit supplier of drywall, metal studs, acoustical ceilings, insulation, and lumber. “I suspect demand is on the increase in the Southeast as well as California and Las Vegas, anywhere construction is just going gangbusters. Builders there may not be getting all of the board that they want, but right now I suspect they are at least getting all the board that they need.”
OSB supply shortages among survey respondents have declined to one-third since peaking last October, when 52 percent of builders polled had difficulty obtaining product. According to NAHB economist Michael Carliner, who oversees the quarterly survey, supply shortages of gypsum, OSB, and insulation are related to capacity issues at the manufacturing level, but indicated that dealers can help by communicating supply issues with contractors. “Suppliers react in different ways to material shortages,” he says. “In some instances it's ‘sell to the highest bidder,' but more often sales of materials in short supply are based on established relationships, and a good supplier relationship will help mitigate the shortages for builders. The best thing suppliers can do is strive to provide reliable information to their contractors so they can plan accordingly.”
Ideker and Wilke also emphasize keeping communication lines open, in particular encouraging accounts to keep dependable subcontractors in the loop about possible supply shortages. According to Wilke, builders who regularly pay their suppliers on 30-day terms also historically face less of a supply squeeze than those contractors stretching payment out to 90 days or beyond.
