Housing Supply Chain Issues Show Signs of Resolving

After a rough start to the year, some of the supply chain problems plaguing construction of new housing are showing signs of abating.

Lower housing starts has softened demand, according to a pair of industry watchers, meaning product availability has improved for some products — though others still remain difficult to snag and on longer lead times. And ultimately, those supply chain improvements will ease shortages and tame prices.

“We’re starting to see slight improvements,” said Chris Beard of John Burns Real Estate Consulting. “We’re seeing some dealers saying that some products are coming back to normal. We’re hearing manufacturers themselves say that inventory levels are returning back to somewhat normal. But we have to evaluate, is this normal 2021 normal, where lead times were extended and where there really was an overall shortage/? Or are we talking 2019, pre-COVID normal?”

In conversation with Beard on a recent John Burns Real Estate Consulting podcast, Greg Brooks of the Executive Council on Construction Supply said “it’s going to get better from here,” while noting that supply chain problems still abound, particularly for things like windows, sealants, and the resins that go into engineered wood. But  ”for the most part, we are okay right now,” he says.  ”Lumber itself is still probably twice as high as it was back in 2017, 2018. But we have, I think it is nine new mills that are coming online. And as those new mills come online, they’ve been slow to come online because, guess what, the manufacturers can’t get the parts to build the sawmill. And so that’s all moving slowly, but as that comes along, the supply chain will again get in that position where things will smooth out.”

While the rising price (and scarcity) of lumber has taken center stage throughout the pandemic, Beard also notes that he and his colleagues have seen ”an acceleration of different products coming in at different stages of the home that really are leading to shortages,” like cement, electrical wiring, and plumbing pipes and fittings. Windows are also challenging, thanks to a float glass shortage in the US, as well as shortages of the aluminum required for cadding.

Ultimately, Beard says, “most people will agree that these supply shortages are probably going to continue into next year before we’re going to actually see a return to pre-COVID normal.”

“By the spring of next year, I think most of these problems are going to work their way through the system,” he says. “There seems to be a lot of manufacturers that think that too. Yes, things are getting better. No, not completely back to normal. But again, what’s normal? Is it COVID normal or is it pre COVID normal? But if I was a betting man, I would say that probably into next year, next spring, we’ll be in good shape.”

Beard also notes that “a lot of capacity” is being added to certain manufacturing sectors like roofing, insulation, siding, carpet, and decking.

And as for the housing market more broadly, “demand probably will slow down,” Beard predicts. “But for now, things look relatively good. We like to say the fundamentals, the housing fundamentals are still relatively strong. So we have an undersupplied housing market, a millennial cohort coming of age and becoming homeowners. Those facts still exist. That’s not really going away. And so I think a lot of people think about, yes, there’s going to be a temporary lull, potentially. Or slow down or deceleration, if you will. But the structural drivers for housing fundamentals are still there. And so looking into 2023 and beyond, there’s the expectation that demand is still going to be there. And most manufacturers seem to be relatively upbeat about into next year and the year following.”