Strategies Builders Employ to Combat Rising Building Material Costs and Shortages
How have single-family builders reacted to recent shortages and price increases in building materials?
The most common strategies, cited by 62% and 59% of builders, were to raise their prices on their homes frequently and pre-ordering materials, according to a June survey for the NAHB/Wells Fargo Housing Market Index (HMI).
These approaches were followed by price escalation clauses (45%, waiting until late in the construction process before listing spec homes (39%) and cost-plus pricing (32%).
Only 2% of builders indicated they had adopted none of the listed techniques for dealing with the shortages and rising cost of materials.
While some of the most dramatic price increases over the past year involved lumber prices, this has caused very few builders to switch away from traditional wood framing, although some are considering it. In particular, 17% are considering switching to steel, 16% to structural insulated panels, 14% to insulated concrete forms and 8% to concrete masonry.
NAHB Senior Economist Paul Emrath provides more analysis in this Eye on Housing blog post.
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