Opening an email from an offsite construction factory and seeing another announcement of a price increase is nothing new to builders and developers.
What is new is the huge dollar increases with every new email and from just about every supplier and vendor.
Construction costs, excluding the cost of land, spiked by 1.5% in March and by 17.3% year-over-year, according to separate data from the Census Bureau.
Unlike past price increases charged by vendors and suppliers to the offsite factories and passed on to builders and developers, which were normally due to simple inflation, lumber tariffs and unseasonable weather, these increases have the Law of Supply and Demand as their basis.
COVID started the ball rolling when hundreds of container ships were stuck at sea waiting to be unloaded and at the same time ships that were lucky enough to get unloaded had their shipping containers stuck in the ports.
Vendors and suppliers to the construction industry didn’t have enough material to keep everyone supplied. Then in late 2020 the offsite factories began being bombarded with orders for affordable housing projects which made the shortages of materials that much worse.
At the same time, labor shortages began taking a large toll on factories who were having projects setting on the drawing boards instead of being put on the production lines.
The Federal Reserve just raised interest rates by half a percentage point Wednesday, the most in over 20 years, in an effort to cool off demand and lower inflation. Consumer prices have been rising at the fastest pace in 40 years.
However, the surge in mortgage rates “will temper the pace of home price appreciation as more would-be homebuyers are priced out,” said Greg McBride, chief financial analyst for Bankrate. Still, the number of available homes remains historically low, a trend that will likely frustrate buyers and keep prices high and fuel even more new houses and affordable housing projects.
There are so many questions attached to what is happening to housing today:
- Will we ever see adequate building material levels?
- Where will we find new sources of skilled labor in our factories?
- How will innovation and automation help our current situation?
- With costs rising faster than ever, what impact will that have on affordable housing?
Plus your factory probably has its own set of questions looking for answers.
Related Articles:
- If This Isn’t A Housing Bubble, What Do We Call It?
- Solving Modular’s Process Constraints
- Offsite Construction About To Enter Another Whac-A-Mole Stage
Gary Fleisher is the Editor in Chief of Modular Home Source and Offsite Builder. Email at [email protected]
To learn more about the Offsite Construction Industry, visit:
Offsite Builder, the Construction Magazine for Builders and Developers
