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HIGH DEMAND: Despite material price increases and labor shortages with subcontractors, Bussell Building's Tyler Bussell expects a record year for residential construction for his company.
Eric Arvizu | SBJ
HIGH DEMAND: Despite material price increases and labor shortages with subcontractors, Bussell Building's Tyler Bussell expects a record year for residential construction for his company.

Overcoming Challenges: Home builders continue to navigate backlogs, high material prices

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While home builders had to contend with project backlogs through most of last year, local companies expect demand for new house construction won’t subside in 2022.

The challenges brought about over the past year for residential builders were numerous, said Tyler Bussell, co-owner of Bussell Building Inc. Price increases for materials, labor availability and rough winter weather in the first quarter of the year all contributed to what Bussell called “by far the most challenging year of homebuilding” the company has had in its 22-year history.

Bussell said the company is mostly caught up on its backlog but was briefly behind by nearly 70 homes last summer. Material availability and prices, particularly for lumber, which hit an all-time high of $1,670.50 per thousand board feet in May 2021 – a roughly 35% rise from the current rate – was a major contributor. As costs escalated, it was difficult to get materials and contractors on-site. It was a circumstance he said the company had never encountered to this degree.

“It got to the point where I was offering to pay contractors more than I had ever paid and they still turned me down,” he said, adding many told him they were struggling to find enough employees to keep up with their large workload.

Those ingredients led to missed project deadlines, Bussell said.

“That was something we never used to do. We used to always hit our deadlines,” he said. “If we would be behind, it would be by a week or so. We got to a point where we were behind by months on closings.”

Bussell said the company managed to gain momentum in the latter half of the year to complete 119 houses. However, that sits on the low end of its annual average, which has previously reached as high as 140, he said.

Be patient
The housing backlog for Ryan Green, owner of First Choice Custom Homes, is on a much smaller scale. As his 12-year-old company builds full custom homes for its clients with a six-person staff, project totals usually land between 12-20 houses per year. Last year fell below that average to 11 homes, largely due to supply chain issues.

He pointed to the wait time for windows as a major contributor to the longer turnaround to finish a project. What previously took two to three weeks to receive now has stretched between three to four months.

“We’ve got to order windows as soon as we sign a contract,” he said, noting the homes he builds are mostly priced $400,000-$800,000. “Then we’re still a lot of times waiting for windows by the time of rough inspection when we’re ready for insulation and drywall.”

Like Bussell, he said a variety of factors are pushing back completion dates.

“Some of it is supply chain,” he said. “Some of it is our subcontractors are so busy that getting them on the schedule and getting there and making sure they get done in a timely manner is a challenge.”

Green stresses patience from his clients, noting it currently takes First Choice eight to 10 months to build a house. That’s up from an average of five to eight months two years ago.

The lumber prices make pricing homes more of a challenge, builders say. After lumber hit the record-high in May, it dropped to $456.20 in August. However, it’s now back above $1,100, according to financial data and software company FactSet Research Systems Inc.

“We try to keep our customers up to date and be as close as we possibly can,” Green said. “There’s so much price volatility that it could potentially be higher.”

Bussell said he doesn’t expect lumber prices to get any better for 2022 but is uncertain where it will next peak.

“Our response to that is significantly different than it was last year,” Bussell said of supply chain and pricing issues. “We’re staying out ahead of things. We’re still taking presold homes but we’re limiting the numbers of what we’re taking. We don’t want to put the buyers in a position to be disappointed.”

Patience also is a message passed to those contacting the Home Builders Association of Greater Springfield, said Executive Director Dori Grinder.

“Demand is still really high,” she said, noting builders, suppliers and homeowners are all frustrated by the supply chain and pricing issues. “Even though this has been quite honestly the strangest two years anyone has seen likely in their careers, it’s still been fantastic for business.”

New home sales in the U.S. posted a solid gain in November, driven by buyer demand, low existing home inventory and low interest rates. Sales of newly built, single-family homes rose 12.4% over October’s total to a seasonally adjusted annual rate of 744,000. It’s the highest rate in seven months, according to U.S. Department of Housing and Urban Development and U.S. Census Bureau data.

Additionally, the median sales price rose to $416,900 in November from the $408,700 price posted in October. That’s an 18.8% year-over-year increase.

Median list prices in Springfield have jumped 12.9% since the previous year to $197,500 in November, according to Realtor.com.

Grinder said the continuing increase of home prices is a source of frustration for HBA. It’s a reflection of the cost of supplies rising that leads to higher price tags for houses, she said.

“The pinch happens with first-time homebuyers. They are going to be priced out of the market,” she said. “There’s just a higher percentage of people that will not be able to buy because of the prices. That’s incredibly frustrating.”

New year boost
Although the snow and record-low cold temperatures that hit the Ozarks last winter contributed to delays for home builders, Bussell said the unseasonably warm weather this December provided a boost to his business.

He said the company has foundations completed or in progress on roughly 75 homes and close to 40 houses framed now in the Springfield area.

“That puts us into a very good position going into the spring,” Bussell said, adding he expects to exceed 150 units this year, which would be a company record.

Despite the high demand, the area’s largest single-family home builders according to Springfield Business Journal list research built 413 homes in 2021, one fewer than a year prior.

Green said First Choice is aiming this year to build 15-18 houses – a number he admits could be impacted by the ongoing supply chain issues.

“I keep thinking it’s going to level out and get normal again. But it seems to me until they fix the supply chain problem, we’re going to be dealing with these challenges,” he said, noting material delays continue through U.S. shipping ports. “We could be dealing with these challenges for the next couple of years, and we’re kind of planning around it.”

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