A small inventory of available homes isn’t the only problem impacting the Valley’s housing industry.
Building material shortages and an inadequate labor pool have become bad enough that the state watchdog for the contracting industry is urging building and remodeling companies and their customers to exercise patience, candor and understanding.
And price increases over the past 12 months have raised an alarm by the Associated General Contractors of America over the future solvency of many companies.
Citing shortages in key materials such as wood as well as a need for workers, the Arizona Registrar of Contractors last week urged homeowners and contractors to have patience and keep open lines of communication regarding their projects.
“From new home builds and pools to installing air conditioning units, both residential and commercial contractors alike have been struggling to get materials and find enough workers to fulfill existing contracts and start new ones, according to a survey by the Associated General Contractors of America,” ROC noted in a release.
Moreover, the contractors association last week released an analysis that concluded, “The cost of goods and services used in construction climbed by a record-setting 4.3 percent in May and 24.3 percent over the past 12 months, jeopardizing contractors’ solvency and construction workers’ employment.”
Last week, another wood-related group gave a different take even as Federal Reserve Chairman Jerome Powell said lumber prices appeared to be falling.
The American Wood Council said, “A variety of issues have spurred an imbalance between lumber supply and demand, and more importantly, what can be done about it.
“Sawmill capacity increased by 1.4 billion board feet in the last year and Forisk recently announced that it expects another 1.6 billion board feet in expanded capacity the second half of this year,” the Wood Council said, noting another company announced it will build a new sawmill – but it will take two years to become operational.
Noting Powell’s assertion that lumber prices appeared to be falling, the Wood Council said, “The most meaningful opportunity to address constraints to lumber supply is to focus on transportation and workforce limitations. These challenges were present before the pandemic and have exacerbated the current situation.”
The Associated General Contractors of America cited a variety of products impacted by steep price increases over the last 12 months – including products made from wood, metals, plastics, and gypsum.
“The producer price index for lumber and plywood more than doubled—rocketing 111 percent from May 2020 to last month,” it said.
“The index for steel mill products climbed 75.6 percent, while the index for copper and brass mill shapes rose 60.4 percent and the index for aluminum mill shapes increased 28.6 percent. The index for plastic construction products rose 17.5 percent. The index for gypsum products such as wallboard climbed 14.1 percent. Fuel costs, which contractors pay directly to operate their own trucks and off-road equipment, as well as through surcharges on freight deliveries, have also jumped.”
Association officials said the Biden administration can provide immediate relief from some price pressures by ending tariffs on Canadian lumber, along with tariffs and quotas on steel and aluminum from numerous countries.
But tariffs may not be the only issue impacting lumber prices, according to the financial website thehustle.com.
It noted that lumber demand cratered in the U.S. when the housing market collapsed in 2008, forcing more than 30 large sawmills out of business.
And Canada, which supplies a third of American lumber, also has had its share of problems, including an infestation of bark-eating beetles in the early 2000s that wiped out 44 million acres of forest and 60 percent of British Columbia’s pine. Subsequently, wildfires in 2017 and 2018 devastated another 6.2 million acres of Canadian forest.
Atop that, American lumber mills early last year reduced their production by 40 percent, expecting the pandemic to cut down demand. Instead, the opposite happened, The Hustle said.
Building more mills is not an option, it added, citing the two-year construction time and $100 million cost of building a state-of-the-art mill.
Moreover, The Hustle said, “Today’s mills rely on microprocessors and heavy machinery – markets that face their own shortages.
The contractors group earlier this month offered a grim forecast for the immediate future.
“Contractors are being told they must wait nearly a year to receive shipments of steel and four to six months for roofing materials,” said Ken Simonson, the association’s chief economist. “These delays make it impossible to start some projects and to complete others, leaving contractors unable to keep workers employed. In addition, soaring prices for steel, lumber, and other materials are deterring owners from committing to going ahead with projects.”
Simonson also noted that contractors are having considerable difficulty finding qualified workers “as some people remain reluctant to return to work while their children are learning from home, or they are collecting elevated unemployment supplements.”
“Steadily worsening production and delivery delays have exceeded even the record cost increases for numerous materials as the biggest headache for many nonresidential contractors,” he said. “If they can’t get the materials, they can’t put employees to work.”
Associated General Contractors of America CEO Stephen E. Sandherr also took a swipe at the Biden Administration’s actions it will take to address supply-chain disruptions.
“The President could provide immediate relief from soaring prices for lumber, steel and aluminum by removing harmful tariffs and quotas,” he said.
“Unfortunately, the President’s recommendations ignore that quick and effective approach.
“Instead, these proposals would limit the ability of workers and employers to fill needed construction positions. Imposing mandated hiring percentages from certain localities and training programs, dictating inflexible labor agreements, and setting artificially high pay rates will diminish the number of firms and workers available to carry out vital infrastructure and other construction programs.”
Meanwhile, the Registrar of Contractors noted that one of the most common complaints it receives involve “broken communication lines between a contractor and the property owner.”
“If the ongoing labor and supply shortages are going to impact a current project,” it said, contractors should “keep an open and honest dialogue with the homeowner about the status of the project and any expected or unexpected delays.”
It also said contractors should tell clients about the shortages before even making a bid or estimate on a project.
“Contractors should not take on projects if they know they will not be able to fulfill them,” the agency also advised, warning it will investigate complaints about less-than-forthcoming contractors who don’t discuss the shortage with clients until well after they’ve taken their money.
On the other hand, ROC also advised clients to be patient when supply shortages delay completion times.
“Disciplining a license or investigating a case will not make material shortages decrease and if possible, it’s always best to try to resolve issues with the contractor before filing a complaint,” it said.
“Homeowners should know 95 percent of licensed contractors never have a complaint filed against their license and the ones who do often work to resolve those complaints. If a homeowner is experiencing a problem, AZ ROC is always here to answer questions and to assist with resolving workmanship or abandonment issues if such issues arise.”
The agency has a two-year jurisdiction from the date escrow closed or the date work was last performed. If work is not completed, the jurisdiction time does not toll.
Homeowners who hire licensed contractors may have the additional protection of the Residential Recovery Fund, the agency said.
To qualify, however, the homeowner must “allow the contractor the opportunity to correct any outstanding work or workmanship issues and to take part in the agency’s administrative process,” ROC said.