Top Challenges for Builders: Building Materials Prices in 2020 & 2021

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Building materials prices topped the list of problems builders faced in 2020 and is expected to return to the number one spot in 2021, according to special questions on the December 2020 survey for the NAHB/Wells Fargo Housing Market Index.   The survey results showed that building materials was a significant issue for 96% of builders last year.  In 2021, however, a smaller share – 89% of the builders – expect it to continue being a problem.  The second most widespread problem in 2020 was availability/time it takes to obtain building materials cited by 78% of builders. In 2021, the share of builders expecting availability/time it takes to obtain building materials is expected to increase to 80% compared to last year. The high incidence of builders reporting building material problems is not surprising given recent increases in material prices.

In 2011, building materials prices was reported as a significant problem by 33% of builders, followed by 46% in 2012, 68% in 2013, 58% in 2014, 42% in 2015, 48% in 2016, 77% in 2017, 87% in 2018, and 66% in 2019 before peaking at to 96% in 2020. Meanwhile the cost and availability of labor was reported as a significant problem by only 13% of builders in 2011. The share increased to 30% in 2012, 53% in 2013, 61% in 2014, 71% in 2015, 78% in 2016, 82% in both 2017 and 2018, and increased to 87% in 2019. While 65% said it was problem in 2020, 71% expect it to continue being a problem in 2021.

Concern about employment/economic situation was a problem for only 48% of builders in 2020, but 57% expect it to be a problem in 2021. In 2011, Concern about employment/economic situation was reported as a significant problem by 79% of builders. The share decreased to 71% in 2012, 60% in 2013, 51% in 2014, 47% in 2015, 44% in 2016, 25% in 2017, 28% in 2018, and 25% in 2019.

Another significant problem that builders faced in 2020 and is expected to face in 2020 is cost and availability of developed lots. In 2011, cost and availability of lots was reported as a significant problem by 21% of builders. The share increased to 34% in 2012, 46% in 2013, 55% in 2014, 58% in 2015, 60% in 2016, 58% in both 2017 and 2018, and 63% in 2019. While a smaller share 48% builders said it was a problem in 2020, 57% said it will continue to be a problem in 2021.

Compared to the supply-side problems of materials, labor and lots, federal government policies were not as widespread last year, but builders expect many of them to become more of a problem in 2021. Federal environmental regulations and policies was a significant problem for 28% of builders in 2020, compared to 48% who expected it to be an issue in 2021. Taxes on home builders was a problem for 21% of builders in 2020, it will be significant problem in 2021 for 41% of builders. While Attempts to limit mortgage interest deduction/other was a significant problem for 23% of builders in 2020, but 36% expect it to be a problem in 2021. Regulation of banking/financial institutions was a problem for only 18% of builders in 2020, but 33% expect it to be a problem in 2020. Followed by OSHA regulations and inspections for 31% of builders in 2021, compared to 18% in 2020.

For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full HMI Dec 2020 SplQ REPORT EXTERNAL FINAL.



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