With delivery schedules delayed and prices of material goods rising, pandemic-induced supply-chain issues have dominated headlines for much of 2021, and are poised to continue into the new year. While the supply-chain issues have an effect on every corner of the economy, the housing market has felt a particularly dramatic impact.
“Every part of a house is more expensive today,” says Philip A. White Jr., president and CEO, Sotheby’s International Realty. “It’s impacting new-home construction more than anything. We hear the most about lumber, but it’s everything. And that’s pushing up the average sales price.”
People will still build personal homes if, for example, a US$12 million house now costs US$13 million instead, says Jason Friedman, senior global real estate advisor, Daniel Gale Sotheby’s International Realty in New York. But for developers, a sudden spike in the price of construction material, compounded by a chronic shortage of labor, can change the entire calculus of a project.
“The Achilles’ heel in the market right now is construction costs,” says Dean Jones, owner, Realogics Sotheby’s International Realty in Washington. “The delays associated with Covid have given every developer pretty significant [difficulties], - some projects are facing six- to 12-month delays.”
Even a shortage of basic appliances like stoves and refrigerators is slowing things down. “The thing we’ve been seeing the most problem in getting is actually the appliances,” Friedman says. “You can pay whatever you want to pay, they just don’t have them.”