Texas builders face shortages, price increases amid strong demand for new construction
If you think you’ve had a wild year or two in real estate, chat with a builder in Texas. “The past two years have been the best years we’ve ever had,” says Gene Lantrip, president of the Texas Association of Builders.
While builders have never been busier, they’ve also faced unique challenges while trying to meet the demands of an extraordinary housing market. “This is uncharted territory. I’ve been doing this for 30 years. We’ve never had issues like we’re having right now. It’s on all fronts: supply issues, price issues, labor issues, price increases. It’s everything hitting all at once.”
Lantrip describes the top issues facing builders and how agents and builders can work together. “We cannot control the supply nor the time it takes to build a house. We are telling agents that we’re working as fast as we can to make it happen,” he says.
Parts and Labor
Builders are having a hard time sourcing materials because of supply chain problems, according to Lantrip. “Our windows used to take two weeks to arrive; now we’re at six or seven weeks. At one time, it was tough to get appliances, but they’ve gotten that straightened out. We’re having a hard time getting electrical breakers and the meter boxes for houses. Every week something different crops up on shortages, and our subcontractors have to think outside of the box to get these items.”
Rising lumber prices continue to be an issue. While most of Texas’s lumber comes from East Texas and Louisiana, tariffs on Canadian lumber affect the entire industry, Lantrip says.
The price of a type of wood panel used for roofs leapt from roughly $5 18 months ago to a high of $56 a sheet. Now it’s closer to $29. Lantrip says his Abilene-based firm, Lantrip’s Custom Homes, can’t set firm prices on spec homes anymore because they have no idea how much the lumber will cost. Price changes have even caused him to take a loss on a few of the houses he’s built.
Labor issues have also been a challenge for contractors and subcontractors, he reports. An electrician may only have 10 of 18 crew members show up for work. Entry-level laborers say they can find better jobs elsewhere. There are only so many subcontractors to hire in the state, Lantrip notes. Cost increases for subcontractors raise prices for contractors, which in turn raise prices for homebuyers.
Keeping up with demand is a blessing and a curse. “We get three or four calls a day wanting custom homes done. We say we can’t get your house started for three or four weeks. The caller calls the next builder, and he says the same thing. Every one of us is taxed to the limit.”
It’s essential to have good communication between real estate agents and builders, Lantrip says. He tells builders to keep agents informed about how and why delays happen. He asks agents and homebuyers to be patient. “The builder wants to get the house done and finished on time because he doesn’t get paid until the house is done and closed. We are doing the best we can with what we have to work with.”
He invites agents to attend courses on the contract that the Texas Association of Builders uses for new residential construction, which is different than TREC’S New Home Contract (Incomplete Construction) (TXR 1603, TREC 23-17) and New Home Contract (Completed Construction) (TXR 1604, TREC 24-17). For example, the TAB contract includes escalation clauses in case of price changes.
“These clauses are not something that builders had to use before. But with materials prices rising 200% or even 300% between contract and home completion and closing due to the pandemic and supply chain disruptions, they are unfortunately now necessary so we can get homes built and still make some profit,” Lantrip says.
Lantrip encourages agents and builders to join each other’s associations and attend each other’s meetings. “Some may think that agents and builders don’t get along. Nothing could be further from the truth. Builders and REALTORS®, we’re in it together. We want the same thing. We want affordable housing and we want to get these houses built in a timely manner. We want the customers happy.”