Record inflation rattles regions new home construction

The supply of garage doors for new houses was so low earlier this year that families in Pittsburgh and across the country boarded up the openings with plywood and waited months for them to arrive.

“At one time, there was nothing in stock,” said Jason Sherry, owner of Three Rivers Garage Doors on Mount Washington.

And it hasn’t just been garage doors in short supply. Builders and buyers of new homes in the past year have been playing the waiting game while the biggest supply chain disruption in a century is causing abnormal delays for everything from kitchen cabinets to windows and roofing material.

Short supplies, in turn, helped fuel record inflation at every link in the building materials supply chain, making the cost of new home construction more expensive than ever. And, while parts of the supply chain have eased a bit recently, rising mortgage rates are likely to temper any quick relief for buyers.

The total bill for materials required to build an average size new single-family home increased by 42% from 2018 to 2021 — making materials cost roughly $35,000 more, according to a Bank of America report on new home construction released in June. Lumber prices alone have added up to $18,600 to the average cost of building a new home.

The median price to buy a new home in Allegheny County in the first quarter of 2022 was $417,424 compared to $391,650 in 2019, according to REALSTATS, a real estate information service based in Ross. The monthly payment on a 30-year mortgage of $400,000 has risen almost $800 in that period [from $1,686 to $2,476] due to the increase in interest rates alone.

Custom homes in the Pittsburgh region’s higher-end market start at around $600,000 and often cost $1 million or more, local building experts say.

“We have finally seen the top come off the housing market around here,” said Jeff Burd, owner of Tall Timber Group, a consulting firm for the commercial and residential construction market based in Ross.

The rising costs are slowing interest in building homes, he said. Mr. Burd said new single-family home construction in the Pittsburgh region is down more than 20% in the first five months of the year compared to last year.

“After 30 years of tracking this market, it’s unusual to be off 22% for five months other than the time right around the pandemic when it was artificially stopped,” he said. “This is really a reflection of demand.

“You have the inflationary factors and the supply chain being stretched out considerably,” Mr. Burd said. “When you add high mortgage rates into that mix, you’ve just got fewer houses to build and fewer demand for houses than a year ago.”

Pandemic ebb and flow

The demand for construction materials and supplies went through the roof around the summer of 2021, following the COVID-19 shutdown in spring 2020.

Vaccines had come out by then and business was going back to normal. While inventories weren’t being depleted during the shutdown, staff had been laid off and inventories weren’t being replenished either.

Supply chains that extend around the world were caught off-guard by the flood of orders for building materials and supplies that poured in.

“My electrician tells me that meter sockets and things like that are taking eight to 14 months to get delivered,” said Josh Adamek, a real estate investor who is currently building new homes on Mount Washington.

“Some of the dayto-day materials that these guys need to do a job, you just can’t get it.”

It’s causing project completion dates to get delayed by months and buyers are left frustrated. “We’ve had a couple of buyers under contract who had to move on to another home or decide not to buy a home,” he said.

“Every buyer is different. But when somebody is expecting a new home in 9 to 12 months and that gets bumped to 18 to 24 months, it could be a problem. Maybe they’re moving in from out of town or maybe they sold their home previously and are living somewhere temporarily.

“We used to get kitchen cabinets in two to four weeks. Some kitchen cabinet suppliers are 8 to 12 weeks. Some are 36 to 52 weeks out depending on what type of kitchen you’re going with.”

Mr. Adamek said builders will be waiting a year or longer for some window packages they’ve ordered for their new builds.

Meanwhile, construction crews and manufacturing workers are raising prices on their labor as companies compete for skilled workers. Rising gasoline prices have increased the cost of manufacturing and transporting products.

But getting products delivered is only half the challenge.

So much time often elapses between the initial ordering and the actual shipping that local builders say some manufacturers — particularly roofing — are pricing materials at the time of shipping rather than when a purchase order is placed.

That pushes the risk of inflation from the manufacturer to the roofer. In the current climate, roofing contractors are less inclined to agree to a simple fixed-price contract because their costs for materials is liable to be higher than what they initially quoted for the job.

“With all the dysfunction, the minute a builder starts a house, they have to order everything,” said