Home Builders Report Significant Shortages in Key Building Materials

Builders and suppliers are noting significant shortages of certain home building materials even though new home and other construction is described as far below normal levels. The National Association of Home Builders (NAHB) and the National Lumber and Building Material Dealers Association (NLBMDA) reported the shortages based on recent surveys conducted by each.

Shortages of oriented strand board (OSB) were reported by 22 percent of builders and 27 percent of dealers and wall board by 20 percent and 12 percent respectively. Plywood and framing lumber were also said to be in short supply by respondents in the double digits in both surveys.

"Supply constraints are one of the barriers to a more robust recovery," said NAHB Chief Economist David Crowe. "The shortages and price increases reported by both home builders and lumber dealers are particularly concerning given that the current rate of construction is still far below what would be considered normal or necessary to meet underlying demand."

More builders reported a scarcity of wall board than did dealers but for each of the 23 other building products about which each group were questioned more suppliers reported shortages than builders. The share of builders reporting a shortage of most products was higher than in similar surveys conducted by NAHB in May of 2011 and 2012. The only exceptions were copper wire, vinyl siding, HVAC equipment, insulation, and structural insulated panels..

"The shares of reported shortages are not as high now as they were in 2004 or 2005, but the increases since 2012 are quite significant, especially when you take the early stage of the housing recovery into account," said Crowe. "In 2004 and 2005 the home building industry was producing over 1.8 million new homes a year, while the current rate of new housing starts is still below 1 million."

A larger percentage of lumber dealers reported price increases in building materials over the last six months than builders. Dealers reported an average increase in the cost of materials they sell of 10 percent or more while builders reported a 5.17 percent increase. Most builders than suppliers reported increases in the cost of concrete related products.

"While a nascent housing recovery is underway, as reflected by the modest increase in sales by dealers, it's clear that the ongoing material shortages and price increases being reported by dealers continue to be a cause for concern as we move into the latter half of 2013," said Michael O'Brien, NLBMDA president and CEO.

NAHB's survey was in the form of special questions added to its monthly survey for its Housing Market Index. The dealer results come from a special survey of NLBMDA's members, who operate single or multiple lumber yards and component plants and deal in many of the same products that NAHB members purchase.