‘The supply channels cannot handle the demand’: Why contractors are experiencing supply shortages

Due to increased construction activity, the U.S. is facing a shortage of many building materials. (Courtesy Adobe Stock)
Due to increased construction activity, the U.S. is facing a shortage of many building materials. (Courtesy Adobe Stock)

Due to increased construction activity, the U.S. is facing a shortage of many building materials. (Courtesy Adobe Stock)

As some manufacturers were forced to close their factories during the COVID-19 pandemic, many Americans took on home renovation projects and new home construction, according to Mike Dishberger, the CEO of Sandcastle Homes based in Houston and a former president of the Greater Houston Builders Association.

Because of this increased demand for materials such as lumber, steel, copper and even appliances, more than 70% of contractors nationwide faced supply shortages in the first quarter of this year, according to the U.S. Chamber of Commerce’s Commercial Construction Index.

In a recent interview with Community Impact Newspaper, Dishberger explained how the shortage came about and how it is affecting local homebuilders. This interview has been edited for length and clarity.

What factors might be causing the shortage in materials?

A lot of it from the homebuilding side is demand—there’s strong demand. A lot of companies thought last year when COVID hit in the spring that that business would drop in homebuilding. Some businesses had to shut down because of COVID, and others just shut down some of their factories and said, ‘OK, we’re going to lay people off and ride it out.’

Instead, the opposite happened. People had nothing better to do, I think, than stay at home and decide they want to buy a new house or remodel. So, demand has exceeded supply, and when that happens, prices rise.


The price of plywood last year in April was about $7 a sheet. It’s over $50 a sheet right now. There’s only so many plywood manufacturers, and they just can’t turn factories on and off. Once they shut them down, it takes a long time to get them back running again. And to produce a new factory for lumber is a two-year process. You can’t build a mill in six months and start producing lumber.

A lot of things are coming from overseas, so you can see pictures on the Internet of all these ships waiting in line in California to offload the materials that they have and get them shipped around the country with trucks and trains. The supply channels cannot handle the demand.

You mentioned lumber being a big issue. Are you having trouble sourcing other materials as well?

Yes. There’s also a shortage of copper, so my electrical price just for the material went up 25%. There’s a shortage of polymers for paint, so paint is going up. In the recent freeze event in Texas, some of the petrochemical plants had their water pipes freeze, and they didn’t come back online until later. Some of them are still being worked on, so there’s a shortage of all the plastics and materials out of that.

It’s all over the board. Dishwashers are like gold. We got three last week and we were super happy, but we had to decide which three homes got dishwashers. They’ve been on order for three months. Dishwashers across the country are in super short supply. Again, a lot of people were at home and decided to remodel, and a dishwasher is one of the easier appliances to change out.

I’ve been doing this since the '80s, and the big difference this time is the things going up in price aren’t going up 5% or even 10%—they’re going up 25%-30%. Lumber is two and a half times what it cost last year.

It’s one contract or supplier after another. There’s also a sheet metal shortage, so garage door prices have almost doubled. Lumber is the big-ticket item, but windows used to take about a week and a half to get, and now they’re at nine to 10 weeks.

When did you first start to notice a change in the market with those costs going up?

We saw the lumber last summer. The other items didn’t really start occurring until December and January. The economy was getting back rolling again in most states, and that’s when I started noticing stuff was being delayed, stuff wasn’t arriving.

What challenges does this present to a homebuilder?

First of all, the construction time is going to increase on your house. A lot of builders now are less likely to want to sell early on in the process; they want to see what their costs are. The challenge is you can write your contract and have an escalation clause, but nobody likes that. Nobody wants to buy a home with an escalation clause saying, "If the price of lumber gets to a certain point, you’re going to have to pay more for your house."

What I think you’re seeing is a lot of builders are saying, "We’re not even going to sell the houses early. We’re at least going to get the house framed and some other things in the home." A lot of the expensive stuff is done first; framing, windows, roofing materials all goes into the house pretty quickly. And then they’ll list their houses and decide what they can get for them.

Builders normally work on a margin like a lot of businesses, so you would think they’re making a lot more money this year. Well, they probably aren’t because the costs are rising faster than they can raise prices. The buying public is not going to accept a 25% increase in the cost of homes, and as the price of homes get more expensive, fewer people can buy them.

So, that’s the challenge—how much of the cost can you pass on, and how long will the buyers keep paying the higher cost for that. I’m not sure waiting is going to do any good, but that’s what some people are probably doing, trying to wait this out. Interest rates are super low right now, which makes buying a house less expensive. If the costs go down and interest rates go up next year, sometimes they’re equal to each other.

Is there any indication of how long this will continue before prices start leveling off and ultimately coming back down?

Last year, I thought the lumber issue was going to go away by the end of the year because typically construction slows down across the U.S. in the wintertime. It did drop some, but [prices] skyrocketed even more after that. I’m going to probably tell you this is going to be the whole year.

Until they get supply channels worked out where they have materials going across the country in rail, trucks, ship—however they get here—and get employees to work to do that, the issues are going to continue. If the price gets too high, some [builders] are going to say, "I’m not going to start anymore houses [because] I can’t make the money I need to make."

There’s already some sign, based on futures markets, that lumber is going to be down [in cost] by the end of the year, but I don’t think we’ll ever get back to where it was before. I think it’s like oil—the guys who make lumber are probably going to limit supply to keep the prices up because the cost of producing that material has not gone up.
By Danica Lloyd
Danica joined Community Impact Newspaper as a Cy-Fair reporter in May 2016 after graduating with a journalism degree from Union University in Jackson, Tennessee. She covers education, local government, business, demographic trends, real estate development and nonprofits.


MOST RECENT

A house in the Balmoral development in Kingwood.
2,300 homes slated along FM 2920 in Hockley

Land Tejas will construct 2,300 new homes in a 646-acre development in Hockley.

The pizza and pasta eatery is opening this fall. (Courtesy Russo’s New York Pizzeria & Italian Kitchen)
Russo’s New York Pizzeria & Italian Kitchen coming soon to Bridgeland

The eatery specializes in New York-style pizza, but calzones, pasta, deli sandwiches, salads and soups are also on the menu.

Harris County Pets facilitates pet adoptions, foster placements and more. (Courtesy Harris County Pets)
Harris County Pets temporarily waives adoption fees to control increase of population

Harris County Pets has exceeded its capacity to house its growing pet population, officials said.

Masterpiece Desserts is opening in late June with plans for a grand opening in late July. (Courtesy Masterpiece Desserts)
Masterpiece Desserts to open Cy-Fair storefront this month

This is the first brick-and-mortar location for the business, which specializes in miniature cheesecakes.

Americans spent 44% more shopping on websites, including Amazon, in 2020 than in 2019. (Courtesy Amazon)
Surge in online shopping strains Houston’s distribution channels

Online spending in the U.S. was up 44% from 2019 to 2020, and transportation expert Bill Eisele said this uptick has put a strain on the region’s transportation system.

According to county officials, 40% of the $125 billion in damage caused by Hurricane Harvey took place within Harris County. (Shawn Arrajj/Community Impact Newspaper)
Texas General Land Office says it is 'not feasible' to request $750M in federal flood aid within 30 days

Houston-area officials ask for 30-day-dealine on the Texas General Land Office's formal request for $750 million in federal flood aid funding, but GLO says it is not possible.

Texas Central has signed a $16 billion contract with Webuild to lead the civil construction team that will build the train. (Rendering courtesy Texas Central)
Texas Central signs $16B construction contract for high-speed rail project

Texas Central could be one step closer to starting construction.

Russ Poppe, the Harris County Flood Control District executive director, will officially step down July 2 after nearly fifteen years in the position. (Courtesy Harris County Flood Control District)
Executive Director Russ Poppe announces resignation from Harris County Flood Control District

Harris County Flood Control District Executive Director Russ Poppe announced his resignation June 11.

The Electric Reliability Council of Texas issued a call for Texans to conserve energy June 14. (Iain Oldman/Community Impact Newspaper)
ERCOT asks Texans to conserve energy with generation outages 2.5 times higher than normal

"This is unusual for this early in the summer season," said Woody Rickerson, ERCOT vice president of grid planning and operations, in a news release.

League City's Helen Hall Library History Club hosted an event related to Juneteenth on June 7. The holiday honors Union Gen. Gordon Granger coming to Galveston in 1865 to announce the liberation of enslaved people in Texas. (Graphic by Justin Howell/Community Impact Newspaper)
Celebrate Juneteenth in Galveston with a movie screening, parade and more on June 17, 19

The Juneteenth Legacy Project, which aims to recontextualize the day and properly communicate its story and relevance, is hosting or advertising numerous events over the course of the holiday weekend.

Missouri City resident Jackie Ward became the chief nursing officer at Texas Children’s Hospital in January. (Photo by Michael Carr Photography, graphic by Chase Brooks/Community Impact Newspaper)
Q&A: Jackie Ward, Texas Children's Hospital chief nursing officer, discusses career, nursing during COVID-19

Prior to becoming chief nursing officer, Missouri City resident Jackie Ward worked as an oncology nurse and in a variety of leadership roles at Texas Children's Hospital.