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Builders are facing supply shortages, so some are changing their sales tactics

By Mike Wheatley | October 28, 2020

Building projects are facing longer timelines due to a shortage of supplies such as appliances, flooring materials, hardware and lumber, and builders are finding some clever ways to pass the associated costs onto home buyers.

Builders have reported difficulty in securing appliances such as air conditioners, refrigerators and washing machines for new homes due to supply chain disruptions resulting from the COVID-19 pandemic, and prices are rising because of that, BUILDER reported.

In a survey by Meyers Research in July, almost half of all builders said they faced disruptions to their supply lines, and 80% of 300 division presidents in a survey in August said those challenges are likely to impact their sales plans in 2021.

“When flooring is delayed, we have to rework our schedules to allow for other things to progress, or we have to put the home on hold and wait for the material or reselect something that is available at the time,” Jon McReynolds, Garman Homes division president in Raleigh, N.C., told BUILDER.

Meanwhile, the increase in the cost of lumber has added approximately $16,000 to the cost of building a single-family home since April, the National Association of Home Builders says. In response to this McReynolds said Garman has adjusted the price of its new homes at the community level, while lot premiums now also cost more.

Some builders have resorted to using the escalation clauses in their contracts, so that customers will have to pay the additional costs if prices rise by a certain percentage.

Other builders have smarter ideas to offset the rising costs for buyers. For example Meritage Homes is offering to scale back on upgrades for new homes, so buyers can choose from just a few product collections at the same price point, instead of paying more. It used to offer 56 different dishwashers for instance, but now only provides a choice of six models that are well-stocked.

“We’re going to have a lot more success in being able to procure those dishwashers, for example, than we are some of [Whirlpool’s] slower-selling, more expensive models,” Steve Hilton, chairman and CEO of Meritage Homes, told BUILDER. “That goes on and on for every component of the house, whether it’s door locks, plumbing, fixtures, carpeting, or tile.”

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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