Builders Change Selling Tactics Amid Supply Shortages

October 26, 2020

Builders say a shortage of supplies, including appliances, hardware, flooring products, and lumber, is affecting the timelines and costs of their projects, and they’ve had to find ways to pass those costs on to customers. Builders report difficulties getting air conditioners, refrigerators, washing machines, and other appliances for new homes. Production and supply chain disruptions from the early days of the coronavirus pandemic are lingering, causing prices to escalate.

Nearly half of builders surveyed in July by Meyers Research reported supply disruptions, and 80% of 300 division presidents nationwide in a survey in the last week of August said supply challenges likely will impact their 2021 sales plans. “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.

Rises in lumber prices have added an average of $16,000 to the price of a newly built single-family home since April, according to the National Association of Home Builders. In response, McReynolds says Garman has increased prices at the community level and adjusted lot premiums higher.

Some builders are reportedly using escalation clauses in contracts so that if prices rise by a certain percentage, customers will have to pay those extra costs.

To help offset some of the rising costs, Meritage Homes is scaling back its upgrade options for new homes, offering only a few product collections at the same price point. For example, Meritage used to offer 56 dishwasher options, but now it offers only six that tend to be 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.”