This past summer, when Karen Pearse was asked to supply a special marble from China for a project in the Hamptons on Long Island, she had to tell the architect that the cost would be at least 30% higher than last year and take twice as long to arrive.
“We used this beautiful marble, which is unusual because it could be used next to the ocean. A lot of types of marble can’t be around salt because it can get damaged,,” said Ms. Pearse, owner of Karen Pearse Global Direct in New York City, a distributor of high-end materials for developers, architects and designers. “But tariffs on Chinese marble went from 4.9% to 30% in the past year and everything takes longer now, too.”
In that case, the homebuyer and the architect opted to pay more money and wait longer to get the marble they wanted. The decision the homebuyer faced is increasingly one that many consumers, remodelers and developers today are also confronted with due to shortages, delays and price hikes.
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“It’s much harder to start projects quickly now, so we need to set expectations upfront,” said Kirsten Gable, a kitchen and bath designer with Anthony Wilder Design Build in Washington, D.C. “A few clients opted to wait until 2021, but most go forward with their plans and selections with the understanding that the products we need may not be here for three months or more.”
One of Ms. Gable’s kitchen renovations included a dishwasher ordered in May that did not arrive until mid-September. She saved the original dishwasher so the clients would have one and swapped in the new one after the rest of the kitchen was completed.
Tariffs and Supply Chain Issues Creating Shortage
While remodeling and home construction are bright spots in the economic recovery, the explosion of demand for materials and products for projects and developments contribute to shortages, said Rob Dietz, chief economist for the National Association of Home Builders in Washington, D.C. Lumber is in particularly short supply and has seen sharp price increases that are adding to the cost of remodeling projects and homebuilding.
“Lumber prices have come down slightly from their peak but are still around $900 per thousand-foot board, which is an increase of about 150% since mid-April,” Mr. Dietz said. “We estimate that adds about $16,000 to the cost of building a 2,600-square-foot home.”
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Lumber prices have risen because of higher demand occurring when domestic production is down and because of tariffs on lumber from Canada, Mr. Dietz said. Approximately 30% of lumber used in the U.S. comes from Canada, and buyers must pay a tariff of about 20% on that lumber, he said.
Shortages of lighting and plumbing fixtures, cabinets and appliances have also been reported by builders and remodelers, particularly for items manufactured overseas.
“Construction costs have risen across the board because of the lack of availability of raw materials and because of staffing issues in manufacturing and distribution,” said Josh Kassing, vice president of design development for Mary Cook Associates in Chicago, which provides interior design services for developers and custom builders. “Even windows and appliances are less available and more expensive because they need metal and glass.”
Since the pandemic, the global supply chain has been disrupted with fewer flights and ships delivering items across borders, according to Mr. Dietz.
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“Literally even nuts and bolts are in short supply,” he said.
Even before the pandemic, the trade war with China and tariffs on Chinese goods meant that a wide range of items were no longer being delivered to the U.S. by one of its biggest suppliers, Mr. Dietz said.
“We’ve had an issue with ceramic tile from China going back to 2019, when the tariff jumped from 8.5% to 25%, and then there was an anti-dumping effort that basically meant they added another 331% tariff followed by an additional 358% tariff,” Ms. Pearse said. “A tile that cost $2 would now cost about $1,000, which meant that we’ve had to find similar products elsewhere.”
For Ms. Gable, the biggest issues have been delays for cabinets and appliances.
“When Covid started in March and April, there really were no supply issues because everything was so uncertain and people put every project on hold,” Ms. Gable said. “In some places, like Pennsylvania, there wasn’t a shortage because all construction and remodeling was on hold.”
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However, the pace of remodeling and construction began to pick up in May and then to explode in June, according to Ms. Gable.
“The turning point was Memorial Day weekend,” she said. “We put in an order for custom cabinets that typically takes five to six weeks, and then right after Memorial Day, we were told it would take eight to 12 weeks because they were so overloaded with orders.”
Products that were in stock were quickly snapped up when demand rose and many manufacturers continue to operate at half-capacity because of Covid-19 precautions, Ms. Gable said.
Prices for appliances and cabinets have not sharply risen yet because most manufacturers change their prices annually, Ms. Gable said. However, she anticipates price increases across the board in 2021.
Pivoting and Patience Required
Adapting to shortages and delays requires a nearly weekly recalibration, according to Mr. Kassing.
“The model homes we design for builders have very sensitive timelines, so there’s pressure to meet deadlines,” Mr. Kassing said. “We have weekly check-ins with our vendors about what’s in stock and sometimes switch products as long as we can keep in the spirit of the design.”
In some cases, builders are deliberately waiting to start framing a house in the hope that lumber prices will decline, Mr. Dietz said.
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“We’re especially hearing that from high-end custom builders, because those homes are larger and more costly,” Mr. Dietz said. “They take a little longer anyway, so the buyers may be more willing to accept a delay.”
Shortages of raw materials are causing delays for even fabrics and furniture, Mr. Kassing said.
“Even art and accessories aren’t in stock, so residential customers who want something specific may have to wait months,” Mr. Kassing said. “The sense now is that this is not the time to settle for something that isn’t right, so most individual customers are willing to wait and invest their money in quality even if it takes longer.”