White House Says Materials Shortages 'May Be Short-Lived'

The shortages that have plagued the building industry since the onslaught of the COVID-19 pandemic may be ending, according to White House economists.

After hitting an eye-popping price of $1,711 per thousand board-feet last month, lumber prices have fallen 38%—a sign economists Susan Helper and Evan Soltas say suggests that some materials shortages could be short-lived. Commodities tracked within the Producer Price Index rose 19% year-over-year in May 2021, the largest such increase since 1974, and lumber has quite notably led those increases. 

The skyrocketing price of lumber has led a record number of homebuilders to delay new construction, according to National Association of Homebuilders data, but it’s not the only commodity in short supply. More than 90% of builders surveyed by NAHB also reported shortages of appliances and OSB, and exactly 90% reported a shortage of plywood. About 87% said there was a shortage of windows and doors.

And of course, such shortages have serious effects on development of all types. Marcus & Millichap’s John Chang noted recently that it’s “increasingly likely” that deliveries of the estimated 335,000 new apartment units, 325 million square feet of industrial space, and 523 million square feet of self storage space scheduled for completion this year will fall short. 

Supply shortages are also exacerbated by a lack of skilled labor, and those problems won’t be solved by falling materials prices and resolved supply issues. The construction unemployment rate is now 7.7%, down from more than 16% a year ago; meanwhile, construction wages are up by 3% during that same time frame. And overall, federal May job creation numbers were yet again lackluster at 559,000 new positions. With an estimated 8 million job openings across the US and 9.3 million unemployed workers, “a hiring disconnect continues to plague the employment market,” Chang says.