Fewer Multifamily Developers Are Seeing Deals Reprice

Nearly half, or 47%, of the respondents to a National Multifamily Housing Council survey saw deals reprice up last month, down from the 58% who witnessed upward repricing last December and much fewer than the 83% who found that to be the case a year ago in June.

However, only one fifth or 20% of respondents reported deals repriced down, which was consistent with the last two quarters when the numbers were 21% in March and 18% in December. The numbers changed more from June of a year ago when a smaller group or 13% of respondents saw dollar repricing drop.

How much did these repricing swings translate into dollars and cents? On average, there was a 9% increase, up from 3% in March of this year and last year, 8% in December and 11% in June.

For the fifth consecutive quarter, lumber prices continue to drop, down specifically 4% over the last three months. However insulation prices on average have climbed 3%. Some other essential products also have increased but at a slower rate compared to prior months. Appliances increased an average 2% but that was down from 7% last quarter, electrical components increased 7%, but were down from 9% the last quarter and exterior finishings and roofing went up 3% but were down from 4% last quarter.

Builders and contractors can be quite entrepreneurial when it comes to getting the job done at or near a desired price. To compensate for price increases as well as those supply shortages, in the case of exterior finishings and roofing 63% of respondents said they used alternative brands or suppliers for work while 50% used alternative product/material types or made design changes and 47% changed their purchasing schedules. When it came to coping with electrical components and appliance challenges, similar tactics were deployed, with the exact percentages varying.

Some also focused on escalation clauses but that was the least popular mitigation strategy the survey revealed, with 20% doing this with regard to exterior finishes and roofing shortages, 20% for electrical components, 3% for appliances, 7% for insulation and 4% for lumber.

Another piece of good news that has occurred over time is that respondents reported needing to call on fewer alterations for all products versus last year because supply chains have been recovering. All those windows and appliances that weren’t available at the peak of the pandemic are now on shelves and in warehouses, helping to get projects done with the preferred choices.

  Still at the top of the list of which alterations or used alternative products/materials were still required last month was electrical components—panels and items with chips at 47%, followed by lighting fixtures at 40% and then hardware—locks, door/window hardware and cabinet hardware at 27%. Yet all three of those also represented lower numbers than last March when the electrical replacements were 51%, the lighting fixtures at 53% and the hardware at 28%.