Materials shortage pushes homebuilders even farther off the pace of demand

|  July 29, 2013 |

woodenbarsIn addition to the skilled labor shortage currently keeping the construction industry from meeting the increased housing demand it has seen in the past 6 to 10 months, a shortage of building supplies is now keeping these contractors even further off pace, reports Reuters.

According to the report, regional building materials makers—the companies that supply home builders with wall and roofing materials as well as interior fittings—are still operating in a very tight credit market because of the recession.

In addition to the tougher federal regulations on lending that make some small building material suppliers unattractive to big lenders, many of the smaller, regional banks these companies went to for loans didn’t survive the recession.

And it’s not just odds and ends that contractors and middlemen are having a hard time getting their hands on from suppliers.

One company that Reuters talked to was facing a shortage of oriented strand boards—the most commonly-used roofing material in the U.S. In fact, a National Association of Home Builders survey in June found that 22 percent of homebuilders have reported a shortage of these boards, which are strands of wood bonded with wax.

Plus, analysts told Reuters that many of these suppliers have “ridden the coat-tails of the wider housing market rebound” and have deceptively overpriced shares.

“It’s a really attractive industry from an economic perspective but … from a valuation perspective we find it less attractive,” David Manger, a portfolio manager at AMI Investments, told Reuters.

 

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