2021 is over now, it will remain a year in infamy for the builder. Never before was it so hard to get any work done, or so expensive relative to earlier years, to get the materials, if even materials were there to buy. Anyone who purchased a finished house in 2021 should consider themselves fortunate, as that same house would cost significantly more to build by December than it did in January. The year could be broken down into a series of unfortunate circumstance;
labour - typical small business owner would have a couple install crews. One key member would quit, and a second stay home and find other ways to get money. Now his crew is halved and the available jobs are everywhere. Or the best crew would quit and decide to freelance and double their rate. Now the business owner is screwed even more, the installer is making more from the same job than the business owner but doesnt have any of the responsibility to quote, supply, administer or service the client.
materials - typical small business owner has a longstanding wholesale relationship allowing expedited shipping and good pricing. Due to shortages, the wholesaler jacks the prices and the terms change from great service to ‘its coming sometime’. business owner caught in the middle and cant do anything right, scrambles around to fill orders, schedules are not met, the efficiency that allowed a company to run on big volume and smaller margins is disrupted. Every relation sours among everyone.
Infuriating as the year was, the material pricing and availability scenario has gotten worse, as some sector would recover, another would have an issue. The suppliers exercised a lot of pricing power, often they’d book a series of regular price increases that would compound. So raising prices 5% a month for 5 months results in a much larger than 25% increase to the end buyer. Diminishing quality was also noted of metal containing product. Throughout the year, it did seem that the productive crews that used to be busy became swamped. They’d try to hire and get no applicants willing or able to do the work. This has culminated now in some major price increases for crews able to offer good service. Maybe some of the labour increases were long overdue, and with a supply imbalance, skilled labour is really taking its piece. One anecdote from a skilled exteriors guy related to how he hadn’t touched vinyl siding for a decade, until he stumbled on a job paying 4x what he last was paid long ago. The vinyl job got done and some other builder had to wait. Now there will be an hourly wage expectation for any type of work. This is just inflation unfolding in front of our eyes, as the value of the dollar has completely diminished at a rate not seen by anyone.
In business news, we finished five homes by the end of the year, and sold four, with a new show home opening this week. Each had various trials and tribulations. Clearly we need to do things different and stick to procedures that work given the landscape has changed in what we can deliver. Expectations have never been higher while ability to get work done lower. We purchased a couple great properties and are really hesitant on acquiring any more. Prices are just too high and the uncertainties and downside risk too large to overextend. So many deals were done on property I felt was overpriced, undesirable, or just bad business. Will I be proven right or wrong does not even matter, when I see land sold for prices that don’t make any sort of sense I want to sit out. Inventory of inner city homes does seem to be really low, but will prices rise enough to account for high land, material, and now labour costs? Im suspicious of this market and what changes can happen in 2022. In 2021 we offered exceptional value in the buildings we created, something to be proud of, although the personal price of the management of these projects has never been greater.
here is a repost of some sales stats on 2021 for detached homes. what we see is remarkable strength in November and then December the level of sales smokes the available inventory selling 113% of homes listed. This is something not witnessed in my memory, though I don’t have a lot of market data at hand.