KC’s housing industry booming despite pandemic, supply shortages and more

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KANSAS CITY, Mo. — You can hear the exhaustion in Shawn Woods’ voice. 

As the president of Ashlar Homes in Blue Springs sits in his truck outside one of his unfinished houses, he can’t hide his frustration either. 

“We’ve been extremely busy,” Woods said. “We could have sold 20 more homes last year, but we just couldn’t get the materials we needed.” 

Despite a global pandemic, shaky economy, shortages of supplies and skyrocketing lumber prices, Woods said the demand for new homes has continued to grow. 

“The number of people wanting to build a new home hasn’t gone down,” he told FOX4. “And we’re in a volatile situation. Lumber costs have increased – in some cases adding as much as an additional $25,000 to $30,000 to the price of a home.” 

“The price of nearly everything you need to finish the inside of a home also ticked up, like drywall and windows,” he added. “Normally we could lock in those prices for a year or at least six months. Now it’s 30 days.” 

The industry has faced supply shortages, too. 

“Our window supplier doesn’t have enough to meet demand,” Wood said. “We used to have a three-week lead time. Now it’s 12-15 weeks. Early in the year, we had delays with cabinets. Those are back to normal. We also had issues getting some models of heating and cooling systems. We got that resolved, and then we had issues with windows and interior doors.” 

“It’s just been a challenge,” Woods said. 

Will Ruder understands and appreciates Woods’ frustrations. 

“When COVID-19 came around, there were people all over the country wondering how that would impact their industry from an economic standpoint,” said Ruder, executive vice president of the Home Builders Association of Greater Kansas City.

Would COVID-19 trigger a collapse in the housing market? Would 2020 be another 2008, the catastrophic year when risky subprime mortgages popped the housing bubble and sparked a national crisis? 

Those questions and concerns rippled across the housing industry when the pandemic hit, Ruder said.

 “What we experienced, however, was the exact opposite,” he said. “Housing boomed in 2020.” 

The number of building permits issued for single-family homes reached 4,894 by the end of November, according to the Home Builders Association of Greater Kansas City. That’s 674 more – or about 15% higher — than the 4,220 building permits pulled in 2019. 

“Not only did home building boom, but refinancing was up more than 200% in the spring,” Ruder said. “More people were remodeling their homes or re-doing their decks.” 

And that increased demand came at a time when homeowners and homebuyers face escalating costs for materials. 

The price of lumber, which Ruder said represent 12% of the cost to build a home, soared amid the pandemic. 

“Domestic lumber mills started tapering back in anticipation of huge housing hits,” Ruder said. “They were thinking they’d see people not able to finish their homes or all the bad things that happened to the housing market in 2008. So there was lower production and higher demand. And that contributed to higher prices.” 

By September 2020, Ruder said lumber prices had jumped 170% since the beginning of March.  

“Prices did come down and continued to decline in December,” he said. “Now they’re starting to spike again, but not to the point where they were in September. But demand has not dissipated.” 

The lumber mills, he said, tried to adjust and keep up with demand. 

“But when the lumber mills recognized that the housing market was one of the few bright spots amid the pandemic – and it was going as hot as it was – many of them experienced similar difficulties as other manufacturing plants did during COVID, ”Ruder said.  

“We saw a 30% reduction in domestic mill capacity because of the response to COVID-19,” he added. “It was difficult for those mills to get PPE for their employees. There was also a 30% reduction in the Canadian manufacturing of lumber. And on top of all of that, there was a 23% tariff on Canadian lumber.” 

COVID-19 restrictions also impacted the availability of many home building supplies and products, Ruder said. 

“There’s a backlog on windows, dishwashers, microwaves and other products that are foreign-sourced,” he said. “They can’t get here because of COVID. There are ships with products on them that are circling (U.S. ports) and have nowhere to go.  

“Some plants also shut down for safety reasons (amid COVID),” he added. “COVID has impacted production plants nationwide and around the world. Everyone is impacted. It’s made everything so much more complicated. What used to be easy now requires an additional 10 steps.” 

But what does this mean to homebuyers’ bottom lines? How much have all these factors added to the price of a new home? 

“The national average for a single-family home has spiked north of $14,000,” Ruder said. “When you’re looking at homes in the $200,000 to $300,000 range, that increase could be the difference in whether or not you qualify for the home.” 

Woods said he’s seen home prices in the Kansas City increase even more.

“If you looked at a home in January (2020) and then look at that same how now, it could be $30,000 to $50,000 more,” he said. 

Woods credits the historically low-interest rates for saving his business and the home building industry. 

In Kansas City, the interest rate on a 30-year-fixed home loan is around 2.65% and around 2.37% for a 15-year-fixed mortgage for consumers with good credit. 

“The rates are so extremely low that people are able to absorb the increased price of lumber and other materials,” Woods said. 

Ruder agreed. 

“The low interest rates have offset the lumber prices,” he said. “If the interest rates would have been where they were in the fall of 2018 — where you were right around 5% — the increased lumber prices would have been catastrophic.” 

Given the current economic and COVID-19 climate that builders now face, Woods said consumers interested in building or buying their dream home should act now. 

“My dad used to say the best time to buy a house was yesterday,” he said. “If someone is in the market for a new home, I would say they should buy now. Prices are going to continue to go up.” 

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