Homebuilding Hit by Labor and Supplies Shortages

Despite a big rise in orders for new homes in the past year, a shortage of building supplies and skilled labor is causing construction to lag demand.

“A wider housing market recovery has yet to filter down to regional building products makers—the companies that supply the roofing, walls and interior fittings needed to build these new homes,” Reuters reports.

Tight credit is also limiting suppliers' ability to raise their production to meet demand. Since the financial crisis, big banks are more reluctant to lend to small suppliers.

"Until you know unequivocally that the housing market has returned, you are going to be more reticent if you are a bank," Scott Simpson, BlueTarp chief executive, told Reuters. "Big banks are not going to lead the field in lending."

Homebuilders also are still operating at low workforces, following cutbacks during the housing crash in 2007.

"Construction is not proceeding as fast as it might have, had there been an ample supply of labor," says Chad Crow, chief financial officer at Builders FirstSource Inc. "I think that will probably be the trend over the next year or two."

Source: “Starved of credit, construction suppliers lag housing rebound,” Reuters (July 15, 2013)