As we have discussed in our blog post on renovations, the number of renovation projects has increased dramatically since the start of the pandemic. Now that people are spending more time at home to do leisure activities, there is now more time available to do renovation projects that they otherwise have not been able to do. This has led to shortages in materials for contractors, including lumber, house fixtures, countertops, furniture, etc. With many people flocking to improve their homes, it is critical for contractors and property owners to plan accordingly.
Shortages
With the increase in demand, domestic manufacturing and imports have not been able to keep up with needed supply in a timely manner. Because of this, this has led to 70% of remodelers reporting a shortage of labor and 33% of firms are experiencing delays by an average of 3.9 weeks for their new projects. Many lumber mills have been at risk of closing down due to the lockdown restrictions and lack of labor to keep up with demand. According to the NAHB, the price of lumber has risen by 80% by mid-April and has steadily increased since then. The tariffs on Canada and China have also been a factor to the increase in prices overall. Future projections predict that this shortage will last until the winter months, when less construction is being done overall.
Contractor Bidding
These set of circumstances have led to an adjustment of the bidding process for contractors. The price inflation resulting in the lack of supply has led to locking in on higher prices ahead of time. This has been done in order to maintain steady profit margins with the newly inflated prices. If the price is too high for the client, they may offer alternative materials for cheaper prices. This may be the time for clients to consider negotiating outside of the standard “fixed price” contracts. Two common alternatives are CostPlus and Time & Materials Contracts. These can take into account the delays in receiving materials and possible reimbursements for the construction that was not done. While these require more bookkeeping from contractors, they can ultimately save you money during a time of spiked prices.
East Bay Investment
Our firm is always keeping it’s finger on the pulse of the house remodeling market. We take into account the shortages mentioned above and use that to plan ahead to get our projects done within a realistic timeline. Our network of contractors and resources has allowed us to attend to our properties in an efficient manner, while also making sure we get the best quality output of labor. Give us a call today if you are looking to invest into our current property renovation proposals!
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