Builders report historic, broad-based levels of materials shortages

Courtesy of the National Association of Home Builders.

From appliances to plywood, materials shortages are more widespread today than at any time since the National Association of Home Builders began tracking the issue in the 1990s. 

Special questions added to the monthly builder survey for the May NAHB/Wells Fargo Housing Market Index showed 90% or more of respondents had experienced shortages of plywood, oriented strand board, framing lumber and appliances, and most other materials were also in short supply. 

Courtesy of the National Association of Home Builders.

In all, 24 different materials were surveyed, with ready-mix concrete and cement the most available, relatively speaking, with 43% and 44% of respondents respectively classifying them as in short supply. 

The last time the NAHB asked about materials availability was in June 2020. At the time, fewer than 40% of builders reported a shortage of any of the materials queried, according to a press release

In the intervening 11 months, the share of builders reporting shortages increased by at least 27 percentage points for each material, although usually by much more. The shares reporting shortages of oriented strand board and plywood, for example, surged 83% and 81%, respectively. 

The NAHB added appliances to its latest survey after receiving anecdotal reports of shortages. The addition of the item was more than justified, the NAHB noted, since 95% of respondents reported sourcing difficulties, the highest percentage for any item ever recorded in the survey. 

9 ways to win a bidding war

It’s a seller’s world in today’s housing market, and buyers and their agents are getting creative trying to gain an advantage in the bidding wars that seem to precede any successful transaction. From pizza to pre-approvals, here are some of the tools real estate agents are using to help their clients land their dream homes. 

Payment in full. It may seem obvious, but now is not the time to nickel and dime. Sellers know they have plenty of options on the table, so coming in with an offer that’s over the asking price is a good way to get their attention, according to Keller Williams Realty River Cities agent Tiffiney Graham. 

“Of course, the house still has to appraise,” she said. “One of the things we’re doing to win a bid is we’re agreeing to pay a certain amount over appraisal price.” 

In a recent transaction, Graham’s client agreed to pay the seller $15,000 over the appraisal price. 

“No matter what, they’re going to get $15,000 extra,” she said. 

Move fast. Sellers want to get the deal done, and get it done today. There are many ways to grease the skids, according to those we spoke to.  

One of the biggest obstacles to closing a deal is financing, and with so much cash flooding the area from the West Coast and New York, sellers won’t wait on one buyer to secure a loan when there’s another one with money in their pocket.  

Joseph Crochet, founder of Crochet Realty Group and an agent at PalmerHouse Properties, told Atlanta Agent magazine a key for those who do need financing is to get preapproved for their loan vs. pre-qualified. Being preapproved for a mortgage is almost as good as having cash, because the seller knows you’ve got dry powder ready for deployment. 

Option money. Nicholas Brown, founder of &Brown and an agent at Compass, will often recommend his client put down “option money,” maybe $3,000 to $5,000 payable to the seller. 

“Why that is strong is it says, ‘I immediately want to be the winner, I’m going to tell you that if I don’t buy the house, you’re going to get this money, regardless,” Brown said.  

The buyer’s earnest money payment is not at risk, but the option money is immediately nonrefundable, Brown said. 

Keep it clean. A critical step buyers can take that was cited by all interviewees is a clean, no-hassle contract with no special conditions. 

“A really clean contract and a clean offer,” as Graham said. 

“You’re not really asking for anything: If the seller wants to take the fridge, if the seller wants to take the washer and dryer, then so be it, because someone behind you is going to be accepting of those seller terms,” Brown explained. 

Cover those closing costs. The days of negotiating who pays what closing costs are over, at least for now, agents agreed. 

“When it’s a buyer’s market, we usually ask for a certain dollar amount from the seller toward closing costs, and right now, that amount is zero,” Graham said. “A buyer’s got to be able to come up with their own money in order to close on top of any down payment that they have.” 

She added that buyers should expect to cover other additional costs, like inspections of the pool or septic system. 

Let them stay. Buyers need to be ready to provide the seller some additional time in the house post-sale. 

“A typical closing is 30 days, but sometimes a seller needs more time to find a house themselves,” Graham said.  

She recounted a recent transaction in which her buyer closed on a house but agreed to let the seller rent for 12 months while they built a house of their own.  

“That was a creative solution to being able to get the buyer the house that they wanted,” she said. “It’s beneficial for a seller to do something like that because right now, they’re getting the highest price they can for their home, but they’re allowed to stay in the home until they find or build something.” 

To waive or not to waive? There’s a lot of talk about buyers agreeing to waive home inspections before closing, and Graham has one piece of advice: Don’t do it.  

“I want to protect my buyers and give them the opportunity to have an inspection and be able to walk away if the house is in poor condition,” she said. “If that’s going to make us lose a contract, then so be it.” 

Instead, Crochet suggested a “right to request repairs,” which can also be used to trim down the due-diligence period, another fact of life for buyers these days. 

“Five days, max,” Crochet said of the due diligence periods he’s seeing.  

Brown has sometimes used the right to request repairs to eliminate the due-diligence period completely. 

“In Georgia, the due-diligence period means you can terminate for any reason,” he said. “If you take that off the table, and you go to right to repair, then the right to repair means you still get to do your inspection, you come back to the seller and say, ‘Here are the deficiencies, I’d like to negotiate these items out with you.’” 

Continuing education. Buyers need to know what to expect. In most cases, it’s been many years since a buyer last bought a house, if they’re not buying one for the first time. Getting them used to the new normal is key. 

Buyers need to be prepared to “go in full throttle, the best they can, right out the gate,” Crochet said. “We’re not going in with the idea to be the highest and best all the time, but especially in this market, I would say eight out of 10 times we tell them to make the highest and best offer that they can present.” 

Taking it personal. Keeping in close contact with the listing agent during negotiations, or “charming their butts off,” as Brown puts it, can also make the difference between success and failure. 

“I’ve seen contracts where people are offering to buy the sellers pizza,” he said. “It’s anything and everything right now. You’re deploying the charm offensive, you’re making sure that you acquiesce to everything that the seller needs as far as their dates, their timelines, their terms.” 

Even something as small as a letter from the buyer, noting their emotional attachment to the home, can move the needle, Crochet said. 

“Sellers appreciate that as well,” he said. “Each house has its own story, each house is going to be different.” 

For more on negotiations, see our course on making an offer for your client.