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Demand is high for newly built homes, but the pandemic-related delays continue to hinder builders

Home buyers are less patient with builders than they were early in the pandemic, but builders are still facing supply-chain disruptions, price hikes for materials, and other pandemic fallout.

A house under construction by Chester County-based Southdown Homes. In the fall, Redfin predicted that the most houses since 2006 will be built in 2021.
A house under construction by Chester County-based Southdown Homes. In the fall, Redfin predicted that the most houses since 2006 will be built in 2021.Read moreCourtesy of Southdown Homes

More than 50 people were clamoring for the 11 townhouses that Southdown Homes will start building in Downingtown this spring. To decide who gets to move in next winter, the builder had to use a lottery this month.

Southdown used to sell houses well before construction started, but during the pandemic, that “just leads to frustration,” said Amanda Rocco, director of sales and marketing for the Chester County-based builder.

Gone is the patience that home buyers showed early in the pandemic when the unprecedented nature of the health crisis made them more understanding of the fallout. Demand is high for newly built homes as buyers face a record-low number of choices and rising prices for existing homes. Redfin predicts more homes will be built in 2021 than in any year since 2006.

But the pandemic continues to disrupt the manufacturing and distribution of building materials. That supply chain disruption hikes prices of materials — in turn inflating home prices — and delays construction. Materials such as cabinets and appliances that arrive late can hold up the use and occupancy permits needed for homeowners to move in.

“We understand their frustration,” Rocco said. “But at the same time, our hands are tied.”

Southdown Homes used to order vinyl siding four weeks in advance. Now, workers have to order the siding as they’re pouring the foundation to try to avoid construction delays. Tester Construction Group, a Philadelphia-based construction management and general contracting firm, used to wait four to six weeks for windows. Now, it orders them 12 to 18 weeks ahead. Members of the National Association of Home Builders said inconsistent access to building materials is their most pressing concern.

Meanwhile, the price of lumber reached a record high this month, up more than 170% over the last 10 months. That adds thousands of dollars to the cost of a home, delays construction starts, and disrupts closings, according to the National Association of Home Builders.

Prices of building materials such as glass, drywall, and roofing also are up. Costs and supply-chain disruptions will slow the growth of residential construction this year, the association said, but strong buyer demand, partly due to low mortgage rates, is keeping builder confidence high.

In 2020, starts were up 11% from 2019 levels. Applications for building permits jumped 10.4% nationwide in January, signaling strong future construction activity. The National Association of Home Builders predicts that 2021 will be the first year since the Great Recession that builders will produce more than one million single-family homes.

Still, the national supply of new homes is down from December 2019. Single-family construction starts dropped 12.2% nationwide from December 2020 to January, according to the Commerce Department. The only region of the country where construction increased month over month was the Northeast, where starts were up 2.3%.

» READ MORE: Lumber buyers ‘pay up or run out’ amid U.S. homebuilding surge

Southdown Homes closed 67 homes in 2020. “It was a good year for us,” said Tim Townes, director of construction. “Considering all the things that were thrown in front of us, probably a very good year.”

The company plans to start selling single-family and carriage homes in its Downingtown community over the next several months. It has had to navigate the ebbs and flows of appliance availability and delays in getting equipment for heating, cooling, and ventilation systems.

“There’s huge demand out there, and supplies are short,” Townes said.

Because of the influx of buyers who have never purchased a newly constructed home before, builders also have to teach more people about the complexity and difficulties of construction, said Mark Weiss, founder and owner of Weiss & Associates, a real estate developer and design-build firm that constructs luxury houses on the Main Line. It’s not a welcome lesson for buyers who have spent months finding little to choose from and getting outbid in the existing home market.

Faced with shortages of appliances and fixtures, builders search for alternative brands or have to wait to install them later, which delays projects by a few months, Weiss said. Builders, contractors, and subcontractors also face the constant possibility of sick workers and the quarantines that follow.

“At times, we have a workforce that goes down because of COVID,” Weiss said. “That has definitely caused delays in construction.”

Weiss & Associates has four homes scheduled for construction this year and eight or so more in various planning stages. That workload is three or four times what the firm has seen in past years, Weiss said.

» READ MORE: New construction booms as home buyers look to stretch out (from August 2020)

“It is the spirit of the tradesmen and the builders that have rolled up their sleeves and said, ‘People need to move in. They need their homes,’” he said. “We have figured out a way to deliver even in trying circumstances.”

There’s no end in sight to the “continued fallout” from the pandemic that builders face, said Michael Tester, founder and president of Tester Construction Group, which works mainly in multifamily and commercial construction. For example, gas, electric, and water providers also are slogging through service backlogs, which delay construction.

“We’ve just had a challenge in being able to bring those utility services online in order to close out buildings,” Tester said.

At a project on North Broad that is primarily off-campus housing for Temple University students, the delay last spring of the installation of the elevator meant the building couldn’t get a final certificate of occupancy. Tester Construction Group helped residents move in under a temporary permit that lasted until the elevator was installed a couple months later.

Pandemic safety protocols that limit the number of workers on construction sites at one time slows the work, especially for multifamily buildings.

After construction resumed in Pennsylvania last spring, “we basically doubled down,” said Carl Dranoff, developer and chief executive officer of Dranoff Properties, at the showroom for Arthaus, his 47-story luxury condominium building under construction at Broad and Spruce Streets. “When I say doubling down, I mean double shifts. It means working during the rain, during the snow.”

Construction workers build during the day, including weekends, and workers stage materials such as drywall, pipes, and tubing at night. The hoist that is equipped to transport 30 people up and down the building frame now carries only eight at a time because of COVID-19 protocols.

» READ MORE: City Council approves Philly construction tax and changes to property tax abatement in busy year-end session

Dranoff converted the future site of a residential high-rise at Broad and Pine Streets into a pandemic check-in station, where all workers get their temperature taken and answer questions about COVID-19 symptoms and exposure. The site hosts 200 to 250 workers on any given day.

For the health of future residents, Dranoff decided to finish the two amenities floors before residents move in instead of risking the mingling of workers and residents as construction continues, which normally would not be a problem. That decision will push back Arthaus’ original fall 2021 opening date to early 2022. Workers will continue construction on floors 35 and above by using a separate elevator not accessible to residents.