Knoxville homebuilders face high material costs, low inventory
Low inventory and strong demand should continue to drive the local homebuilding industry throughout 2022. Homebuilding will remain a positive sector of the economy but will also face challenges stemming from the COVID-19 pandemic.
The greater Knoxville area has hit record housing numbers over the past two years. Demand for housing in our area has never been higher, existing home inventories are at record lows, and available rental homes and apartments are extremely difficult to find. Prices are up across the board. Contractors are struggling to keep pace and consumers are feeling the pain.
Homebuilders face a few challenges as they navigate what will be another productive yet challenging year.
Higher material costs, supply chain delays
Sky-high lumber prices dominated industry news waves last year as record price increases added roughly $36,000 to the cost of a typical new home, according to the National Association of Home Builders.
Rollercoaster prices have made it difficult for companies to budget and plan for the year, especially smaller companies like the majority of builders and contractors in our area.
Many other products and materials have gone up as well. Appliances, doors and windows all cost more, but lesser-known items like steel mill products, resins and plastics, copper pipes and laminated veneers have all increased.
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Everything adds up when constructing a home.
Not only have prices surged, but availability of products is unpredictable — it can take weeks or months to receive items that used to take only days or a trip to the supplier across town.
Former Home Builders Association of Greater Knoxville president John Cook of Cook Bros. Homes agrees that the supply chain issues are problematic.
“Our company is living it right now along with everyone else,” Cook said. “It’s no joke and it’s not hype or overblown. If anything, the issues are being far understated.”
Workforce shortages, skilled workers
The labor shortage is severe in nearly every business sector.
National Association of Home Builders Chief Economist Robert Dietz said there are more than 400,000 job openings in our industry nationwide.
Dietz estimates the construction industry needs to add 740,000 workers a year to make up for retirements and the industry’s growth.
Local contactors are desperate for labor to keep up with strong demand, particularly skilled workers like carpenters, electricians and plumbers. This is a tremendous opportunity for young adults to begin rewarding, successful careers in the trades.
Gov. Bill Lee and Knox County Mayor Glenn Jacobs are in the process of creating a local school to train a quality workforce in the construction industry, called the Skilled Trades Academy and Regional Training Center (START).
The school is slated to begin training students later this year. Other construction training programs are available via high school career technical education classes, community colleges, trades unions and the Tennessee College of Applied Technology.
Antidevelopment groups, government restrictions
Neighborhood groups that oppose new housing developments are not necessarily antidevelopment overall, they just do not want anything new in their “backyard.”
Developers build new neighborhoods to keep pace with population growth, generally along relatively predictable patterns and expected timelines. Most neighbors understand this process and accept it, but others can get upset about it.
The sudden arrival of people moving here from across the country has put us in a crunch. Good solutions are not always easy to find, and opponents can become very vocal with government offices to deny or restrict new developments.
Currently, Knox, Blount and Loudon counties are dealing with land use issues. Planning departments or elected officials have pressed pause to slow or stop some developments, something that homebuilders oppose during a time when new housing is desperately needed.
Expect more growing pains as housing pushes beyond Knox County borders into surrounding counties in order to meet demand. The National Association of Realtors surveyed more than 20 economic and housing experts to gauge their expectations of home-price growth, new-home sales and existing-home sales for 2022.
Aside from their technical predictions, the experts identified 10 “hidden gem” housing markets across the country, and you guessed it, Knoxville was on the list.
Remodeling
During the pandemic, it became apparent that many families needed more space. Working from home and virtual school classes became routine. Home offices, study areas, gyms and outdoor entertainment spaces became top remodeling projects, and many of these amenities are now being added to new construction house plans.
“Remodeling is forecast to be up 6% this year, making it one of the strongest segments of the…
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