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Homebuilders raising the alarm on the supply chain

22 September 2021
2 min.
Homebuilders raising the alarm on the supply chain

Supply disruptions

America's biggest housebuilders warn that supply chain disruptions caused by COVID-19 are not going away any time soon.

Both DR Horton Inc. and Lennar Corp., two of the biggest homebuilders in the US by market capitalisation, said material shortages and price increases following the pandemic were preventing them from meeting prior supply recommendations.

Since the economic recovery, housing developers have struggled with supply chain disruptions that have led to material shortages and soaring costs at a time of high demand for construction projects.

Lennar delivered 15,199 homes for the quarter ended August 31, about 600 homes below the lower end of its forecast. The company also lowered its fourth-quarter delivery target to around 18,000 homes.

The warning from Lennar came a day after rival DR Horton lowered its forecast for closed homes and revenue in the current quarter due to "shortages and delays in delivery of certain building materials, as well as labour market tightness".

The Arlington, Texas-based construction company on Monday updated its forecasts and said it expects to close between 21,300 homes and 21,700 homes in the fourth quarter, down from the previous range of 23,000 homes to 24,500 homes.

The company also lowered its revenue forecast to $7.7 billion to $7.9 billion, down from a previous range of $7.9 billion to $8.4 billion because of fewer home closures.

While housing developers remain concerned that supply chain issues may persist, they are beginning to see some relief. Lumber prices, which were up 500% earlier this year, are starting to fall. The drop is a welcome sign for Lennar and other construction companies, which saw costs jump by $5.40 per square foot in the third quarter. Lumber accounted for about 95% of the increase.

The drop in the price of lumber and other materials is already being reflected in surveys of builders The National Association of Home Builders (NAHB) said in a report released Monday that sentiment improved by one point in September as material prices fell.

However, the NAHB, like housebuilders, warned that supply chain problems are likely to persist in the future.

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