By Stuart Korfhage, Jacksonville Business Journal
This year has been a celebratory one for MasterCraft Builder Group, but the unpredictability of the homebuilding supply chain has rained on the party a little bit. The St. Johns County builder enjoyed its 10-year anniversary in 2021 and passed the 500 mark in homes completed. It’s just that it’s been tough to get too high even during a record year.
While unprecedented demand has its advantages, it has also created plenty of problems across the industry. “The demand is off-the-charts good,” MasterCraft owner Chris Shee told the Business Journal. “But the volatility in construction costs and supply delivery has just been atrocious.”
Volatility has been so high that MasterCraft and other builders have had trouble pricing their products appropriately as material prices skyrocket. For instance, Shee said an average home that his company builds incurs a cost of $20,000 to $25,000 for lumber under normal conditions. That cost has now reached about $55,000 to $60,000. Shee said that a piece of plywood that cost $10 last summer has surged to $60 now. With such a jump, Shee said his company will actually lose money on some homes built this year because his costs rose so much between the time the contract was signed to when construction commenced.
“When our costs started going astronomically higher and I realized I was going to lose money … the discussion was do we go back to our customers and tell them we’ve had exorbitant price increases and we need to increase their purchase,” Shee said. “Ultimately, I didn’t want to do that. Because for the whole year, I was going to make money. A lot of other builders are not doing that.”
It hasn’t been just lumber making things difficult for builders. There have been shortages of windows. There was a two-week period in which a local heating/AC contractor couldn’t get flex duct, so they couldn’t install HVAC systems. Sometimes electricians haven’t been able to obtain electrical boxes. An array of material shortages has plagued builders as demand has increased for new homes as well as remodels.
“It’s a blessing to do what I do,” Shee said. “I’m not complaining. It’s just very challenging.”
Looking ahead, Shee expects to be able to keep doing what he does for a long time. Building only in St. Johns County, Shee said there is enough pent-up demand to keep him busy for years. By his estimate, the county has under built by more than 40,000 homes since the recession. His projection is reflected in the low inventory in St. Johns County. According to the Northeast Florida Association of Realtors, there was less than a month’s worth of inventory in the county in May, the most recent statistics available.
“We have years of robust business ahead of us,” Shee said. “There just aren’t enough homes. When you have demand that’s greater than the quantity of supply, it’s going to be a robust market.”
As many industry leaders have pointed out, even though Northeast Florida home prices have certainly risen quickly — currently at a median sales price of $290,000 for the region, NEFAR says — they are still much lower than other parts of the country. That’s little solace to locals, who are experiencing some sticker shock in the current market. As an example, Shee said the smallest home he sells in SilverLeaf is a 1,500-square-foot house on a 40-foot lot. The starting price is $405,000.
“The locals are having price shock, for sure. We’re seeing that,” Shee said. “We’re really cheap compared to almost anywhere in Florida, at least coastal counties in Florida. And we have the best freaking lifestyle out of all of them. It just isn’t going to slow down.”
The relatively good news is that Shee doesn’t see prices going substantially higher in the near future. Lumber prices are expected to come down, which should help. And prices just can’t go up at this rate for long periods. Buyers do have finite incomes. “I think we’re nearing that plateau if we aren’t at that plateau now. Lumber prices have peaked,” Shee said. “We’ve increased our prices at an unsustainable rate because we had to and the market kept absorbing it. But it can’t go on forever. I think our pricing is going to level out. The demand will continue, but our pricing is going to level out.”
