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  • Writer's pictureDon Magruder

Building Material Supply Issues are Not Political

Let me state this upfront, this is not a political column disguised as a housing column.

Recently, a local politician asked me what was going on in the building supply chain with all the disruptions, and when I gave him my thoughts, he said that is (bad word), it was all the fault of the President.

Please, can we stop with politicization of business cycles and systemic issues in housing.

My perspective on the supply chain has been formed from 42 years of experience in the building supply industry, operating one of the largest independent building supply dealers in the state of Florida, a former Chairperson of the Florida Building Material Association, countless leadership positions in the Home Builders Association, and someone that consults large, national investment houses on a monthly basis. I might have a little more insight than a local politician who wants to politicize every problem in America.

Here are the real issues which have caused the building supply disruptions we have seen over the last couple of years:

Supply capacity in the United States cannot keep up with demand. Simply put, there are not enough mills and manufacturers to keep up with the housing and remodeling demand that has been pent up for more than a decade. The following are real numbers from the United States Census Bureau on housing and population.

In 1979, the United Sates population was 225.1 million and, in that year, with an average 11.2 percent housing interest rate, there were 1,745,000 housing starts.

In 1999, the United States population was 279.0 million, and for the total decade of the 1990s, the country averaged 1,371,000 housing starts.

After the housing crash, the yearly average number of housing starts in the United States from 2008 to 2020 was only 983,000. This is a record low in housing starts for a 12-year period by far since World War II.

Now compare that total to the most recent housing numbers in December 2021.The United States population is currently estimated to be 329.5 million and in December 2021, housing starts were 1,702,000.

Think about these numbers and what they say about the supply chain and housing.

First, based on population growth, the United States has not been constructing enough housing for the last decade or better. There were a similar number of housing starts in 1979 as in December of 2021, however, the country currently has 104.4 more people. These numbers make no sense. Therefore, it can be postulated that multiple families are living together in homes and apartments.

The other unfortunate secret is that the average yearly low housing starts in the United States from 2008 to 2020 put a huge number of lumber and building supply mills and manufacturers out of business. Some years, the market shrunk by more than 60 percent and during this time-period most people in the supply chain were barely surviving if at all.

Technology in the industry has been good and bad. A lot of manufacturing equipment during the huge collapse after the housing bust became obsolete with parts unavailable or with unsupported software platforms. The industry must re-tool which requires a lot of capital and time. Once the new technology is put in place, it should help resolve some issues, but that is a multi-year process.

Finally, the COVID-19 pandemic has demonstrated to our new generation that owning a home is indeed important. Demand for housing is surging due to the interest in homeownership by young people.

Yes, there are issues with COVID delays in staffing and labor, along with tariff concerns that the politicians could help to ease, but the amount of housing built relative to population growth has created a real housing hole for the country. If you want to blame the politicians, you need to blame all levels of government since about the mid-1990s for not having a real national housing policy.

There is another part of the housing equation that can’t be ignored. The world population is growing and the lifestyles of millions are improving. The overall international demand for building supplies is growing faster than any point in human history. America must now compete globally for building resources.

So, please don’t politicize the housing and building supply issues. These are systemic housing issues created over the last 12 years after the housing bust of 2008.

In next week’s column, I am going to discuss, in detail, the main areas of the building supply chain that are having the biggest problems.

Don Magruder is the CEO of Ro-Mac Lumber & Supply, Inc., and he is also the host of the “Around the House” Show which can be seen at AroundtheHouse.TV.

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