Florida is one of the hottest real estate markets, and it begs the question is there a housing shortage or oversupply in the state?

There is always a seller for each buyer, and while a rising real estate market may indicate supply constraints, that is not always the case. In this analysis, we will look at the raw data and interpret and understand whether there is a housing shortage or oversupply in Florida and what exactly is driving prices higher.

Understanding the real estate market in Florida

Median home prices have surged in Florida during the last two years, partly due to Covid-19, with many individuals going fully remote and choosing to relocate. While some companies have also moved to Florida due to the attractive business policies put in place by Governor DeSantis.

This has created an influx of remote workers looking for better weather and a lower cost of living. This also partly explains the population increase across the state. It explains the increase in rent prices across the state compared nationwide and the lower number of houses available to rent.

Despite the rise in home prices, home prices in Florida are still slightly lagging compared nationwide. On top of this, housing inventory, as the number of active listings is now roughly 50% lower than before the pandemic.

One of the reasons that explain the lower number of active listings is that single-family home transactions have continued to increase throughout 2020 and 2021.

Demand and supply dynamics in Florida

While analyzing the number of active listings is a good way to understand housing supply, it falls short when trying to see the grand picture. The reason is that active listings show homeowners or investors’ intent to sell a property, but it does not paint the full picture to understand the market’s supply side.

For that, we will need to look at the number of houses per inhabitant and compare it with the national average. At the same time, Florida remains one of the top destinations in the country to buy a second home, affecting how we analyze the results since these individuals are not actively looking to sell their property. They might rent it out but are not usually interested in selling it.

There are 10,054,457 residential properties in Florida, which considering the population of roughly 21 million, makes up 0.47 for each inhabitant. This means that, on average, there is roughly a house for 2 Floridians.

Nationwide, it is estimated that there are 142,153,010 residential properties in the US. This equates to 0.43. While it may seem like Florida has more houses available per inhabitant than the rest of the country, it is essential to understand that Florida has 1.04 million second homes, and it is by far the favorite destination to buy a second home.

This means that ~10% of all the houses in Florida are second homes, which pushes the real house per inhabitant figures to 0.429, slightly lower than the national average.

While our initial estimate is based on the Census and the second home data, other studies estimate that 1.7 million homes in Florida are empty. If these estimates are correct, we could estimate that between 15% and 20% of all the residential properties in Florida are not available for renters or buyers.

If these estimates are correct, it explains how the number of listed properties for sale is so low and how the market might continue to rise despite the rising mortgage rates and the declining prices in some areas of the country.

This apparent shortage created by the second home demand, the empty houses, and the short rental market has also increased the number of building permits, which slightly increases the supply but does not have a meaningful effect.

Source: HBWeekly

Conclusion

While several experts are predicting the real estate market to cool off, will it have the same effect in Florida as in the rest of the country?

While there is an increase in active listings from the bottom in 2021, there are still individuals looking to relocate to Florida, and the population is expected to grow. The property rental market should remain stable due to the strong demand and continued shortage of homes.

The main risk for the current market is a possible recession that would push empty residential properties onto the market and could lower the average and median home sale prices, but at the same time, it might not have the same impact on home prices as it will have on rents. The reason is that these houses may come into the market as long-term rentals.

When considering purchasing a value-add multifamily apartment property, your first step should always be deciding what needs to be done with the building to increase investor returns. In these cases, the best sponsors adopt a balanced approach aimed at minimizing risk and achieving the strongest possible ROI.

A wide variety of renovations and improvements can be made to any given property, so it can be tough to figure out which will genuinely attract renters and which will be nothing but a money pit.

Our decades-long experience in real estate investments and management, with a specific focus on multifamily properties, has enabled us to develop a simple acquisition process optimized for returns. Using a systematic approach, we assess all potential acquisitions to identify the most profitable options and calculate the overall impact they are likely to have on ROI. For each property, we decide which areas need improvement, how much it will cost, and when the improvements should be made. We then apply this knowledge to our budgeting process to align all decisions with our commitment to providing good value for our residents.

Understanding what upgrades to perform on a building usually means gaining deep insights into current market and area tenant demands. This article will review the most crucial aspects of that process.

Strategy, strategy, strategy

The first part of the value-added process is the acquisition strategy. There are three keys to success at this level: conservative estimates, risk management, and locating an undervalued property. By acquiring the property at the best price, we can improve its chances of success and also offer the investor an important safety margin.

Any given deal is subject to market timing and local nuances, so value-driven acquisitions are more important when looking at overall strategy. Factors beyond a real estate company’s control can disguise bad underwriting in the short term, but strategic errors will always surface over time. Letting your investments be driven by sentiment rather than strategy will have lasting consequences for any investor, especially in extreme market conditions.

Much has been written on the topic of market timing. However, industry veterans who have navigated recessions will tell you to never force a deal and never compromise your underwriting standards to get a deal done. Lowering your standards will inevitably cost you money in the long run.

Balancing maximum returns with risk management

We take a balanced approach to reducing risk and ensuring a reliable return on investment.

When aiming to achieve the highest returns from a multifamily property, there are several considerations to bear in mind. A comprehensive underwriting process, market analysis, in-depth local knowledge, and thriving professional connections are all integral to better returns. Then, a pre-acquisition study enables us to develop, scope costs, and schedule a post-acquisition renovation plan tailored to the property, so we can invest smarter and more reliably.

Identified target demographics, predicted growth trends, and the median income household of residents in the area are just a few factors that guide decision-making regarding the project’s scope and which improvements to make.

In fact, this is why we focus on multifamily properties. Compared to other investment classes, like industrial, retail, or office investments, these properties show excellent risk-adjusted returns with relatively stable long-term cash flows.

Multifamily is also known to have less downside risk during recessions due to the stable tenant base in most major markets. When potential homeowners become renters during economic downturns, the demand for apartments increases, and investors reap the rewards.

Why it’s important to analyze market conditions

During the first property screening and subsequent due diligence, learn everything you can about the market and competitive properties. Value is relative to the market in which it is calculated, and property owners should know what options are available to consumers in that market.

You’ll need to know what the competition is doing, what the marketplace is bearing, and what market segment the property falls into. But, you also need to consider how the property is positioned in the market. Although not every property has to be the best in town or offer the lowest rents, at Nathan Holdings, it is vital for our communities to provide good value for our residents, no matter the rental price or the number of amenities.

When studying the market, the primary goal is to determine its parameters and see what types of upgrades (if any) will work for the property in question. It is essential to recognize that the market dictates strategy, not the other way around. Renovations that return the most significant ROI always correlate with the market in which the property is located. It is crucial to understand that the market dictates strategy, not the other way from it. Renovations that return the most significant Return on Investment usually correlate with the property’s location. For example, installing smart home technology packages only adds value if competitors in the area also offer these features or if research has shown both demand for such upgrades and rent hikes from current tenants willing to pay more for them.

Deciding which renovations to make

Intelligent, informed decisions are the key to successful renovation projects. As mentioned above, it is necessary to perform thorough market research before purchasing a value-add asset because how much you can make on an investment largely depends on the asking price for similar renovations in that area.

We use two important criteria at Nathan Holdings when deciding whether to invest in a specific upgrade:

The first is the upgrade’s ROI. We like to see capital expenditures on unit upgrades produce at least 15% ROI. For example, if an upgrade costs $12,000, we want to see at least a $150 per month increase in rent to justify that investment. A $150 monthly rent increase yields a $1,800 annual increase, which is a 15% return on the original investment.

The other is how the upgrade contributes to enhancing the overall value of the building. When determining the equity multiplier of an investment in CapEx, we calculate the rental increase gain from a renovated unit and multiply by the cap rate projected in the sale of the property. Using the example above, in a 5-cap market, a $150 per month increase, yielding a $1,800 increase in annual rents, would add $36,000 to the property’s value. Compared to the initial cost of the renovation, $12,000, this would be a multiplier of over 3X on the original investment.

Repair vs. renovate

Determining when to repair or renovate involves the assessment of the project. Which strategy will lead to an upgrade in efficiency and which will only lead to an upgrade in appearance? Is cosmetics more important than energy efficiency? Does the existing feature perform well enough to merit its repair? These are the questions that should guide your decision-making process. Understanding what materials in today’s market are worth renovating and which ones are better off repaired is vital.

What’s the difference between repairing and renovating?

A repair typically involves restoring an existing feature to working condition. A renovation, on the other hand, entails removing the old feature and installing something completely new.

Assessing cost-effectiveness through the lens of the holding period is a wise choice. In many cases, renovations are often simpler, and repairs are cheaper. It would be best if you chose which option best suits your investment goals, planned exit date, and risk tolerance.

Information such as when it was built, what it is made of, and how well it still works – can give hints about whether the thing you are looking at needs to be replaced or isn’t going to last much longer. It is also essential to take note if the look of an apartment unit features old-fashioned designs and see if any updates could bring in new tenants and charge higher rates for rent.

Technology advancements have led to many useful and efficient improvements in many facets of construction. Unfortunately, many manufacturers’ “planned obsolescence” model has also led to an increase in disposable products built to last just five or so years. This also needs to be taken into account.

Cosmetic/aesthetic renovation

The aesthetics of a property add to its value through increased appeal to current and prospective residents. These can include painting, landscaping, and updating interior and exterior finishes – changes that might seem trivial but will significantly affect property performance, including vacancy and rental rates. These upgrades also help keep tenants happy, which increases retention.

Red Bay Apartments – Before and After:

Structural & major renovations

In general, renovations involving structural or major changes require the most involvement. These types of renovations can include replacing a roof, repairing foundations, adjusting mechanical systems, switching to high-efficiency toilets, improving kitchens, replacing floor coverings, and providing common area amenities. As this type of renovation is the most intensive, it can often result in the highest return on investment. Upgrades to in-room amenities are generally recognized as yielding the greatest ROI.

For example, we recently completed water, energy, and waste management improvements in one of our properties. This included installing new high-efficiency toilets in 500 bathrooms across all 288 units, achieving a reduction of over 30% in water consumption.

Operational upgrades

An underperforming property can also be improved by upgrading its management. Property management is the key to unlocking value through, for example, raising the rent to market levels, collecting back rents, and adding new revenue sources such as valet trash services to improve waste management and curb appeal. These operational issues should be addressed case-by-case to ensure the property runs smoothly and tenants remain satisfied.

 Increasing cash flow

A tiered, gradual strategy for upgrading multifamily assets gives property owners a way to both retain current residents and earn increased revenue through renovating units by group (building, floor, unit type) and upping the rent.

The impulse to act quickly and aggressively by upgrading everything at once is frequently thoughtless in more ways than one. It’s easy to forget that a multifamily property is more than just an asset classification. It’s a home to dozens or hundreds of people. You need to strike a delicate balance between preserving ongoing cash flow from existing residents and encouraging turnover for enhanced asset improvements and value appreciation when adding value to a property.

Value-adding renovations and improvements that appeal to current tenants, attract prospective tenants, and help keep a property’s occupancy rates healthy will be significant for maintaining profitability over time. Doing too much too quickly is a risky strategy. Going past what the market can handle may cause property owners to hold assets longer than planned, compensating for low cash flow stemming from periods of high vacancy rates caused by them.

Instead, experienced owners will contact on-site management, discuss planned upgrades, and see if the required rent increases are compatible with local market conditions, easing the potential risk.

Improvements may fluctuate in cost

The cost of improvements varies with economic cycles. The past year has seen material and labor shortages as well as a surge in overall construction costs, making it much more challenging to plan projects. Many renovators have thought to have paid around 15-20% more than they would have the previous year.

Macro-economic changes like inflation, supply chain disruptions, and interest rates will cause costs to fluctuate from those anticipated initially during initial underwriting. Financial discipline is necessary. These conditions require all upgrades to be planned carefully, with solid communication between owners, contractors, and suppliers. Remember that a schedule may still be disrupted, despite companies’ promises. We have encountered various economic swings over time at Nathan Holdings and are ready to avoid downswings by anticipating possible challenges.

For example:

Construction Materials Producer Price Index by Commodity is up ~35% in the last 24 months.

Check-in on progress

In renovation projects, there is often a focus on speed rather than costs and the appropriate processes. It is always vital to check in to ensure things are still going according to plan, which means keeping an eye on your budget.

Continued market research and communication with the on-site management team will inform you about the success of your recently renovated units and how to price and market them. It’s essential to stay informed so you can adjust your strategy as needed.

For example, if demand is higher than expected, you may want to increase rent. If construction costs are higher than expected, it may be time to revisit budgets. Or, if there’s an opportunity to rent or sell at a premium to recoup costs quicker, that’s something you should consider. If everything is going according to plan, continue monitoring until all projects are complete.

Conclusion

When determining the costs of renovating a potential investment, the most beneficial method is thoroughly analyzing the asset’s current state and understanding the demographics and competition in the local submarket.

A pre-acquisition study enables us to develop, price, and schedule a renovation plan deal tailored to post-acquisition, so we can invest smarter and more reliably. This is our practice and tradition at Nathan Holdings.

Overview of US shelter inflation

Inflation has been one of the central talking points during 2021, and into 2022. What started as transitory inflation created by supply constraints, has proved to persist longer than expected initially. It continues to affect housing prices, which in turn pushes rents higher, increasing the cost of living for millions of families across the country.

Since the second quarter of 2020, shortly after the corona outbreak started, the median house sale price has increased ~33% to $428,700 as of the first quarter of 2022.

 

Source: FRED

This increase in house prices has also been reflected in rent price increases. Despite the policies taken, including the eviction moratorium, which caused a spike in evictions when it finally ended. Since 2021, the median rent has increased nearly 20%, and there seems to be no end in sight.

Source: Themreport

Shelter continues to be the biggest component of the CPI, representing about a third of the index, and also the main expense for most families. Despite the rent increases, this has not been fully reflected in the CPI numbers. In fact, the shelter component of the CPI has lagged the overall index.

The data shows that the increase in rent prices across Zillow listings has been higher than the current shelter inflation.

While house and rent price increases have not been fully priced into the CPI. This trend does not seem to stop here, as mortgage rates continue to increase driven by interest rate hikes. Although construction costs have also contributed to the increase in rent prices, they have started to decline, as a consequence of higher mortgage rates.

Is There a Link Between Inflation and Migration?

Perhaps one of the main drives of inflation, and in particular shelter inflation has been the migrants. But is this actually true? Could the inflow of new homebuyers explain the rapid increase in house and rent prices in certain areas of the country?

To understand whether there is a direct correlation between inflation and migration we need to analyze the following data points:

• Migration flow into Sun Belt metro areas
• Compare national average inflation with those regions
• Compare the average housing and rent prices with the Sun Belt metro areas

Migration inflow into Sun Belt metro areas

If we look closely at the cities with the largest population growth over the recent past, we see a correlation between them – they are all located in the Sun Belt region. In fact, the top 12 cities with the highest population growth are all located in Texas, Florida, Arizona, and Tennessee.

Florida and Texas in particular were the most popular states (around a 1% increase in the population of both states in 2021). A combination of attractive corporate conditions has also led several companies and their employees to move there.

This combined with the fact that certain cities in those states are seeing population growth above 5%, can explain the higher demand for housing, and therefore an increase in housing and rent prices in the area.

Compare national average inflation with those regions

The national average inflation measured by the CPI has been higher in both Texas and Florida. For example, Tampa is the city with the highest inflation rate in the country, at 11.3%, which is 30% higher than the average inflation in the US, followed closely by Phoenix and Atlanta.

This shows that the migration to these states seems to be having an effect on inflation.

Comparing the national average house and rent prices

Finally, when comparing the average increase in house and rent prices nationally with Sun Belt states we also see data that confirms that migration is driving higher inflation.

Out of the top 10 cities in the country with the highest rent increases, only New York was not located in the Sun Belt region. The same trend can be identified when analyzing the states and metro areas with the highest house price increases. Phoenix, Atlanta, Tampa, and Miami

Conclusion

Real estate investors have also been paying close attention to this, and that explains why Sun Belt Metros has slowly become the most attractive multifamily real estate markets in the country. In fact, in the first quarter of 2022 alone, the number of multifamily property transactions doubled compared to 2019.

This shows how the demand and supply in the multifamily real estate market have increased, and it is the most liquid in the country. Dallas, Phoenix, and Atlanta remain the most liquid multifamily real estate markets.

Migration in certain states has been a key contributor to inflation, and in particular in the rise of housing and rent prices. Sun Belt cities remain one of the most attractive destinations, and it seems like this trend will continue over the following years.

Three Factors Contributing To Fewer People In The Workforce

A piece Yaron wrote for Forbes Real Estate Council about The United States labor force: “As of the beginning of 2022, there are around three million fewer people employed than before the pandemic. There is an increase in people quitting their jobs, (also known as the “Great Resignation”).

Read more about “Factors contributing to fewer people in the workforce“.

Leave Nothing to Chance

When you’re investing in multifamily properties, the right property management company can make the difference between making a profit or losing money on your investment.

An active property management strategy ensures that your investment properties remain productive and profitable, saving you time and effort while increasing the value of your assets.

Download

TV Interview: What To Consider When Choosing A Real Estate Investment Firm

Investors are looking for alternative forms of investments beyond the stock market.

Welcome to the world of passive income through a real estate private equity company.

Instead of dealing by yourself in finding a property that is a good fit for you, managing it daily, getting finance, finding a tenant, collecting the rent, dealing with lawyers, tenants and more, you can invest through a private equity company. When investing through a private equity company, you benefit from a whole team working just for you.

 

For those interested in real estate investing, listen to our team’s interview at “Inside the blueprint”:

Real-Estate Predictions for 2022

A piece Yaron wrote for Forbes Real Estate Council about the snowball effect of rent inflation: “In 2021, the real estate market saw a historic rise in home and rent prices throughout the U.S., leading many to ask if rent prices will continue to skyrocket in 2022. As I argue here, rent must go up!”

Read more about “the snowball effect of rent inflation“.

The U.S. Economy currently has More Open Jobs than Jobs Seekers

Experts attribute current hiring difficulties to several primary factors: unemployment benefits, pandemic concerns, and childcare. One thing is clear, the issue is not down to a shortage of jobs. In June, according to the Job Openings and Labor Turnover Survey, U.S. job openings soared to a record 10.1 million, exceeding available workers for the first time since the pandemic recession began. A handful of sectors were even tighter than the broad ratio implied. The wholesale trade sector— businesses that sell goods and merchandise to retailers — had a three-month average ratio of just 0.4 workers-per-opening, per Economic Policy Institute data. That made it the tightest industry in the U.S. Meanwhile, the finance, insurance, and government sectors displayed similar ratios of 0.6, and restaurants and accommodation businesses had ratios of 0.8.

U.S Job Opening Hit Record High as Workers Quit in Droves

The sectors most adversely affected by the COVID-related economic shutdown are still struggling to fully recover. Pandemic-related concerns are still a key factor for many Americans, as jobs that require physical interaction with other people (nurses, servers, checkout staff, hotel cleaners, etc.) continue to receive substantially fewer candidates than open positions. University of Massachusetts Boston professor Françoise Carré noted that retail jobs have been particularly grueling during the pandemic because of their “frantic pace” and employees’ fears over catching COVID-19.

Workers Attitude

Harvard University economist Lawrence Katz has highlighted the fact that, while many employers might want things to go back to the way they were before the pandemic, many workers have something else in mind. “It’s a mismatch of expectations and aspirations,” he said.
Rich Templin, a lobbyist for Florida AFL-CIO, a federation of labor unions around the state, commented that the biggest issue is that jobs in the tourism and service industries don’t pay well and don’t provide benefits. “We are seeing a major reset of the labor market in this country because of what we just went through and what we’re going through right now. What business owners are saying is, ‘We want you to come back under the old rules and be paid poverty-level wages,’” Templin said. “And people are saying, ‘no.’”

Chris Tilly, a professor at UCLA’s Luskin School of Public Affairs, said it’s hard to make predictions about what’s next for the labor market, but noted that consumer demand appears to be out pacing retailers’ ability to staff stores –circumstances that give workers more leverage. “I don’t think we’re at a point where workers have permanently gained the upper hand, but I would be cautious about saying exactly when the power is going to shift back more to employers,” he said. The central issue is that “retailers are having trouble attracting workers at the rates of pay that they’re offering. Consumer demand is expanding faster than people are able and willing to go back into the labor force,” he said.

Echoing his sentiments, Sylvia Allegretto, a UC Berkeley labor economist, pointed out:”There’s simply no labor shortage when you’re talking about finding house cleaners for a hotel—there is a shortage of workers who want to work at what you’re offering.” She said the country is experiencing a “wage and benefits shortage.”

Logistic Difficulties

Federal Reserve Chairman Jerome Powell blamed additional human resource factors for supply shortages and the consequent price rises, including skills mismatches and geographic differences. Hiring new employees is a time-consuming process.

There are limits on how fast employers can hire, and the problem is only aggravated by the high level of people now quitting their jobs to pursue other opportunities.

Skills mismatches are a solid contributor to rising costs and slower economic recovery, including within the real estate industry in particular.
Kevin Liang, vice president at Argo Construction, commented that builders have not been able to keep up with demand due to skilled labor shortfalls. “That raises concerns about the quality ofwork being done on construction sites,”Liang said. “And the current supply chain issues, everything from material shortages to scarce shipping containers, to a shortage of truckers, everything in that supply chain has a significant effect on construction.”
Gary Kaplan, president of construction for AXA XL, noted that the sector’s labor shortage concerns are not new, but the shortfall effects are beginning to be reflected in insurance claims. Namely, unskilled workers are being mentioned as the number one cause for subcontractor default insurance claims.

It is also likely that geographical mismatches are occurring between where businesses are hiring and where the unemployed are currently located. These mismatches are not only present across state lines, but also within metropolitan areas.

Where is the price rising?

In June, the National Federation of Independent Business (NFIB), found that 47% of small business owners are raising their average selling prices, the highest reading since January 1981, at the tail-endof the Great Inflation of the 1970s.

Price hikes were most frequent in wholesale (82% higher, 4% lower), retail (63% higher, 1% lower), and manufacturing (62% higher, 5% lower). Seasonallya djusted, a net 44% plan price hikes (up 1point). The NFIB report concludes, “The incidence of price hikes on Main Street is clearly on the rise as owners pass on rising labor and operating costs to their customers.”

Why Prices are Rising?

The federal reserve has highlighted two main culprits for this current rise in prices: Supply Shortage & Hiring Difficulties

Supply Shortage

Due to the supply chain bottleneck mentioned above, the prices for many goods and products have risen significantly. For example, in May, lumber (LBS) reflected a massive 461% increase over the past year. However, lumber prices have begun to fall, and as of mid-August are only 20% up on their pre-pandemic price, at the end of January2020. This data may support the Fed’s position that current inflation will mostly be short-lived.

In terms of shelter, which makes up nearly one-third of the CPI, prices increased 0.5% for the month, and are now 2.6% up on the June 2020 figures.

“What this really shows is inflation pressures remain more acute than appreciated and are going to be with us for a longer period,” said Sarah House, senior economist for Wells Fargo’s Corporate and Investment Bank. “We are seeing areas where there’s going to be ongoing inflation pressure even after we get past some of those acute price hikes in a handful of sectors.”
Returning to the lagging effect of higher house prices on inflation, a
paper by Fannie Mae suggests that CPI components for rents tend to follow the Case-Shiller price index, with a delay of about five quarters. Eric Brescia, an economist at Fannie Mae, has drawn the following conclusions:

Due to how shelter costs are measured, the housing components of the indices decelerated considerably over the pastyear, despite robust home price appreciation. This has kept topline inflation from being even higher.

Lagged effects from the past year’s house price appreciation and more recent rent recovery could begin to flow into inflation measures as soon as the May readings.

House price gains to date suggest an eventual acceleration in shelter inflation from the current rate of 2.0 percent annualized to about 4.5 percent. If house price growth continues at the current pace, shelter inflation would likely move even higher.

Timing lags suggest that increasing shelter inflation will last through at leastצ2022, meaning “transitory” increases to the overall inflation rate may be more prolonged than many expect.
Due to the heavy weight given to shelter, housing could contribute more than two percentage points to core CPI inflation bythe end of 2022 and about one percentage point to the core PCE. Both would be the most substantial contributions since 1990.

The global supply chain grid lock may not be cleared until well into 2022. Shipping rates continue to soar, delivery delays are up significantly, and inventories are insteady decline. Container freight rates, forexample, have increased more than 400% over pre-pandemic levels.

According to the Institute for Supply Management’s latest data, delivery timeshave also slowed, with manufacturing supplier delivery times roughly 30%  slower than they were a year ago.

“Shipping costs are increasing at a double-digit pace, wait times for products remain unusually long even as throughput at ports has improved, inventories are still inadequate, and labor is hard to find,” theWells Fargo economists wrote. “Not onlyare these problems symptomatic of ongoing supply chain constraints, they area source of price pressure that continues to filter through the economy and stoke inflation.”

Ken Simonson, chief economist at the Associated General Contractors of America, commented in the AGC’s June release that, “Steadily worsening production and delivery delays have exceeded even the record cost increases for numerous materials as the biggest headache for many non-residential contractors. If they can’t get the materials,they can’t put employees to work.”

He added that contractors are being told they must wait nearly a year to receive steel shipments and 4-6 months for roofing materials. As a result, home builders could not keep up with demand, manufacturers faced delivery delays of materials needed to finish goods, and “it remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled trades people.”

Of course, the construction industry is far from being alone in this predicament. Two other notable sectors suffering from supply issues are the semiconductor and automotive industries, as the Computer Chip Shortage of 2021 shows no signs of slowing.

Intel has warned that the global semiconductor shortage that has affected the auto industry and raised the cost of some consumer electronics could last until the middle of 2023. “While I expec tshortages to bottom out in the second half [of 2021], it will take another one to two years before the industry is able to completely catch up with demand,” CEO Patrick Gelsinger said recently.

That is particularly disheartening news for carmakers, with many of their plants lying idle this year due to a lack of chips –General Motors was forced to stop making most of its full-sized pickup trucks for aweek in July. Due to the limited supply ofnew vehicles, used car prices are soaring.

Goldman Sachs has said that new car inventories are unlikely to recover until September and will remain well below pre-pandemic levels through the end of next year. The bank said it expects new car inventories to fall further in August, toaround 1 million vehicles, before beginning to steadily increase in September. The firm forecasts that new car prices will likely continue to rise over the next few months, peaking around 6% above their pre-pandemic level toward the end of this year.