Residential Construction – Business Outlook for 2021

Construction is off to a good start in 2021, and Riverhead Building Supply is optimistic about the home building industry for the rest of the year.

That’s not to say that there won’t be some bumps along the way. Recently, John Callahan, president of Riverhead Building Supply, shared some insights on what to expect in the coming months.
Q: Can you tell us what makes you optimistic about 2021?

A: Demand for single-family housing is very strong across the country, driven by low mortgage rates and the continuing urban exodus. On one side, this creates significant opportunities for all of us.

Q: What’s the downside to that?

A: The flip side is that there is not enough production capacity at any level of the supply chain. Shortages and shipping delays are becoming a regular frustration.

Q: What can you tell us about pricing?

A: Prices for lumber, OSB, and plywood are continuing to climb through record territory. Supply is very tight and the producers are in the driver’s seat. The only constant seems to be that the lumber we buy today will be more expensive than it was yesterday.

Q: What advice do you have for builders, general contractors, and others in residential construction?

A: The pressure to protect profits from erosion due to future price escalation has never been more important. Our customers need to be in regular contact with their clients, to convey what is happening in the industry.

Q: Are there particular product categories that are being affected more than others?

A: There are several. The supply of treated lumber is tightening; certain lengths of 2 X 12 are extremely difficult to source. The demand for engineered lumber seems to have caught most manufacturers off guard, forcing them to implement allocations to spread their production equitably among customers. February storms in Texas crippled the production of a common resin component that is used in the manufacturing of other products including glue, insulation, vinyl, and PVC. As a result, prices of vinyl siding, composite decking, and PVC trim are expected to rise as their production costs increase. To give you an idea of how challenging the asphalt roofing situation is, it is not unusual for us to place an order and have the manufacturer confirm a shipment date six months from now.

Q: And yet, you remain optimistic?

A: Yes, I am optimistic! Residential construction is a great business with a promising future. Demand is strong, and home values continue to appreciate.  Everyone I have spoken with recently has more work than they can handle. Our buyers are working tirelessly to stay on top of our inventory to fill our customers’ needs. The forecast for the rest of the year is strong. Let’s work together to make the most of it!