The Expert Podcast

So the big elephant in the room for the building industry is what is going to happen over the next 12 to 18 months as a general contractor and even if you're a client of a general contractor or considering a build or remodel you have to look at what's really going on in the market this is not a normal market and just like trying to predict home prices predicting what is going to be available for construction is a huge factor so we're going to take a look at a couple industry publication market predictions and also talk about in real life what these mean.

So here's Equipment Today magazine talks about the state of construction the new year brings uncertainty with supply chain and labor that's going to be the key everybody sees on the news the factor of lumber price or maybe supply chain for appliances and those are factors the much bigger elephant in the room is the labor availability we'll look at that how it's addressing these articles it says right here supply chain will be corrected over time and it may take a while and we'll talk about how that happens but the labor shortages plaguing the industry are expected to intensify.

So what they're saying is the lumber and the materials and the appliances might work itself out and by work itself out that only means that they'll be more available it's not going to change the price the price is not going to go back down and we'll talk about projections of of where that is they may not go up too much more but the price for appliances materials roofing lumber cement concrete those have raised up in the last 24 months and the current levels are probably going to be a ratchet point meaning that it ratcheted up to that it's not going to go down much below that it might go up in and hover at that range up and down but it's not going to go back down to pre-pandemic levels and the reason why is because the production means for those things has changed the way that lumber's produced the way that appliances are produced that indus those industries are all different now.

Just like the car business is no longer going to have dealerships with 500 cars on the lot because they found they can make just as much money selling 40 cars a month the appliance industry is not going to have hundreds of different models available and we'll see that in this other article where one of the things that builders are doing is reducing skus in effort to work around supply chain and a sku is basically a model number so instead of having 40 different appliance packages you can pick for a new home build you're going to have two and by consolidating the available offerings to a buyer it makes it not only easier not only more profitable but even possible to build homes and the supply chain challenges is what they're talking about but even in this article it's going to talk about you know raw materials and um the raising price of 10 to 20 000 but the most important thing is labor.

The supply chain can be fixed by maybe building new factories getting more shipping you can't replace the loss of qualified labor technicians or tradesmen because those take a generation to create as electricians skilled trades like framing plumbers hvac roofers all leave the business as they age out people retire or they find other businesses to be in that quite frankly aren't as physically demanding they're not going to go back into the industry and to train a new crop of skilled trades people it could be a 15 to 20-year pipeline cycle of getting people in trade schools getting people to go in that career path and that's what it says right here in terms of labor gen x retired in record numbers during the pandemic the industry has not developed a talent base to replace those who have left which will be an ongoing challenge says technology is one answer but you can't use technology to swing a hammer and to frame roof rafters or trusses the industry needs to attract new generation of workers.

So we see this every day in our business in our contracting business there are no qualified people that are excess they're all working for an employer currently most of the ones who want to leave a current employer are poor quality they want to leave because really the their employer doesn't want them there anyways maybe they're not really that good maybe they have personal life problems so the only ones that are looking for a job are ones you don't want to have anyways the ones who are good at their job their current employers holding on to them like a million dollar lottery ticket so if you're a builder looking to expand your business or to do more business it's very difficult to find new additions to your workforce we'll talk about ways to accommodate that one way is to make more efficient building processes.

And you can look at what the suppliers are doing you know suppliers are dealing with lengthy lengthy timelines and missing parts where you can't just get enough throughput for example kb home says garage doors are a challenge they're real issues around garage doors and they're trying to figure out how to do that one of the things they're doing is minimizing garage door styles that it offers to match what's available same thing with appliances one builder is finishing homes with appliances bought from best buy or with loaner appliances just something to put into the space to get the the home closed and they'll fix it later.

What's the solution well this is a solution happening in every industry in the automotive industry in the equipment industry in the electronics industry limited choice improved quality and the way that works is if you offer a certain number of products three or four as an example if you take it down to one or two and you reduce the choice you improve your ability to get the product and compress the build time and it also gives you higher quality now customers are already getting used to not having a huge variety of things to pick from you go to the car dealership there used to be 400 cars on a lot now there's 20 so you got to take what you can get they're used to not having as many choices for menu items in a restaurant not as many houses for sale.

Within the building industry if you're a smart shrewd contractor and you limit your offerings to a very narrow range without having the customer be able to pick and choose whatever they want you can deliver a job to that customer rather than having to pass on the job or price it too high if you tell them look if you want an addition we can do this type of addition with trusses standard framing standard insulation standard trim work finishing standard flooring that's it nothing crazy no unusual architecture no difficult building materials if you do that we can deliver your product and clients are now more willing to do that because they see it in everyday life.

So if you're a contractor not that you need more business but if you are struggling with finding good help finding good labor work trades people if you consolidate your job so it doesn't need as much man hours of labor into the job you may be able to deliver something for the client it'll probably be cheaper than what they're imagining and you can put boundaries on what the client wants to get and look they may want to have certain specific things but in reality in the long run it's probably better for the client to keep things more standardized think back in the 1970s you know when you had avocado green sinks and you had you know pepto-bismol pink appliances in the kitchen and harvest gold rugs if things were kept more standardized the design development will have more longevity in terms you don't have to replace it that often you know custom granite countertops in three years that style of granite isn't popular anymore if you keep things standardized you can offer a lower price.

If you're looking to bid a job maybe offer the customer two options look if you're adding on a 1500 square foot addition with a new kitchen and new bath and you know maybe um an extra window in the in the balcony if you tell them look if if i do your specs from your architect with all your finishings it's going to cost 280 000 if i do the same footprint but with my roof trusses maybe you'll lose the cathedral ceiling standard builder grade paint and finishing and maybe you don't have this bump out maybe you don't have this difficult you know roofline it's going to be 180 000 the client may be more inclined to do it and you can tell them it'll be done quicker take control of the project don't necessarily let the tail wag the dog.
If you are a builder and if you're a home owner or a somebody building a house for your own use or somebody putting on an addition be flexible with your builder if you want something to exactly your specs that's fine that's your right your prerogative but don't take it personally if the builder wants to offer something different because they're just trying to help you at least get something done using that same car dealership mentality if you walk into a car dealership and say i want you know a lime green with this option package 82a you know with the fancy wheels and the upgraded sound system and the navigation and the infotainment and it's got to have option 42b with the backup camera whatever okay you can have that but it's going to take six months to order one and it might be the next model year so it's more money but if you take the one in stock it's maybe silver it doesn't have this other option you can have it right now and it's going to be a thousand dollars less at least give the customer the option and if you're a customer be flexible.

Look it's not the builder's fault that this market is existing so don't take it out on them don't blame it on them look and ask your builder for what the options are now if you don't believe your builder is being scrupulous with you and they're just making things up for their own benefit then look at get another builder but if you're dealing with somebody who's honest and somebody who is authentic in what they're discussing with you and you can verify it all and they're giving you an option to do something maybe slightly different than your ideal dream project but it's going to be doable quicker maybe they can take the job rather than having to pass on it and cheaper look at it as an option that you have.

In reality five years from now it's not going to make that much difference the space will be there the window's going to be there may not be the you know custom teak frame triple pane mullion window but it's still going to be a window and you can get it the appliances might not be you know the upgraded miele you know washer dishwasher viking range it might be something different than that but at least you have your project done and if you want to upgrade those later you can more than likely you'll be fine with something that's a little bit more standardized.

The mentality of having to lower expectations it's not because builders want you to lower your expectation it's because the reality of the marketplace is making that the solution that builders are able to offer even one of the largest home builders kb home is limiting its appliance options to only stainless steel which reduces their skew count from 400 to 150 so they all get there all their appliances from whirlpool but it sounds like in the past you could get white black gray stainless any different colors well they said no you can now get stainless only and it helps you with lead times and simplifies the internal process which in fact makes it better for the customer as a customer you might think well i want to have my choice so that's great ideally kb homes would probably want you to have your choice too but since they're trying to assist getting the ball across the finish line and getting your home closed they're doing what they have to do to make it better for you so if you can be part of that solution and collaborate with your builder it might be a win-win for everybody and even some of the insiders are seeing that i think customer sentiment is changing they want customization but it doesn't have to be every single feature in the house pick out a couple things that you want to customize that are doable and leave the rest for later or maybe not do them at all.

A good analogy is this i remember seven or eight years ago i have a very close friend of mine who was at an electronics store something like best buy looking at tvs and you know you've all been to the electronics store whether it's at walmart or costco or best buy and there's 100 tvs on the wall and he was looking at a certain tv let's say it's a 42 inch you know back 10 years ago that was a good size tv and there were 10 of them on the wall and they all were about the same one might have been 40 less 50 less 100 more whatever and looking at them all the features are different the blackness the the frequency range the the refresh rate all the different features on the tv and he was having a tough time picking out a tv and i remember he called me up on the cell phone we were talking about something else he goes yeah i'm at best buy right now and i can't decide what tv to get and they're all i mean i could spend 20 more to get this or 30 less to get that and it's not like he didn't have the money this is a a wealthy affluent person well off so he could pick out whatever tv he wanted but he just couldn't decide and i told him zimbie george i said george think about it in the store you see all these different tvs and all these choices no matter which tv you pick out when you bring it home and put it on your wall and watch it it's going to look good it's going to be a nice tv on your wall so don't worry about picking one out pick out the one that seems like it's decent good price good brand and don't nitpick over the little one detail over another because when you get home and put on your wall without any other 100 tvs around it it's going to look just fine.

Same thing with your remodel or your addition or your new home if it's a new house and it's got good stuff in it it's going to look fine because you're not going to be comparing it to anything else so in these days of limited supply supply chain labor problems whoever you want to blame for that whoever you think is at fault whatever you think is not fair or not fair doesn't matter look at what the reality is of having a solution and work with your builder make them a partner in your solution if you think that you don't want to work with them as a partner because you don't trust them then stop and get another builder but then work with that builder be collaborative with your building partner and if you're a builder work that way with your customer let them know look i want to help you if you want every last thing customized we'll do that but it it's going to make more than this much difference it's going to make a big difference because of labor supply chain maybe put together some resources that help demonstrate that.
So the building industry is still being pressured by supply chain which will work itself out at some point within the next year or two but the labor is not going to change and a smart builder a smart developer a smart general contractor is going to recognize look trades people and labor is not going to be magically resolved so build your business around not having employees at will building around not having as many people as you want to chip in and frame inside and all the other things you need to do build your business around having limited resources keeping it simple keeping great people around if you have them still look for opportunities to add to your team but don't try to over promise to a client or even to yourself and how much you can do maybe make it up in in volume of simple projects versus quality of complicated projects you.