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Photo by Michael Minasi/KUT

Austin builders are starting a lot of new homes. Finishing them is not so simple.

Wednesday, July 13, 2022 by Audrey McGlinchy, KUT

Alexandra Spurlock bought a new three-bedroom home in Hutto, about a half-hour drive north of downtown Austin. When she signed the papers last summer, the home was nothing more than a plot of dirt. The builder said the house would be move-in ready by February.

Now it’s July 2022, and the house is still not finished. As of last week, the house had showers with tiles but no showerheads, pipes but no running water, and cabinets but no kitchen sinks.

While Spurlock waits for her home, she and her young daughter are living with family in Michigan. The 33-year-old nurse gets summers off and instead of risking high rent prices by negotiating another lease renewal with her Austin landlord, opted to decamp to her mom’s house.

Photo: Alexandra Spurlock. Alexandra and her daughter, Aubrey, at a July Fourth fireworks display in Canton, Michigan, this summer.

Aubrey, Spurlock’s 4-year-old daughter, plans to paint the wall of her new bedroom the colors of the rainbow, but she’s confused why this hasn’t happened yet.

“She keeps saying to me, ‘I want to go home. I want to go back to Texas,’” Spurlock said. “And the answer is, we don’t have a home in Texas.”

For much of the pandemic, the homebuilding industry has endured delays because of supply chain issues. One month builders can’t get door handles; the next, it’s door hinges, windows and refrigerators. And now this shortage has converged with another: a lack of employees. Like other industries, construction companies are straining to keep workers. The result? But finishing these homes quickly also feels more urgent than ever. As rising mortgage interest rates have made homebuying more expensive, fewer people are lining up to bid for homes. Builders want to get these houses on the market before interest rates go up again and more people are locked out of homebuying.

Untangling this mess, one builder said, is delicate.

“It’s like a big, knotted ball of yarn,” said Tammy Schneider, vice president of sales and marketing at Brookfield Residential. “You have to figure out, what string can I pull, or where can I start to unknot it and not make the knot worse or more difficult to get?”

A room full of microwaves

While builders in the Austin area are starting new homes at historic numbers, the number of new homes finished and sold lags behind. If you think of the number of new home groundbreakings and the number of new homes finished and sold as trains traveling on two parallel tracks, historically they’ve kept pace.

That’s no longer the case.

According to the real estate research firm Zonda, builders started roughly 26,500 new homes during the first few months of this year, while homebuyers closed on just under 20,000 new homes. Compare that to the last months of 2019, when the number of new homes started and new homes sold diverged by just 300 homes.

The same is true in the rental market. In the first quarter of 2022, developers broke ground on 10,420 apartments in the Austin area. But at the same time, roughly three-fourths of these apartment builders said they expected to finish these homes three to eight months past their original timelines.

“It’s pretty common for a project to be delayed up to three months,” said Robin Davis, the manager of ApartmentTrends.com, which provided the data. “But the eight-month timeline is way far from normal.”

A rotating menu of hard-to-get materials is one of the biggest causes of delays. (Right now, builders say appliances and HVAC systems are causing the most trouble.) These delays are compounded by the realities of homebuilding. Building a house is a linear process. For example, you can’t install windows before you’ve framed the house. One hiccup equates to a full-throttle stop.

“Let’s say you poured a foundation and framed up a home,” Cody Carr, a residential builder in Austin, told KUT. “However, your window manufacturer was behind by 16 weeks. If you didn’t frontload that ordering process or you were running a little late or misinterpreted that timeline, that window delay could cost you four to six to eight weeks in the field as you wait for windows.”

In response, some builders have gotten creative. Bryan Glasshagel likes to tell the story of one builder who, staring down delayed appliance orders, began stockpiling microwaves.

“They had one of the rooms in their office that was filled with microwaves that they had to go to a local home improvement store to buy,” Glasshagel, senior vice president of Zonda, told KUT. (Glasshagel wouldn’t share the name of the company but said it has an office in Austin.)

When completion dates get pushed back, homebuyers who have already signed for the house may have to renew a lease or ask their landlord to live month-to-month, a situation that often comes with a higher rent price. For homes that won’t go on the market until they’re finished, construction delays could mean those homes sell at higher prices.

“As these projects have taken longer and longer to build, these costs are continuing to rise,” Carr said.

Prices, though, may be offset by a slackening demand for for-purchase homes. Add increasing mortgage rates to a historic rise in home sale prices in Austin, and builders are starting to feel the frantic demand cool and they’re racing to catch it before it chills entirely.

Labor shortages

Vicky Benites and her husband own We Love Electric, an electrical contracting company. While they used to employ eight workers, that number has dwindled to two, as employees have left for jobs with better pay or better conditions.

Their work as electricians is so in demand, though, that despite Benites being eight months pregnant, she has joined her husband on construction sites.

“Sometimes I have to go out there and help my husband do the job or buy material,” she said.

A shortage of construction workers, from framers to plumbers, has plagued the industry. Schneider, with Brookfield Residential, said if a plumber pulls out of a project, that can cause months of delays.

“Everything literally has to come to a standstill,” she said. “You can’t just say, OK, well, one plumber’s out and today we’re going to start a new plumber.”

One reason, she said, is because when you apply for a building permit, you have to list the contractor. If a contractor backs out, you have to change the name on the permit.

Schneider also said some contractors have pulled out of home projects because of the cost of commuting while gas prices are so high. A development by Brookfield Residential in San Marcos, for example, has faced significant delays, in part, because of this.

 

But while these builders work their way through a frustrating and strangling construction landscape what Schneider calls a “pig in a python” some wonder what it may mean when tens of thousands of new homes are ready for buyers at a time when becoming a homeowner is much more expensive.

“Are there cancellations in their backlog?” Glasshagel said, imagining questions builders may be asking themselves. “How many of these homes that are under construction today actually go through with a buyer or move into standing, unsold inventory?”

In other words, empty homes.

As for Spurlock, her home is empty but not unsold. A sign staked into the front yard, which is still dirt, reads “sold.” Last week, workers showed up to build the fence around her small backyard. The developer has told her she should be able to move in mid-August, but she’s not hopeful this will happen.

On Tuesday, Spurlock visited a Christmas store in Michigan with her daughter and considered buying a red tree ornament that read, “First Christmas in Our New Home 2022.”

But then she paused. “I don’t want to jinx it,” she said, and left the ornament on the shelf.

This story was produced as part of the Austin Monitor’s reporting partnership with KUT.

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