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Record Damage to Homes to Tighten Material Supplies
 The long road to recovery from Hurricane Katrina is likely to exacerbate shortages of skilled construction labor and key building materials over the next several months, according to an ongoing disaster analysis by NAHB.
Latest estimates from the American Red Cross show that the magnitude of the storm’s destruction dwarfs the losses from any other U.S. natural disaster. Approximately 275,000 homes have been completely destroyed, according to the organization’s damage assessment, nearly 10 times the 28,000 housing units leveled by Hurricane Andrew in 1992 and the 27,500 homes lost in the four hurricanes that struck Florida last year.
Although most attention has focused on New Orleans, the number of homes beyond repair in Mississippi, roughly 69,000, is more than twice the number destroyed in Florida in 1992. Across Louisiana, Mississippi and Alabama, the Red Cross estimates than an additional 77,000 homes are currently uninhabitable, and will require major repairs.
Before Hurricane Katrina hit, cement was in short supply in parts of 30 states, according to the latest industry reports, and prices were up about 15% from a year ago to about $90 per ton.
Further compounding the situation, about 12% of the nation’s cement imports last year arrived through New Orleans and Mobile, Ala., areas that suffered major destruction.
And structural repairs from the hurricanes that battered the region in 2004 have still not been completed, hampered by tight supplies of roofing, concrete and other vital materials.
Waiting for New Deliveries
“There are going to be a lot of bottlenecks in a situation that was strung pretty tight,” said NAHB economist Michael Carliner. “Builders are having trouble keeping on their construction schedules as they have to wait for new deliveries. The cost of those delays may be a greater expense than the higher prices of the materials.”
Due to insufficient domestic production capacity, the U.S. has had to rely on imports, especially of wood products and cement, in order to meet the demand for new homes.
The impact of price spikes and shortages could be eased if the federal government rescinds tariffs on key building materials in support of reconstruction efforts.
NAHB has a long-standing policy calling on the federal government to rescind tariffs on Canadian softwood lumber imports and cement from Mexico, and the association’s board of directors reiterated that position during its meeting earlier this month in Reno, Nev.
Suspending Import Tariffs
To help facilitate and hasten post-Katrina rebuilding efforts, the board on Sept. 11 called on the Bush Administration to “immediately suspend tariffs and other trade barriers on lumber, cement and other construction materials imported from other countries.”
On the following day, a Treasury Department official indicated that the Administration was considering reducing or eliminating the costly duties, observing that the “government has the authority to adjust the tariffs in an emergency situation, but no determination has been made yet.”
While NAHB will continue to urge the Administration to follow through on this initiative, removing the duties on lumber, cement and Brazilian plywood would only provide a partial solution to the supply problem.
Timber harvests from private forests are already at or beyond maximum sustainable yields, and sales of timber from public lands have been reduced by 87% since 1990, increasing housing costs and reliance on imports even before Katrina pounded the Gulf Coast.
In the coming weeks and months, recovery efforts are expected to focus on cleaning up and minor repairs, with the rebuilding phase probably not beginning until early next year. In addition to those destroyed or suffering major damage, almost 115,000 homes have incurred minor damage from the storm, according to the Red Cross, and another 30,000 were “affected.”
Fears Spawn Stockpiling
Meanwhile, fears of shortages have led to a short-term run on plywood, roofing, OSB and other materials, as contractors and builders seek to stockpile supplies.
The trade publication Random Lengths reported that its OSB composite price jumped from $301 per 1,000 square feet on Aug. 26 prior to Katrina to $365 on Sept. 2 in her immediate aftermath. The price was running at $444 on Sept. 16.
The price on Random Lengths’ Southern pine composite has surged from $476 just before the hurricane to $606 last Friday.
The price spikes are not unprecedented. Plywood costs jumped nearly 45% in the weeks following Hurricane Andrew in 1992.
Roofing materials, which had already been in high demand following last year’s hurricanes in Florida, are also expected to remain in tight supply.
Although the cost of framing lumber has climbed from $355 to $403 per 1,000 board over the past three weeks, prices are expected to moderate over the near-term, in part because trees blown down from Katrina will be harvested, helping to offset lost inventories.
With the supply of skilled workers already tight around the country, there are also fears that labor shortages could develop in some places as crews head to the Gulf Coast. There are still shortages of construction workers in Florida as a result of the unfinished efforts to repair damage from last year's hurricanes.
For more information, e-mail Michael Carliner at NAHB, or call him at 800-368-5242 x8376.
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