'Strained construction': Reno homebuilders play ‘long’ and ‘safe’ game as supply chain, labor issues persist

In this 2018 photo, crews with HomeCrafters work on a home in the Pine Bluff at Caughlin Ranch community, which the Reno-based homebuilder completed in 2020.

In this 2018 photo, crews with HomeCrafters work on a home in the Pine Bluff at Caughlin Ranch community, which the Reno-based homebuilder completed in 2020. Courtesy Photo

By Kaleb Roedel

Tuesday, November 2, 2021

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Troy Means, co-owner of Reno-based homebuilder HomeCrafters, recently received a letter from a concrete supplier, notifying him of a 25% increase in cost of precast products.

There was more. The supplier was also increasing labor and truck rental fees by 15%, equating to a price hike of $10 an hour.

Two years ago, Means and his brother and company co-owner, Travis, would have been wide-eyed over receiving such a notification. Now, more than 18 months into the coronavirus pandemic, they hardly bat an eye.

“We’re receiving ‘increase letters’ from material suppliers weekly,” Troy Means said in a phone interview with the NNBW. “Every year, we would receive some material price increase notices from certain suppliers, but not nearly to the extent and how often they’ve occurred during the pandemic … and how large the increases are.”

Since last spring, Means said HomeCrafters has seen building costs shoot up $70,000 to $85,000 per home compared to pre-pandemic. What’s more, the lingering crimps in the supply chain are adding “three to four months” to the company’s homebuilding timeline.

HomeCrafters was the developer of Pine Bluff, the newest neighborhood at Caughlin Ranch that wrapped construction last year. The community consists of 43 semi-custom homes that span 26 acres.

Notably, the HomeCrafters brothers are the sons of Alan Means, co-developer of Caughlin Ranch, who began building there in the 1980s.

Troy Means said the ongoing material shortages and resulting inflations are unlike anything he has seen as a builder.

Troy Means, co-owner of HomeCrafters, says building costs have increased $70,000 to $85,000 per home compared to pre-pandemic levels. Courtesy Photo

 

“We’re waiting an extensive amount of time to receive these goods as compared to 18 months ago,” Means said.

‘STRAINED CONSTRUCTION’

It’s arguably the biggest challenge Northern Nevada builders like HomeCrafters have faced since COVID hit as they work to meet the region’s booming housing demand that was accelerated by the pandemic. And it’s showing no signs of slowing down.

A combination of a growing economy, more millennials starting families, and changes in where people and businesses can locate due to the remote-work revolution suggests the need for new homes in Northern Nevada and beyond will only increase.

According to Freddie Mac, at the end of last year, the U.S. was 3.8 million single-family homes short of what is needed to meet long-term demand — and that struggle has been compounded by homebuilders’ difficulties in not only obtaining materials, but also hiring skilled labor, said Means.

“It’s been concerning to me that we’ve lost a percentage of our workers that still have not come back,” he said. “Unfortunately, it’s created a situation that if the workers that left don’t come back, then we need to find a way to get more workers into this industry.”

On the materials side, one of the first indicators of the severity of supply chain problems came when framing-lumber prices began shooting higher last year. However, many of those issues have since been ironed out, with prices down in recent weeks more than 60% from their historic high of roughly $1,500 per thousand board feet in May of this year, according to media reports.

Yet, there is a lot more that goes into building a house than wood, and builders are dealing with other materials that are in short supply, from garage doors to vinyl siding, said Steve Thomsen, general manager at Ryder Homes of Nevada, a longtime community developer in greater Reno-Sparks.

In this 2015 photo, Steve Thomsen, general manager at Ryder Homes, looks at blueprints at the site of the company’s Shadow Ridge housing project in Spanish Springs. Courtesy Photo

 

“The supply chain with construction is just broken right now, so it’s hard to finish homes,” Thomsen said. “The market’s great, but the construction side of things is strained, and it’s stressful for our superintendents and project managers to build right now.

“And not only is it strained, but costs have gone through the roof. Our construction costs over the last 18 months are up nearly 20% to 25%.”

Ryder Homes is one of the original developers at Somersett in West Reno. The company has constructed nearly 400 homes across five different communities there, including a 64-home subdivision that was completed in January, according to previous reports.

Means added that another factor “hurting” homebuilders is the lengthy regulatory and permitting process.

The timeline it takes to buy a piece of land, go through the entitlement process, put in infrastructure, and start going vertical is now a “two to two-and-a-half year process,” he said.

“The length of time to get projects approved has increased dramatically,” he continued. “It’s harder for us to react when there’s such demand going on to get those houses to market. It really impacts our ability to bring housing to the market.”

‘THE LONG GAME’

Despite challenges, Northern Nevada’s white hot housing market suggests now is an especially profitable time to be a homebuilder.

In September, the median price for a home in Reno-Sparks was $530,000, an increase of 20.5% from September 2020, according to the Reno/Sparks Association of Realtors.

Still, homebuilders such as Perry Di Loreto, president of Di Loreto Homes of Nevada, are concerned that the region might become “extremely unaffordable” for would-be homebuyers.

After all, the population of Reno-Sparks is projected to increase by more than 100,000 residents over the next 10 years, according to the Northern Nevada Economic Planning Indicators Committee.

“We’re still a good deal compared to where a lot of people live, especially in Northern California,” Di Loreto said. “But there’s so much pressure on the market right now. And we can’t respond immediately.”

To that end, Di Loreto said a homebuilder must have an inventory of land in order to “play the long game.”

He knows that perhaps more than any builder in the region. Di Loreto Homes is the master developer of Damonte Ranch in South Reno, a community of 6,000 homes that Perry began blueprinting in 1987. He said the first five-plus years were spent planning Damonte Ranch before the company even went for entitlements.

“We didn’t actually break ground on anything of significance until 1997-98,” he said. “It’s a long game. It’s a marathon. So, if you try and buy land now, with the prices that you’re going to experience, it’s hard to make the numbers work.”

As such, Thomsen said having strong land positions is “more important than ever.” He added that Ryder Homes is “positioned really well for growth,” with enough lots in the pipeline for the next seven years, including projects in Carson City, Spanish Springs and Lake Tahoe.

“We’re running out of land pretty quickly,” Thomsen said. “It’s very limited and there’s a lot of growth happening here. If you don’t have good land positions now, it’s going to be tough in the future.”

Meanwhile, Di Loreto said Di Loreto Homes is not only playing the long game, but also “a safe game” moving forward as material shortages and the market’s “hyperactivity” continues.

“We committed to not getting too far ahead of ourselves,” said Di Loreto, noting the company builds roughly 100 units a year at Damonte Ranch. “We have not ramped up. We’ve been building at the same level since 2011. We want to build and produce just at the level that we can do an excellent job here.”

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