This tiny $3 component is holding up the construction of new homes

Here’s one reason why some builders are finding it hard to complete new homes — they can’t find a tiny $3 component to finish their windows.

Earlier this year, supply-chain shortages were ravaging industries, with products from baby formula to core components like semiconductors being hard to find, frustrating American businesses and consumers.

Housing had its own supply-chain issues, with builders missing things like garage doors and appliances, preventing builders from finishing homes and handing them over to buyers.

One of the more unexpected items that was in short supply was a tiny but critical item required by homebuilders when they’re trying to put windows on a home: window casement latches.

On a podcast hosted by John Burns Real Estate Consulting, Greg Brooks, who is with the Executive Council on Construction Supply, explained how a shortage of $3 window casement latches is causing an outsized impact on output.

“We had a discussion at our last meeting, and among our members is a major window manufacturer. And people are talking about how… windows are kind of the largest, biggest problem in the channel right now,” Brooks said.

But oddly enough, that one member noted that they’re not having problems with the windows themselves. 

“We’ve got all the materials we need to build windows,” Brooks recalled them saying. “The problem [is that] casement window latches that we were sourcing … was stopped because they could not get latches.”

The complexity of putting windows on a house is pretty interesting. “A lot of hands have to touch a window,” Chris Beard, a research director at John Burns Real Estate Consulting, who also appeared on the podcast, explained.

According to Beard, there’s the glass (which we’re also short of), there’s the aluminum cladding (also in “tight supply of”), there’s the vinyl, (also not in great supply due to storms in Texas in February 2021), and then there’s the casement latches.

“And so, just because of the complexity of the product and the number of hands that need to touch it, it continues to be an issue in the industry,” Beard said.

And that has a major knock-on effect on the homebuilding process, Brooks stressed.

“It meant completely refiguring all the production lines in order to switch to a different product. So it was this one little tiny $3 product that was stopping the entire process,” Brooks said. “And that’s been happening all over in various industries.”

And that’s one factor that’s likely affecting sales.

In late August, the Commerce Department reported a 12.6% drop in new home sales in the month of July. The pace of new home sales that month was the lowest level since January 2016. 

Sales have fallen off a cliff since hitting a peak of 1.04 million in August 2020. Year-over-year, sales of new homes were down by nearly 30%. 

Are you a home builder? Or you’ve just got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]