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2023 Construction Industry Outlook: Riding the Wave of Fluctuation

With 2023 well underway, both contractors and building material suppliers are faced with a potentially volatile year.
January 27, 2023
Miniature of home construction on architectural plans near a calculator
With 2023 well underway, both contractors and building material suppliers are faced with a potentially volatile year. Thankfully, there are many tools available to help mitigate the risks many business owners may encounter. Before we look at that, let’s take a look at what experts expect from this year’s market.

Supply Chain Woes

Supply chain issues were the thorns in last year’s side, and 2023 will still see some effects of this. As pointed out by Housing Wire, labor shortages precipitated supply chain backups due to the need for specialized skills; with demand dropping, the supply chain will be able to catch up, albeit sluggishly.1 This increased demand for labor also means skilled labor will have higher expectations of their employers, requiring building material manufacturers to pay their employees competitively and reduce friction to retain labor.1 These lasting issues in the supply chain will, of course, lead to volatility in the LBM market.

Price Fluctuation

The LBM market is still recovering from 2022’s instability. Last year saw price jumps in cement, diesel, and asphalt, according to Construction Drive, while fluctuations are still ongoing for copper and PVC, necessitating wider padding on quotes for these particular materials.1,2 There is also still price volatility for gypsum products, #2 diesel fuel, and copper brass mill shapes, making it difficult for contractors to plan their budgets easily, with cement and concrete shortages further complicating the situation.2 This instability could create issues for suppliers as well, causing their customers to shy away from purchases due to the increased volatility. The automation of accounts receivable specifically addresses this, enabling supplier customers to maintain purchasing power despite price fluctuations.

Unsustainable Surge

Materials aside, how will the housing market as a whole develop in 2023? According to HBSDealer, the post-pandemic surge has proven unsustainable, with a huge decrease in housing starts predicted for 2023.3 The NAHB estimates that the housing market is underbuilt by 1.5 million houses, with buyers being priced out.4 Both the NAHB and NAR predict a decline in affordability, with median home prices increasing, as well as a decline in existing home sales.4,5 This stagnation will most certainly have a ripple effect on the residential construction industry as a whole, even if not immediately.

Handling Volatility

With supply chain obstructions, LBM price volatility, and a stagnant housing market, what is someone in the construction industry to do? One way to handle this environment of instability is to create a healthy cash flow for your business as well as automate accounts receivable. With BlueTape, contractors and suppliers alike can get paid fast and improve their invoice collection system, expanding their cash flow. This healthy stream of capital is paramount to riding the waves of high price fluctuation or instability in the market. With BlueTape, you can cut down on the waiting and focus on completing more projects in a timely manner. Get started today by booking a free meeting with one of our team members, and be prepared to face all that 2023 will bring the construction industry.
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