A Q&A with Keith Wingfield of River Rock Builders
Keith Wingfield has spent his entire adult life working in the construction industry, with much of that time making custom homes as the owner of Little Rock’s River Rock Builders. He’s also respected in the industry, serving as the area chairman for Arkansas, Louisiana and Mississippi for the National Association of Home Builders, a position that provides him with a deep perspective on issues facing the construction trades.
The pandemic has shaken the industry in some unexpected ways, causing tremendous impacts that could possibly rival the devastating days of the 2007-08 recession. Wingfield, 65, explained these forces in an exclusive interview with Arkansas Money & Politics.
He opened up about his business, about the rising costs of building materials and what he believes is the corporate greed behind it, and how the industry could be heading for something like the 2007-08 housing market crash.
AMP: You’ve built your career for 44 years, with 22 of them building homes across Central Arkansas. Could you share the structure of your operations?
Wingfield: We employ four staff members directly in management and supervisory capacities, but we also hire between 40 and 50 different subcontractors on every project. So, you know, we hire an outside electrician, hire an outside plumber, people like that, to complete the home. They have their own separate companies, and we routinely work with the same people over and over again. That’s a common approach in our industry.
AMP: How has the pandemic affected the construction industry in the region?
Wingfield: Because I’m chairman for the three-state region and also a working task force responsible for lumber and material pricing, I’ve seen a lot of changes occur amid the pandemic. In the first months, we were virtually shut down because it was an unknown, and we had a lot of concern about our workers, so we followed all the safety measures. But after the first month, construction was deemed to be an essential industry, and when that occurred, then we continued to find ways that we could physically distance and separate and perform our jobs.
That meant that we were slowed down because you couldn’t have as many people on your project at one time to keep them physically separated. For instance, you might not be able to work the plumber and the electrician in the same home because you wanted to keep those crews separated.
AMP: How did the pandemic affect the supply chain?
Wingfield: We started to see shortages in certain materials, meaning that when we would normally order something, it might take a week before we received it on the job. It started to be two weeks or three weeks or even several months. And along with that shortage in the supply chain, we started to see an increase in pricing for almost all products, and lumber has been the one that has risen the most.
We’ve seen it in PVC pipe, anything made out of plastics, anything made out of any metals, aluminum, copper. So, it’s been across the board in building materials somewhat, but not to the degree where some of the lumber products are. Some of the lumber products have actually increased 400 percent during the pandemic, and engineered wood products like structural beams are in particularly short supply. Just a month ago, we received a price-increase letter that said lumber was going up another 70 percent.
Our modern plywood we use today is an oriented strand board, or OSB, and you see it on the roof. On any given house, there might be two, three, four hundred sheets of it. Before the pandemic, it was about $8 a sheet. Today, it’s $50 a sheet. The common two-by-four was about $8 before and now runs around $20. And it’s all happening despite the fact we can prove that there’s no increase in raw material cost.
AMP: Sounds like someone’s making out like a bandit.
Wingfield: The largest landowner in the country is Weyerheauser, and they’re a publicly traded company. So, this information is very available. And in the fourth quarter of 2020, right in the middle of a worldwide pandemic, they reported record profits. OK, this is at the period of time when a lot of other people are having to be helped with SBA loans and grants and prepay and all the other things that our government is passing out.
But these people are enjoying record profits. They’ve already reported their first quarter in 2021. Once again, another record. It doesn’t take a rocket scientist, I don’t think, to figure this out. We’ve been screaming at the top of our lungs. And so, the question is, why is our association concerned? We’re concerned because we believe this bubble of pricing increase, which builders will pass on to the public.
We believe this is going to be fundamental to the housing economy being ready to collapse because it cannot sustain this type of pricing. It’s very, very similar to what happened in 2008 where the housing activity was ramped up. It was being supported by faulty mortgages, and when the faulty mortgages went away, the economy collapsed around it. A lot of people wound up being upside down in their homes.
If it finally gets to a saturation point, which we think it will, then it starts to decline. Once again, you’re going to have people in homes that they’ve spent far too much money for, and they’re not going to be supported by what the value collapse gets to. And so now, you’re going to have more people back into homes that are overpriced, but this is also affecting people who are having damage claims.
AMP: How does the problem cross over into home insurance? That seems like a leap.
Wingfield: I know this because the insurance industry knows that most houses right now are underinsured. If there’s a disaster, if there’s a tornado or a flood, hurricane or whatever it might be, they’re underinsured. Some people are going to be way short on what their claim will actually cover.
So, what’s the solution? I don’t know, but we’d like to get the players at the table and ask the administration for a summit that we can get the timber producers or the loggers, the lumber manufacturers, the mills, builders, mortgage companies, appraisers and whoever else is in the chain of housing, and sit down at a table and try to figure it out.
This model of a 400 percent increase in prices is not sustainable. If you go up that fast, you’re bound to crash. And it’s going to leave some people really hurting when it does crash. So, let’s deal with it now.
AMP: Has there been a response from the Biden administration?
Wingfield: All we’ve heard is they’re aware of the problem. But we’ve seen no action. Yet they’re also signaling that they’re trying to raise the tariffs on Canadian imported lumber. Now, that’s a hell of a time to think about doing that.
Builders that, unlike me, build speculative homes can get caught with a price increase that actually can come out of their pocket. They will. Or they’ll lose money maybe once or twice. But on a given project, I’m a custom builder. All I build is for people, and so I’m able to pass all of those costs along.
So, some people would say, ‘Well, what are you worried about?’ I’m worried about a sustainable housing economy because when our housing economy collapses, people hurt. I mean, all those people that I’m hiring, the electricians, the plumbers, the drywall, you know, a lot of them left the industry after 2008 because they had no work. They had nothing to do. We’ve got to keep that from happening again.
Every time we go through one of these cycles and it collapses, there are fewer tradesmen left. The average age of a plumber in the state of Arkansas right now with a master’s license is almost 60 years old. Everybody needs to be prepared. We’re not getting people coming out of high school wanting to be plumbers. And that’s a problem.