Lumber Delays, Appliance Backorders, and the 2022 Appraisal Gap

By the fall of 2022, two separate problems had collided for new construction buyers in the Houston area. The first was a supply chain still recovering from 2020 and 2021: windows, garage doors, and certain appliances were on backorder for months at a time, and builders were closing homes without a second refrigerator shelf or a specific window style buyers had selected, promising to complete the item later. The second was faster-moving and more consequential — rates that had roughly doubled since January were starting to cool buyer demand, and appraisers were starting to see it in the comps.

Why the appraisal gap showed up specifically in new construction

An appraisal gap happens when the appraised value comes in below the contract price. It's always been a risk in a fast-appreciating market, but in 2022 it showed up differently in new construction because the contract price had often been locked in six to nine months earlier, during a period when demand — and prices — were still climbing. By the time the home was finished and the appraisal was ordered, the comparable sales the appraiser had to work with reflected a market that had already started slowing under the weight of 7% rates. The contract price and the appraised value, which would have matched in March, didn't always match in October.

For a cash buyer this was an inconvenience. For a buyer financing 90% or more of the purchase, a gap between appraised value and contract price meant either bringing additional cash to closing to cover the difference, going back to the builder to renegotiate (which production builders were historically reluctant to do, though a few started making exceptions as cancellations rose), or walking and losing earnest money.

What the delays meant beyond inconvenience

A six-month delay on a new construction closing wasn't just an annoyance in 2022 — it was a rate exposure problem layered on top of everything else. Buyers who had budgeted a closing for spring, when rates were still in the 4s, and who actually closed in the fall at rates near 7%, were absorbing both a materials shortage and a financing shift they hadn't agreed to when they signed.

What this meant for how we approached new construction contracts

Several practices became standard advice during this period that are still worth following: get the builder's estimated completion date in writing with a realistic buffer, not the optimistic number from the sales office; ask specifically which items might be substituted or delayed due to supply issues, and get any substitution commitments in writing; and go into the appraisal process aware that a gap is a real possibility in a moving-rate market, with a plan for how you'd cover one if it happened rather than discovering the plan at the closing table.