The story below is from our September/October 2021 issue. For more stories like it, Subscribe Today. Thank you!
It’s not just the outrageous increases in lumber prices. Construction costs continue to soar in every area. Here’s how to deal with it.
Courtesy of Building Specialists Inc.
Just when we think we have one of COVID-19’s life changes under control, another one comes along to disrupt our lives in basic ways.
The virus pandemic has affected where, how and even if we work; food prices and availability, especially meat; used car prices and the supply; political divisions; and a raft of other daily inconveniences.
Now, we’re hit with construction costs that have soared through the proverbial roof, leaving shingles all over the ground. The National Association of Homebuilders says that building materials have increased by more than 25% on average in the past year on new single-family homes. That seems dramatically low. Still, what do you do when new home prices are out of reach? You renovate.
But that, too, has taken the long ride upward with lumber prices often doubling and costs for that lumber outpacing steel, which is often used in framing.
Design-build company Stevens says that a year ago, lumber prices jumped 130% and the price of the average new home leaped upward by $36,000, according to the NAH. Lumber costs 388% recently, according to Trading Economics. A thousand board feet of lumber went from $365 in May 2020 to $1,673 this past May. Prices dropped in February because of stay-at-home orders and social distancing. The lumber industry then depleted its inventories, leading to more price increases for what was left.
Josh Beisley, an estimator for Building Specialists, a Roanoke homebuilder and renovator, says, “From what we’ve learned it boils down to demand, which is higher than supply. There have been significant impacts from energy prices in Texas [where the electrical grid failed this past winter]. Texas supplies resins involved in construction, which are critical in building. There’ve been increases in the costs of piping, electrical conduits, fittings and strong increases in wood products, oriented strand board, and to paints and primers. The news says lumber prices are down and I’ve seen some, but others have continued to rise.”
Price increases, says Beisley, “Are across the board for all commodity items: drywall, flooring, cabinets, lumber, windows and doors—anything used on a construction project. I’ve never seen it across the board like this. It’s the perfect storm on materials.”
Roni Sutton, who with her husband Richie owns Blue Brick Building and Renovations in Roanoke, says, “Prices have quadrupled on some items, such as lumber. Metals and parts made of metal have seen prices skyrocketing, in addition to being hard to get.”
She gives this example: “Our HVAC contractor will no longer guarantee prices past 24 hours because the copper tubing he buys has doubled in price overnight several times over the last year or so.”
She says, “We are being careful and frugal with the materials we buy for the house we are remodeling to sell, but with housing prices as they are, even that isn’t particularly worrisome as long as we can get it on the market prior to the bubble popping, which we fear may happen within six months. Customers who are willing to be flexible with timing or maybe use materials purchased from the Habitat Re-store or culled lumber {which is imperfect] from Lowes or Home Depot can get around the increases somewhat, but that is limited.”
John Garland of Garland Properties, which mostly renovates older properties, places the blame squarely: “It is simply supply and demand, from my understanding. Increased demand is due to the pandemic and people having time for projects and decrease in supply due to people staying home and a reduced work force.”
Garland blames high demand and low supply “caused primarily by effects of the pandemic, which is, hopefully, coming to a close. I am optimistic that the pricing will stabilize soon and perhaps rescind a bit. One concern is the current increase in the COVID variant that may keep people from work, coupled with adequate unemployment benefits, and so forth.”
The basic problem, Sutton insists, is “supply and demand. The shutdowns on manufacturing are catching up, so there are fewer materials available while they try to catch up with manufacturing parts and milling lumber. We have been waiting for a septic tank install for almost four months because the specialized pipe is on back order. Our son installs whole-house generators in Georgia and those generators are on six-month back order.
“This has impacted us in minor ways. We have had one couple wanting to build a mid-sized porch decide to wait a year and see if materials prices come down. It hasn’t really slowed down requests for bids for us, though.”
Bob Fetzer, president of Building Specialists, says, “We are doing a lot of aging in place. People want beds and baths on first floor. We’re building master suite bathrooms and seeing more swimming pools because people want to entertain at home. They want to cook outdoors and have bathrooms there for full enjoyment of family and friends. I believe it’s a lifestyle change. We’re seeing people want to feel safe in their own environment. There’s lots of renovations to existing homes. We are working a job in Raleigh Court where an office is detached from the house, separating the two parts of life.”
Roni Sutton offers these tips should you plan to build in the near future:
We always suggest getting at least two or three estimates. Ask friends and relatives for recommendations for good quality contractors.
Be sure to compare apples to apples, don’t give contractors different expectations or job scopes.
Explain up front that you are aware that materials have risen exponentially over the last year or so and ask the contractor what can be done to moderate expenses. For example, our company always has spare lumber lying around. We’re willing to use it rather than new lumber if that’s what the customer would like us to do, particularly if it is off-color or an odd size, but the difference is not visible. As long as it conforms to code, we can sometimes save a bit of money that way.
Contractors can and will get creative, so don’t be afraid to ask.
Beisley suggests that your contractor should have a “record that expands beyond COVID and understands how the market should work outside this environment.”
And “this environment” is not likely permanent.
Are Big Changes Coming in Building?
Lenore Weiss, a partner and interior designer at Spectrum Design in Roanoke, sees the sea change in construction caused by COVID-19 and wonders how much of it will remain with us once the pandemic virus has left for more fertile fields.
“I think the thing that will be most interesting,” she says, “is now that you have materials and other prices rising, what will be the change in the culture? A lot of companies don’t necessarily need the space they have. If you work from home a couple of days a week, what does that do to the need for office space? After the cost of employees, the cost of space is the next largest expense. How many of us will go back to business as usual? What does that do to commercial real estate? We will see some leveling from a construction standpoint, but people need to shift space; they won’t need as much of it.”
Right now, she says, Spectrum is taking “a multi-faceted approach. What we do depends on what the project is and the time frame. Furniture is sustainable, so cost rises won’t go down. It had been increasing once a year, but now it’s twice or three times a year. We recommend buying as soon as possible, even if it means storing the furniture for a while.”
There are four approaches Spectrum uses, Weiss says. “We are checking in more frequently with our partner general contractors. We recommend that clients increase contingency. We look at the schedule. We think there will be a market correction because what’s happening now is not sustainable. Finally, we try to remain flexible in the material choice.”
Many builders are seeking alternatives. Says Weiss, “Supply is still a problem because manufacturers are not working full bore. We will, for example, contact tile distributors and ask what they have in their warehouse now. We try to determine what we can do to lock in on something already there. It goes back to the flexibility.”
Clients’ expectations, she says, “haven’t been diminished that much. I believe they may have diminished in one month, two months, but not that they’re okay with delays. There’s a labor shortage going on. There is still a lack of skilled tradespeople available.”
She is “seeing some outrageous prices for change-orders” and with the current situation, “builders can charge what they want.”
But the light at the end of the tunnel is likely not that far off.
The story above is from our September/October 2021. For more stories, subscribe today or view our FREE digital edition. Thank you for supporting local journalism!