Building Material Costs See An Average Increase of 27%

Real estate sales have hit record highs across much of the nation, but unfortunately for builders and home buyers, so have the cost of materials. The National Association of Home Builders (“NAHB”) reported an average increase of 27% in building material costs in just the last 12 months, dwarfing the previous largest increase of 6% in 2017.

What does this mean for buyers looking at land with plans to build, or anyone considering a remodel? “Proactively plan and budget in a contingency for price increases,” said Brett Shaw, owner of Timberline Contracting. Timberline, like other local construction firms, is setting placeholders on future jobs to ensure they don’t break ground without materials in hand. Lead times of over two years are becoming commonplace.

“The phone is ringing every week with people looking to renovate, or out-of-town clients wanting to build,” remarked Shaw. “We want to meet everyone’s needs but on top of material shortages, the labor pool right now is not very deep.”

According to the Bureau of Labor Statistics, there were 344,000 unfilled positions in the construction sector, up over 4% since last year.  Finding subcontractors to work on sites in mountain towns like Steamboat is a challenge.

Fixed Prices On Jobs Are No Longer A Guarantee

Most builders will no longer guarantee fixed prices on jobs, which has turned the norm for bids to a cost-plus industry. The NAHB says that rising lumber prices alone have added $24,000 to the cost to build the average single-family home. In Steamboat, it’s likely more than that. Crude oil, which impacts paint, drain pipe, roof shingles and flooring, has rocketed up more than 80% since fall. Copper, which carries water and electricity throughout houses, costs about a third more than it did a few months ago.  Inflation in the construction industry is officially here.

The NAHB reports that appliances, framing lumber, plywood, windows, doors and copper wiring are among the materials with the greatest shortages for the industry. Even paint supplies are limited.

Local construction firms continue to see an increase in calls requesting recycled materials that can be repurposed on other jobs. Homeowners are also looking at alternative materials to combat shortages, such as pre-engineered flooring instead of wood that needs to be finished.

Shaw said they have found ways for clients to ride out the current price increases, with solutions on larger projects such as building a care-taker unit and garage before the main residence. “It allows new owners a chance to enjoy being here and be part of the community, until prices stabilize.”