If construction material costs return to normal, will homebuyer habits follow?

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Workers for Collier Construction of Natchitoches restore a rental home on the corner of Second and Bossier Streets damaged by a fallen tree. Fluctuations in the price of materials have put pressure on contractors and homeowners alike. Above, a worker passes a platform ladder to a crew member working on the exposed attic. Nathan Wilson

Nathan Wilson

During a July 20 congressional hearing on housing affordability, National Association of Home Builders(NAHB) Chairman Jerry Konter characterized surging home prices as a nationwide crisis.

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Among other cost drivers, the NAHB points to a 19% increase in the price of residential construction materials over the past year.

As owner of K and Z Construction of Gorum, Chris Edwards specializes in building, renovating and remodeling homes. He explains much of his business is preparing quotes for homeowners who reach out to him with an idea in mind. “People call me up and say ‘hey I want you to do this project. Give me a price,’” he says. “That’s part of the job I do as a contractor.”

Edwards reveals the total cost of his projects has shifted towards the supplies he needs for each job. “I’ve bid on jobs and the material has got to where its way higher than labor,” he says. “It takes some getting used to.”

Collier Construction crew members position a piece of lumber to be used in the roof of a home. Lumber prices, typically priced by wholesalers for every thousand feet, surged to more than $1,400 per thousand board feet in March before dropping to less than $600 this month.

As a contractor, Edwards accounts for the increased cost of materials in his bids, but he still describes the higher prices as frustrating. “When I break it down, what the material costs are versus the labor costs to remodel a house, then a lot of people here lately have been backing out saying that they want to wait until the price of materials goes down,” he says. “Its sort of hanging over me: well, I don’t know if the homeowners are actually going to accept this price with the materials as high as it is.”

Edwards explains that every bid that leaves a potential client with sticker shock is more than just a lost opportunity; it’s also lost time. “When you’re bidding a job for the materials, it’s a three or four, sometimes five hour process doing all that, and so you’re sitting at home doing all that and it builds up,” he says. “It’s sort of like a proposal and you don’t know if you’re sitting there wasting two hours of time.”

Nathan Beaudion, owner of C & N Roofing and Remodel of Cloutierville, says a lot of contractors he knows are facing similar problems with clients hesitant over price. “I hear that a lot, that people will give them estimates and they’ll say ‘well, we’re going to wait until the costs go down,’ because they just can’t afford it,’” he says. “We never hear from them again because the prices haven’t.”

Edwards warns the waiting game doesn’t always work out. “Three years ago… what I was charging for a turn-key house was around $135 to $140 a square foot. Now it’s $170 a square foot,” he says. In some cases the costs can be much more. He describes a job he recently completed. “I was supposed to have done a kitchen remodel and it got postponed. I bid on it two and a half years ago and it was $26,000. On the same house, I ended up doing it two months ago and it ended up costing $68,000 for the same thing, same products,” he says. “Nothing changed on the list, it’s just that’s how much the materials went up.”

The cost of wood at least might soon return to normal. Wholesale lumber prices began a steep decline in late March after more than doubling over the past year. This leaves the wholesale cost close to where it was a year ago, but contractors haven’t seen the price they pay decline nearly as much. Beaudion doesn’t see the price he pays at building supply outlets returning to normal. “They’re coming down a little bit,” he says. “I don’t think the prices are going to go down to what they were before all this happened.”

This article published in the July 30, 2022, print edition. Subscribe to the print or e-edition by calling 318-352-3618.

The surge in material costs has led Beaudion to see changes in the projects he gets and the business he pursues. “I haven’t built a new home in years. I’ve been doing mainly remodeling lately because new homes are just outrageous,” he says. “Renovations are coming up more because it’s cheaper to renovate a house than just go from the floor up. New construction, you need everything: electrical, plumbing.”

Edwards sees the same trend occurring. “A lot of customers I deal with, they’re looking for second hand homes, and just putting an addition on it or remodeling or something like that versus building a new house,” he explains. He believes the appetite for new homes is coming to an end. “There’s still building going on, but it’s eventually going to come to a halt,” he predicts. “I’ve been doing this 21 years and I can see it, and other contractors see it as well. It’s fixing to slow down tremendously.”

Edwards’ concern is shared by many in the construction industry, who fear any cost savings for buyers may not occur fast enough to resuscitate a housing market that declined more than 8% in June compared to the previous year.

The sudden drop in new home construction activity is mostly being credited to increasing mortgage interest rates, which leave homebuyers paying more for the amount they borrow. The prospect of facing higher interest payments at a time when housing costs are at a record high appears to be giving some houseseekers reason to stay home.

Beaudion describes also seeing a change in how his clients approach projects. “They’re comparison shopping now, so they are going with the cheaper materials. They’re not spending the top dollar like they used to. They are trying to budget,” he says. “A lot of people are going with a little lower grade than the top of the line stuff. A lot of the older homes where they just want to update them or whatever, they’re trying not spend any more than they have to.”

Some people don’t appear to be cutting back says Beaudion. “The richer people, I don’t see much difference in them because they’ve got the money, and so it’s basically what they want.” For everyone else, Beaudion says his clients look for less expensive options. “With the flooring, they’ll go with the little two dollars a square foot rather than the five or six dollars a square foot one, and it does the same thing. It’s just a little cheaper material,” he says.

Stylistic features are another sacrifice consumers often make, says Beaudion. He offers examples. “We don’t case the windows hardly anymore, we just sheetrock,” he says. “That way a sheetrock man can do that, and there’s no carpenter needed.” He suggests other features have become the exception to the rule. “I haven’t put up crown molding in forever,” he says. “We’ll just run the sheetrock and tape if off in the corners where there’s no molding at all, so it saves them money like that.”

Edwards thinks other homeowners are using alterations as a way to save money. “They are saving money by buying a secondhand home and just adding a couple bedrooms or something like that, because the structure is already there,” he said

Edwards suggests homeowner attitudes towards the high price of materials may blunt demand for construction projects, but he doesn’t see it ending entirely. “Some people are like, ‘it is what it is and it isn’t going to come down any time soon, and we want the project done anyway,’” he says.

Beaudion expresses a similar sentiment about renovations and remodeling. “They have to get it done, but they don’t have to spend a fortune doing it either.”

The price of construction materials affects both homebuyers and renters. The NAHB found that higher lumber prices had resulted in the average new homebuyer paying $14,000 more in construction costs and added over $50 per month to the rental cost of newly built apartment complexes. They estimate the average value of lumber used to build a newly constructed home has reached more $29,000.