Digging Into Rising Home Construction Costs
Homebuilders are enjoying a busy start to their 2021 construction season. It's demand for single-family homes that's driving most of the construction in northern Michigan right now. 
Bob O'Hara with the Home Builders Association of the Grand Traverse Area says, "It has definitely been an interesting 12 months. No doubt about that. The home construction industry in Michigan was largely shut down for several weeks."
Construction work was halted during the pandemic. But once crews were allowed back to work, the pent-up demand kept them incredibly busy. And now as we enter 2021 things are really framing up for another busy construction season.
Josh Winkler with Winkler Contracting is working on building new homes in a new subdivision in Blair Township. "We took some time off last spring… it really set things back. Pretty much as soon as the restrictions were lifted and we were allowed to go back and do construction – we were right in the middle of a large project. So we powered through that and then the phone's just been ringing off the hook."
O'Hara sees it from the members throughout his organization. "The builders are busy. Seems like everyone wants their house renovated or wants a new house now. There's been an increasing demand for housing in Traverse City."
Winkler says, "We just can't keep up. Just as busy as we want to be. We've got our hands full here… never-ending calls. It hurts to turn work away." But Winkler says they have had to say no to jobs because of how busy they are. "It's one of those feast times of year. You hear about feast or famine. It's definitely feast right now. These sell before we even get 'em built." He says developers "just hand us plans and we build them."
"I know there's a lot of people coming here and there just isn't homes. We're trying to do our part and get some homes for these people to move into. It takes about two weeks to get one roughed in. The usual turnaround on them is four to six weeks, from the start of the project to move-in."
High demand locally isn't unique to our area. Due in part to short supply because of things like the California wildfires and the deep freeze in Texas, the cost of lumber and other materials is also up this year.
Winkler says, "It seems there's longer wait times for windows, specialty products, custom doors. The manufacturers, they had a lull too. So they're struggling to keep up with demand." 
O'Hara agrees. "The price of lumber has spiked recently. It spiked last year, but it spiked again. And it hasn't come down."
"A number of supply chain issues like that are influencing the market, making it hard for builders and buyers to work out a good deal on a house."
One of the owners of the development in Blair Township says they've seen lumber prices more than double over the past year – and in some cases – it's been up 200%. Matt Hodges is a Partner at Lakewood Trails Development and Principal Broker of Kultura Group. He says, "It's almost a perfect storm with (all) that is happening in the world today." During the start of the pandemic, "when plants shut down production but the need for housing doesn't stop… prices increase." And he adds, "we're not feeling that ease yet since we are still behind in orders."
"With imports like windows, lumber, etc. coming in from across the globe, and dealing with COVID themselves, prices continue to rise. A large part of the country's insulation for interiors and exteriors (siding)," comes from Texas, which just suffered a major freeze. "They lost tens of millions of metric tons of product. They are now backdated on many products 12-26 weeks!"
And Hodges says the California wildfires have also had a huge impact. "Since thousands of homes that were lost in the west coast fires are needing rebuilt, that adds to the lack in the supply chain. Therefore prices go up again." Hodges says in addition, interior door prices are up 80% and the price of shingles is up 35%. At Lakewood Trails we are lucky that we can buy in bulk as well as, in many cases, direct from the manufacturer."
O'Hara agrees lumber isn't the only problem. "All sorts of materials are going up. And that has to be passed on the homebuyer or the builder has to take a loss on it. It's pricing people out of the market."
O'Hara says the average home cost is up $25,000. And that can be significant. "For every $1,000 of cost that the home price increases, the National Association of Home builders calculates that 150,000 families are priced out of the market for a home. Millions of people are being locked out of buying a home."
The build-up of home building is also taking a toll on the labor market. "One of the major problems builders have been dealing with is the labor shortage. We've been working on that for years."
Winkler sees it too. He says most of the good workers are already working. Others are new to the construction industry or new to the area. "There's so many contractors demanding help that they get snatched up just as quick as they get here."
O'Hara says the full impacts of the pandemic, home pricing, and labor may not show up for several years.
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Source: https://www.9and10news.com/2021/03/24/digging-into-rising-home-construction-costs/
