How are you dealing with increased costs to build?

[Mayer M.]

Hey!

So how is everyone handling the increased development costs, particularly the dramatic increase in lumber prices?

I have started to see people put projects on hold hoping that material costs come down, but will they? And if so, will it be enough to make a dent?

Personally, I believe lumber costs will continue to rise especially once inflation begins to set in.

I am slated to begin a new construction multi family project and the lumber costs are about $200k more than they would’ve been a year ago. The way I see it is since everything is already lined up and ready to go there’s no sense in pausing with the hope I can build for cheaper in a year.

What are your thoughts?

[Jay Hinrichs]

Originally posted by @Ben Nelson:

@Jay Hinrichs I’d venture to guess labor costs here are quite a bit more as well. Materials aside, land, labor and permit costs all make it more difficult to build at a lower cost in the PNW.

No kidding I am just finishing my budget for phase 2 of my project in Canby 30 lots our of our 90 total 

my costs NOT including the land are  about 70k a lot all in for improvements streets sewer water storm franchise utls  surveying engineering  City fee to build it ( not building permits just the fee to build the infrastructure) Platting final monumentation construction staking appraisal escrow and title fee's for the construction loan  Loan fees and interest paid prior to the actual vertical loan going in.  Then you add the price of the dirt and all the soft costs to get the project through all the entitlements and well that's another 80 to 100k depending on how good a deal you got on the dirt so basically this is why in our area you cannot find a lot for much under 150k

then you add 25 to 35k for vertical permits then you add in the 120 to 140 a foot to build and wa la you have about 400k or so just in costs for a 2000 to 2200 sq ft home nicely appointment not builder grade little cheaper builder grade of course.  So Affordable housing Eh not sure that can happen anymore in our area.. 

My wife has a client from Vegas who wants a home in Newberg as a second home ( they are into the wine scene) cant get one keep getting out bid. I keep telling her sell them one of our new constructions we don't play the multiple bid game at least they will get something.   

[Jonathan Stone]

@Jay Hinrichs @Ben Nelson

Costs in the PNW also have to factor in weather and timing. I know on the commercial/industrial projects I work on you can only pour the Cement Post Tension Slab under specific temp and humidity conditions. The projects I work on often have 2 or 3 pours. I couldn’t imagine trying to build 50 or 100 home foundations and having the pours constantly delayed due to rain/mist or temperatures for the Block Houses.

I still believe as I mentioned in other posts about current lumber pricing we are soon going to see new technologies adopted in home building. New materials, new designs and alternative labor needs.

As for waiting on prices of materials to drop, just realize labor prices will escalate so any material savings have to be enough that you offset increases in labor and delay return of equity to this point in the project. I know it probably hurts quite a bit to see this much price escalation this quickly.

[Jay Hinrichs]

Originally posted by @Jonathan Stone:

@Jay Hinrichs @Ben Nelson

Costs in the PNW also have to factor in weather and timing. I know on the commercial/industrial projects I work on you can only pour the Cement Post Tension Slab under specific temp and humidity conditions. The projects I work on often have 2 or 3 pours. I couldn’t imagine trying to build 50 or 100 home foundations and having the pours constantly delayed due to rain/mist or temperatures for the Block Houses.

I still believe as I mentioned in other posts about current lumber pricing we are soon going to see new technologies adopted in home building. New materials, new designs and alternative labor needs.

As for waiting on prices of materials to drop, just realize labor prices will escalate so any material savings have to be enough that you offset increases in labor and delay return of equity to this point in the project. I know it probably hurts quite a bit to see this much price escalation this quickly.

I know guys have tired to frame in a factory and then assemble  and never really got that off the ground.

no question lost opportunity end of the day affordable housing is a dream of politicians for the reasons you state above. Unless they heavily subsidize it all.  As for current conditions its being passed on to the buyer ( inflation / appreciation).. for us its the Buyers paying more so we can keep our margins.. I was the first one in Canby to pop above 600k for a 2000 sq ft new build and now most every other builder has followed suit and there still is only 16 houses total on the market in a town of 20,000.  Our buyers ( at least in our community) are either empty nesters or sold a home with a bunch of equity in Portland proper and want out of the social issues that are infecting mainly north Portland we have 3 from North Portland who bought and moved out to Canby  :)  WE are not getting the fHA younger family buyer although we have some families sure.. but not the low down payment max leverage buyers.

So people start doing what happened in CA and Atlanta and Dallas they move out of the city centers and become commuters or as stated are retired or semi retired or  we do have some that are now working from home. I did build a Casita house with a separate work / live space but the buyers that bought are putting extended family in that space not an office at least so far.

[Account Closed]

@Mayer M.

All non-essential building of fences decks pergola and so forth is halted in my world. This doesn’t (yet) change my infill plans as I’m 3 years out for those still. Repairs only at this point.

[Marian Smith]

@Jonathan Stone There is a company in Austin that has a 3d printer printing homes...out of concrete, I guess. Thats a pretty novel building technology! They printed one during SXSW two years ago.

[Jonathan Stone]

Originally posted by @Marian Smith:

@Jonathan Stone There is a company in Austin that has a 3d printer printing homes...out of concrete, I guess. Thats a pretty novel building technology! They printed one during SXSW two years ago.

That is exactly the type of thing I am talking about.  You could do light weight foam-crete as well for prefab walls.  There is also an argument for metal studs, which have their own costs and flaws.  But most of these things run into the same issues which is building codes.  Depending on your environment and where in this country you are there are plenty of houses around from 100, 200 and 300 years ago that don't meet any building codes but could provide insight into ways we could be building today.  People used what they had.  There are many magnificent adobe structures in the area I grew up in from the 1700s.

[David Fenster]

There are many options out there when it comes to building materials. We find the default to wood is simply choosing the approach that best suits available labor force. 

We've designed with shipping containers, mass timber, metal, concrete, wood, and prefab. The best scenario is when you can strategize on paper prior to getting to the building stage, but if you're already there pausing (briefly) can be beneficial to see if there are options available to help reign in costs.

[William Coet]

Originally posted by @Jay Hinrichs:

Originally posted by @Ben Nelson:

@Jay Hinrichs Yes that’s true, most if not all of what I saw out there was slab on grade, we hardly do any of that out here. And I agree, I don’t think it’s a bad option, we just would need to change our current building philosophy to make it happen. I would be curious what costs come in at, though I know everything varies by area. I’m constantly trying to figure out ways to provide more affordable housing options out here...I hope it’s still possible. 

my first one is looking like about 80 bucks a foot.. keep in mind permits are next to nothing compared to our area .  and these are not up graded they are builder grade all the way.. starter houses that sell for 210 to 230k a copy. 

I assume so, but I have to ask. Is 80/foot materials only? Also are you doing these with your own crew, hiring local contractors, or a blend? Thanks Jay!

[Marelyn Valdes]

I had estimated rehab costs on a flip house that needed almost all the plywood on the roof replaced and drywall interior, too.  After waiting several months to get started  I just found out OSB was now $35 a sheet and plywood $55 a sheet, so I decided to use OSB and ordered through the pro desk at Lowe's  enough to replace 2 houses in case I find another flip in the near future.  It was almost a month's wait to get the OSB in and delivered.  I don't think the price increases are just from new construction, but also from all the storm damage in other parts of the country (I am in Ocala, FL).  The man who ordered OSB just before me ordered 300 sheets for 4 houses he was building and I overheard another contractor telling the pro desk he had submitted a proposal with 90 day price guarantee and the buyers didn't have the money.  Now they are ready to start building but prices have gone up 20% and he has to do a new contract.  I think if you have the funds and area to store materials, it may be worth stocking up on commonly used materials.