Sup­ply costs may hurt hous­ing mar­ket

Lum­ber, dry­wall much pricier than in 2011, and that could put a damper on re­cov­ery.

Austin American-Statesman - - FRONT PAGE - By Mary Shanklin Los An­ge­les Times

Prices for dry­wall, ce­ment and lum­ber are out­pac­ing in­fla­tion, rais­ing con­cerns that the re­cov­ery could be hurt.

Just as the hous­ing mar­ket seems to be on the mend, prices for dry­wall, ce­ment and lum­ber are fast out­pac­ing in­fla­tion.

At a time when in­fla­tion is run­ning about 2 per­cent, lum­ber prices through­out the coun­try are up 35 per­cent from a year ago, ac­cord­ing to the Na­tional As­so­ci­a­tion of Home Builders.

The cost of in­te­rior walls for new homes has in­creased more than 14 per­cent from Novem­ber 2011, ac­cord­ing to a report by As­so­ci­ated Gen­eral Con­trac­tors of Amer­ica. And sup­pli­ers of that dry­wall, also known as gyp­sum board, have put builders on no­tice that those prices may spike an ad­di­tional 30 per­cent in the coming year.

“We did get no­tice the gyp­sum board would be go­ing up a sub­stan­tial amount, and we are see­ing pric­ing pres­sure from other sup­pli­ers and from la­bor,” said Ken McDon­ald, pres­i­dent of David Week­ley Homes’ Or­lando di­vi­sion. “It’s a balancing act. We will be rais­ing prices to cover the in­creases. We’ve been do­ing that this year.”

The pres­sure on prices is mainly the re­sult of two things: ris­ing de­mand from home­buy­ers ea­ger to take ad­van­tage of record-low mort­gage-in­ter­est rates, and sup­ply prob­lems be­cause of the shut­down of man­u­fac­tur­ing plants in re­cent years.

McDon­ald said the price in­creases also re­flect a home­con­struc­tion in­dus­try that is try­ing to re­build its profit mar­gins, which were dec­i­mated by the hous­ing slump and the re­ces­sion.

“Pric­ing all went to an all­time low, and now busi­ness is try­ing to get their mar­gins back,” McDon­ald said.

Na­tion­ally, new-home prices hit a peak of $257,000 in April 2006 and a low of $205,000 in March 2009, ac­cord­ing to the U.S. cen­sus.

Since then they have been creep­ing up; just this year, the me­dian price has edged up from $221,700 in Jan­uary to $237,700 in Oc­to­ber.

Anir­ban Basu, chief econ­o­mist of As­so­ci­ated Builders and Con­trac­tors, said he ex­pects prices na­tion­ally to sta­bi­lize even­tu­ally, though the near-term ef­fects of higher prices could dampen the re­cov­ery of the new-home mar­ket.

“I think it will slow the hous­ing re­cov­ery, be­cause new-home buy­ers are very price-con­scious,” Basu said Fri­day. “What builders might do is move their prod­uct to be more up­scale; af­flu­ent buy­ers are more likely to spend 5 (per­cent) to 10 per­cent more to get what they want.”

Greg Hard­wick, pres­i­dent of Hard­wick Gen­eral Con­tract­ing Inc. in Mait­land, Fla., said a lack of skilled la­bor is also go­ing to af­fect the new-home mar­ket in 2013.

“The thing that may get us next year is the la­bor. There is a huge theme through­out the in­dus­try that not enough ma­sons, dry­wallers and framers are avail­able to meet de­mands,” Hard­wick said.

“We’ve lost a lot of that la­bor and those re­sources. They’ve gone to dif­fer­ent in­dus­tries, and now the de­mand is go­ing back up.”

DAVID PAUL MOR­RIS / BLOOMBERG

A con­trac­tor works on a KB Home be­ing built at the Vi­cino com­mu­nity in San Jose, Calif., last week. In ad­di­tion to sup­ply costs, home­builders ex­pect to be af­fected by la­bor short­ages.

SCOTT EELLS / BLOOMBERG

Costs for lum­ber, as seen at this Lowe’s store in New York last month, are up 35 per­cent from a year ago.

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