Construction: Prices Fall For Now
REGION – Even though a building project he'd priced out didn't immediately pan out last fall, local contractor Steve Hammontree – and the homeowner he was working with – did receive good news when plans moved forward a few months later.
"I repriced the job, and I noticed the prices had gone down," said Hammontree, owner of Hammontree Builders in Traverse City, of construction material costs.
Key construction materials like diesel, copper, brass and aluminum products did drop in price this spring, according to the Associated General Contractors of America. The organization, however, expected this "rare slowdown" likely to not last long.
"The slowdown in construction input price increases is a rare and possibly short-lived event," said Ken Simonson, the association's chief economist, noting that the last time prices rose so slowly from a year earlier was February 2010.
Hammontree said he did see prices go back up again some, particularly shingle prices, which fluctuate more often given they are tar-based and tend to follow changes in oil prices. Still, those in the industry locally say overall pricing of building materials is good – great, even.
"Commodity pricing is half or more of what it was in 2005 and 2006," said Phil Cochran, chief financial officer for Brown Lumber in Traverse City. "This is the best time to build ever. Labor costs are down. We've gotten more efficient doing more with less and with fewer people."
There is a catch, however: Though there's been some uptick in new construction throughout the region in the last few years, credit restrictions and other financial hurdles that homeowners face are holding back further building, say Fran Seymour, president of Brown Lumber.
"It is a great time to build given the cost of labor and cost of materials, and there are very qualified builders out there, but to finance these projects in this economy … homeowners can't necessarily take advantage of it," Seymour said. "There certainly is a lot of pent-up demand – people wanting to upsize or move, but just can't."
For area contractors, fuel surcharges on construction material delivery in the past several years also have affected pricing, though not for the better.
"The thing that's tough, too, for contractors is delivery – it's so expensive," said Hammontree, who has been in the business for 17 years. "It doesn't matter if it's three doors or a lumber package – it's usually the same charge. That's made it harder."
Some contractors also find that being organized about the products needed for a project is especially important given that smaller stores don't necessarily carry materials needed at that moment.
"It used to be you could go in and get it, and now you have to order and it will arrive in a couple days from somewhere in Grand Rapids," Hammontree said. "Even though you want to try to buy locally, sometimes you just can't."
Seymour, of Brown Lumber, said big box stores don't take much business away from the store when it comes to lumber.
"From a lumber standpoint, we lose very little business to the box stores. It's not a price point issue as much as we couldn't possibly put the investment in the stock that they have," he said. "From a price point, we're usually a little bit less expensive than them."
What the store does offer that big box stores can't, he said, is a different customer service experience.
"We're geared to fully understand what a builder or professional remodeler needs. We have a vast amount of knowledge and experience on our staff," he said. "A lot of these builders come in and rely on our salespeople and counter people for advice – similar to what they would get from a building code specialist and architects."
This service proves helpful to contractors like Bruce Anderson, owner of the northern Michigan company August Construction, who says customers want to know more about the products being used in remodeling and construction jobs.
"I'm giving people more detail -they seem to want it," Anderson said of sharing information about certain product availability, including specific costs as well as the benefits and potential drawbacks of certain brands. "I could say that for me, I'm spending more time educating people."
In the meantime, contractors like Hammontree and Anderson are staying busy and are optimistic about future home building and remodeling in the region.
"This year has been a really good year," Hammontree said. "It's taken a while, but everybody I talk to is extremely busy, and that's good." BN