Local Home Builders Reflect on Current State of the Industry

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(A SolAire home in Sisters | Photo courtesy of SolAire Homebuilders)

Last year at this time, professionals in the home building industry were concerned that they were headed toward a recession, as COVID had shut down businesses and homeowners hunkered down to wait and see what would happen next. The Central Oregon Association of REALTORS (COAR) had released numbers that pointed to a slight decline in new residential construction over the previous year, but home building was deemed an essential business, so construction on new and existing homes continued. Local building professionals remained optimistic that the industry would stay strong, and little did they know that demand for homes would roar forward with a gusto the likes of which they have never seen before.

A year in, demand has continued to increase, but the news at the forefront of the industry is the high cost of lumber and other supplies, the regulations being imposed on builders and the high demand for remodels due in large part to the severe shortage of properties available for purchase on the market. The pandemic has caused delays in procuring materials, so builders must order what they need well in advance, and the cost to do so has escalated significantly.

Here are what a few Central Oregon home builders have to say about the current building climate:

David Rink, President, D. E. Construction Inc.

Question: How is business going a year into the pandemic and in the midst of the current housing market?
Answer: Business and customers are up from last year in our remodeling division. The clients range from locals wanting to upgrade their existing home to the newer Bend clients who purchased homes last summer and want to remodel them with upgraded finishes.

Question: How has that changed since last year at this time?
Answer: We thought in March 2020 that the shutdown would take us into a builder’s recession with folks holding back on spendable funds. Today, business is a steady pace, and we feel it’s going to get even busier this summer and into 2022. Clients want what they want, and they are willing to pay for our services even though the price we pay for materials keeps rising. When talking with other contractors, we all agreed on this: “We are busy, and the cost of construction is going up.” This is mostly due to outside factors: Regulation, regulation and more regulation. This is good and bad all at once. You could say it’s the new normal. 

Question: How does the overall cost of building a home now compare to last year at this time?
Answer: Housing costs have risen at a very brisk pace. Pre-COVID, a nice home could be built for $250 per square foot; last summer, for $325 per square foot and now, the cost is toward $400 per square foot and up for the custom homes we build. 

Question: Are you able to get the materials you need?
Answer: Yes, our lumber supplier (Miller Lumber) has been able to supply our projects as long as we order out in advance, three to four weeks’ notice before we make an order. If a product is not available, we have time to choose another. Last-minute doesn’t work anymore.

Question: How has the high cost of lumber affected home building?
Answer: We have had a few clients cancel their plans when COVID hit, but that was soon filled with others wanting to build here in Central Oregon right now. These are the new Bend clients coming from other areas yesterday, or within the last few years.

Question: Are you concerned about future supplies?
Answer: Not yet! We have heard that some products are being discontinued and wait times are months when they were just one to two weeks pre-COVID. Clients just go another direction; when one product is not available, they select one that is, or wait months for the one they want.

Question: Is there anything else you would like to add?
Answer: Our industry is struggling to fill jobs. There is a shortage of qualified workers who actually perform the work. It’s taken us years to find and keep our most trusted family of subs, and when one of them retires, it’s hard to fill their shoes.

derink.com

Matt White, General Manager of Bend Operations, Neil Kelly Company

Question: How is business going a year into the pandemic and in the midst of the current housing market?
Answer: I wouldn’t have guessed that it would be this busy and this crazy. I’ve been in this business for almost 30 years, and I’ve never seen it quite like this. I think some of it is that it’s like the perfect storm: People are at home, and because of this, they are noticing things that need to be done. They are working from home so need to create office space, and cooking more, so they want kitchen remodels. We are seeing more additions than we’ve ever seen, and projects are larger and more complicated. They take longer to design and longer to build. There are three pieces to the storm: People are spending more time at home so they value it in different ways; interest rates are at an all-time low; and over the last year, money has been easier to get so it has increased people’s buying power. With housing prices skyrocketing and the lack of inventory, people think, we either move, build or remodel. If they sell, they have to also buy at a premium, so they opt to remodel. I don’t want to scare people, but I don’t see the market changing anytime soon. People mention waiting to start, but we could be waiting even longer if we put the projects off. Our recommendation is to get the project in the queue, then we can start getting things lined up and ordering the supplies now.

Question: How has that changed since last year at this time?
Answer: A few things have changed. We still were in a bit of uncertainly in terms of the market last year. But by May, things were loosening up a bit. We generally see a little seasonal decline in the winter months, but this year, it just kept going strong, and in 2021, it has just kept getting hotter. We have pulled our marketing from many different avenues because we can’t keep up with the number of leads we are getting. It’s just a really busy time. We are building and growing. I just hired five new people. We are trying to maintain, but lead times are much longer on projects, not just due to labor; it’s labor, materials and contractors. It takes a little longer to get projects finished. We won’t start a project until all the materials are acquired. It takes longer to get it started because it takes longer to get materials.

Question: How does the overall cost of building a home now compare to last year at this time?
Answer: New construction is much different from remodeling. The price of lumber is adding over $30,000 to the price of a new home. My electrician told me that copper wire has gone up 300 percent this year. But in remodeling, the price of stone and tile haven’t gone up as much. There are a few tariffs and that sort of thing, but costs haven’t gone up like with lumber and building materials. With remodeling, you use a lot of lumber, but it’s not as significant as with a new home project. Prices are higher than the beginning of last year, but less significant than with the price of homes. It’s a timing issue. Because home prices are going up so much, the value that you are adding to your home by remodeling is harder to calculate, but people know they will receive value from their projects due to home prices.

Question: Are you able to get the materials you need?
Answer: We are. We have a warehouse, so our timeline is that we get a project designed, price it, get it contracted, get a significant down payment and then order materials. We warehouse the materials until we have everything we need, and base our schedules on the longest lead time. That initiates when our start date can be. It’s just taking a couple of months longer than what we are used to. Appliances are tricky. With appliances made in the U.S., it’s not too big of an issue. But appliances from out of the country are taking six months to a year to get, and sometimes they can’t even give us a delivery date. If you want a Bosch dishwasher, you may not see it for a year. Sometimes, we put in a temporary unit and then replace it when the other one arrives. Or, we wait to start the project. 

Question: How has the high cost of lumber affected home building?
Answer: What I’m seeing in the industry is that contractors have been forced to use escalation clauses on things like lumber. This has not been done so much in the past. Builders are having to do this because they may lose money on materials if they don’t. They use point-in-time for the clauses; like if lumber goes up beyond five percent over a certain time period, they’d use the clause to cover it. The price of lumber has probably scared away potential buyers looking to build homes, which is understandable. But the reality is that lumber is just a portion of the building costs. It can be a large chunk, but there are many other building materials that go into a home. You have to look at it on a case-by-case basis. More people are looking at steel framing again now.

Question: Are you concerned about future supplies?
Answer: Yes and no. As the economy continues to open back up in other parts of the world, our supply chains should continue to improve. I’m a little less certain about lumber. It feels like the building is happening all over the place. Inventory and supply chains will continue to loosen, but it will depend upon demand. 

Question: Is there anything else you would like to add?
Answer: If people are thinking of a project, now is certainly a good time to start planning. But in reality, a project planned now is probably going to be built in 2022. This is not typical, but don’t let that deter you. You can just spend more time in the planning process and really get the project dialed in. But if you want a project for 2022, now is the time to talk with contractors.

neilkelly.com

Kate Eskew, Home Sales & Marketing, SolAire Homebuilders

Question: How is business going a year into the pandemic and in the midst of the current housing market?
Answer: Our business is strong. We’re getting calls from people who are unable to buy what they want on the market and are choosing to build a custom home instead.

Question: How has that changed since last year at this time?
Answer: Last year at this time, there was uncertainty about how long the pandemic would last, how far reaching the effects would be and how it would personally affect everyone. That caused a brief pause in interest in building a new home. What we found was that the pandemic spurred people into moving up their long-term plans to move to Bend or to build their dream home. The prevalence of remote working has allowed folks to move up their plans to live in Bend as well.

Question: How does the overall cost of building a home now compare to last year at this time?
Answer: The cost to build a new home has increased exponentially since last year. Some material costs rise on a weekly basis. The floor of the market is being raised. Eventually, it will stabilize and settle into a new normal.

Question: Are you able to get the materials you need?
Answer: For the most part, yes. The supply chain isn’t moving as quickly or with as much reliability as it used to. We order far in advance to address this dynamic.

Question: How has the high cost of lumber affected home building?
Answer: It has increased the cost of building a home. Last year, a sheet of plywood cost $8. Now it costs $75. Not all lumber product costs have increased at the same rate. That’s the most glaring example. Availability of lumber products is our biggest concern as product supply is running low.

Question: Are you concerned about future supplies?
Answer: In the short term, yes. We expect the supply chain will recover and catch up in the next year.

Question: Is there anything else you would like to add?
Answer: No.

solairehomebuilders.com

Steve Bennett, Owner and General Contractor, Steve Bennett Builders

Question: How is business going a year into the pandemic and in the midst of the current housing market?
Answer: Business is crazy; it’s absolutely nuts. It’s very cyclical and up and down; people are coming to Bend like there’s no tomorrow. Everybody wants to move to Bend. We are a custom home building company, so we are getting lots of people inquiring about lots and cost; it’s very active out there.

Question: How has that changed since last year at this time?
Answer: It’s more active now. People are leaving Seattle, Portland and California and they are coming to Oregon. Prices are very high, but people are coming so it’s very busy.

Question: How does the overall cost of building a home now compare to last year at this time?
Answer: Prices are higher; lumber, plumbing and materials are all higher. Electricians are having a hard time finding wiring and plumbers are having a hard time getting PVC pipes and copper pipes, but the biggest culprit affecting most of the cost is lumber, no doubt about it. 

Question: Are you able to get the materials you need?
Answer: Yes, but you have to plan ahead. Suppliers are not manufacturing appliances as fast as they used to, so you can’t call and expect them by the end of the month, you have to plan way out. And with cedar from Canada, you can’t get it in a couple weeks’ time like you used to. You have to order it way ahead. The old saying ‘supplier liar’ comes into play: They say they have it, but then they don’t and you are stuck. 

Question: How has the high cost of lumber affected home building?
Answer: It takes longer to build now. I have had to line up all the lumber to build a house ahead of time instead of purchasing it as we go. The last home I built, I got all the wood first and put it on the site. We stored it onsite and covered it up with tarps so we had it available as we needed it. We had to make sure we had it and got it at a lesser price. It was a money-saving process. We’ve never had to do this before. It’s like the stock market; prices go up and down. 

Question: Are you concerned about future supplies?
Answer: Everybody is getting back to their normal. COVID has been a disaster for a lot of folks. But people are starting to feel more comfortable getting out and about again, so we will catch up again sometime; the big question is when. As manufacturers get going again, and people get back to work again, the supplies will be there. 

Question: Is there anything else you would like to add?
Answer: I think we just have to stay positive and think positive, and know that America will turn it around. As people get back to work, production will be right back where we were before COVID. 

stevebennettbuilders.com

Chris Davis, Managing Director, Hayden Homes 

Question: How is business going a year into the pandemic and in the midst of the current housing market?
Answer: It is going well, but with a lot of challenges, mostly with lumber and materials, labor and land. They all create their own unique set of headwinds for the market we are in now.

Question: How has that changed since last year at this time?
Answer: In May of last year, I’d say we were just starting to see the acceleration from COVID. We were bracing ourselves for what could have been a downturn, but the opposite happened. That acceleration has remained steady since May of last year. It’s been wide open since spring of last year and has not let up. 

Question: How does the overall cost of building a home now compare to last year at this time?
Answer: The cost of building a home has increased substantially since last year. The cost of land has gone up, and the costs of all materials and labor have increased. It’s been a trifecta of cost increases that have affected residential home-building prices. There are custom builders who aren’t building now because they can’t set a price. Material costs go up so fast they feel like it’s not worth it to build a home.

Question: Are you able to get the materials you need?
Answer: Just barely right now. It’s been a struggle to keep a steady supply chain in home building. We’ve seen shortages in wood products, plastic products and a variety of other products like insulation, garage doors and also steel truss plates. It seems like there is a new shortage that emerges each month that we have very little notification about. For example, plastics can include anything from the resins that go into switch plates to paint buckets. It’s a difficult time to have these shortages compound on each other. So, we are getting the materials we need, but with stoppages in the order and delivery process. So far, we have not come to a complete stoppage, but I’ve heard stories about that on the east coast. Overall, product time has increased due to labor and material constraints and shortages. Another hurdle we are facing is expanded permit timing. COVID has created limited capacity and increased demand for permits. We’ve gone from a four- to six-week process to eight to ten weeks in some municipalities. It’s impacting the entire spectrum.

Question: How has the high cost of lumber affected home building?
Answer: It’s passed along to the customers and is significantly increasing home prices.

Question: Are you concerned about future supplies?
Answer: I am for the time being. I’m concerned that due to significantly low inventory of new homes, there has been no indication that demand is going to drop significantly. I believe the pressures are going to remain very high on the home building market for the foreseeable future. 

Question: Is there anything else you would like to add?
Answer: Hayden Homes has always hung our hat on being the affordable home-building option in the markets, and even though we are experiencing these pressures, we are diligently working to deliver a quality home at a price that meets the wages of the hardworking families in the communities in which we live and build.

hayden-homes.com

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