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Facing increased construction costs

Some say storms may drive up costs

Some say storms may drive up costs

October 30, 2005|By KAREN HANNA

karenh@herald-mail.com

Cost increases in housing materials in the wake of a record hurricane season might sop up some of the profits for area builders, according to some in the field.

Contractors probably will absorb the higher prices on projects they have already bid, said Tim Fields, president of Washington County Home Builders Association.

The worst might be yet to come, Fields said.

"I don't think we're going to see any long-term price increases until the rebuilding starts" in the areas hit by the hurricanes, Fields said during a phone interview Tuesday.

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According to Fields, the materials that most noticeably have been affected by cost increases include plywood and panel products. Fluctuations in the costs of those materials are common immediately before and after a hurricane, Fields said.

"As they anticipate and prepare (for a hurricane), there's a noticeable and immediate increase in demand, and I think that correlates with an increase in price," said Fields, the owner of Royal House Construction Inc. in Hagerstown.

After Hurricane Katrina, the cost of plywood shot up from about $9 a sheet to $15 a sheet, Fields said, but noted that prices for the material already are coming down. The price for siding, a petroleum-based product, and shingles also have increased, Fields said.

According to the National Association of Home Builders in Washington, D.C., the industry experienced problems with the supply of some materials even before Hurricane Katrina devastated the Gulf Coast in late August. In a statement updated Oct. 19, the association predicts rebuilding efforts in areas affected by hurricanes will rely on large quantities of a limited group of materials, such as roofing, drywall and plywood.

Areas affected by four hurricanes last year have not completed cleanup and repairs, the association said. Hurricane Wilma roared across southern Florida Monday.

Coastal residents trying to safeguard their homes against damage from high winds and flying debris are not the only consumers of plywood - lumber products typically make up about 20 percent of the cost of materials for Royal House Construction's projects, Fields said.

Antrim Building & Farm Supply Co. in Greencastle, Pa., which sells materials to both builders and the do-it-yourself crowd, doesn't have the space to stockpile large amounts of materials in anticipation of shortages or price increases, owner Bob Zeger said.

Prices for plywood went up 20 percent right after Hurricane Katrina, Zeger said. They now are heading back down.

"I don't know if I can say it's an all-time high, but it's as high as you usually see it," Zeger said.

Two months ago - before Hurricane Katrina - Walt Whorten, owner of Whorten Construction in Mapleville, could buy plywood for $7.87 a sheet. A sheet costs $15.99 now, he said.

Builders also have been hit by higher fuel costs, Fields said. For instance, some suppliers now charge for deliveries, he said.

"They can be as little as $20 a delivery, but one house can have literally dozens of deliveries," Fields said.

Whorten and other builders said hurricanes are not the only triggers of price fluctuations in the fickle housing market. There's the industrialization of China, which has led to a run on materials, Whorten said.

Excise taxes and skyrocketing land values also push housing prices up, Tom Martin, owner of Colonial Distinctions, said. Those local costs could do more to dampen the market than do the hurricanes, Martin said.

"I think that's more devastating to the overall building market, more so than the cost of lumber," Martin said.

Builders contacted said they plan to honor the contracts they have already made with homeowners.

"We do not have an escalation clause in our contract because we prefer to keep the faith and believe it will level off," Fields said.

But, Martin said, builders will not be able to absorb the extra costs forever.

"Any kind of an increase, sure, it gets passed on, no matter what the increase is," Martin said.

Martin and other builders said Monday they believe suppliers are simply looking for a reason to spike prices.

"I've seen it for the spotted owl, I've seen it for all kinds of reasons why the lumber people want to raise the price," Martin said, referring to the debate over a rare owl that almost halted logging in the Pacific Northwest a few years ago.

Martin said he believes suppliers and producers could better prepare for runs on materials they experience before big storms. "I don't think it's that ridiculous. They know those things happen, they know we have hurricanes," he said.

Fields said he expects costs will level off over the winter, but might climb again as the spring season of rebuilding begins.

Price fluctuation is a fact of life for the industry, he said.

"I don't think we've seen the worst of it yet, that's my humble opinion," he said.

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