Buyers can build a new home for less, as some material costs and labor costs drop

New homes cost less to build this year than in 2009, according to a national survey, and local builders say that some lower construction costs and smaller profit margins are making homes more affordable for buyers, who are slowly starting to make the decision to build.

The average construction cost of a typical house in the United States was $184,125 this year, down from $222,511 in 2009, according to National Association of Home Builders surveys of a national sample of homebuilders. Among the most dramatic findings of the 2011 survey was that framing costs averaged just less than $25,000, which is down from the nearly $35,000 average cost in a similar 2009 survey.

The survey, which looks at average costs nationally, may not be totally accurate for the Grand Strand, said Harry Dill, president of the Horry Georgetown Home Builders Association. There haven’t been dramatic changes in prices - some wood products are less expensive, but concrete prices have increased, he said.

“Right now it’s a great time to build a house because prices are low and it’s very competitive,” Dill said.

While that’s good news for buyers, it’s hard on builders who are struggling to stay in the business, he said. Several builders said that labor costs are also down as they have fewer employees, less overhead and are negotiating better rates from subcontractors.

“It’s not unusual for us to go to our guys and say ‘we need to be competitive on this, what can you do to help us,’” Dill said.

It’s not only builders and subcontractors reducing costs, throughout the building industry everyone including manufacturers and distributors have had to accept smaller profit margins and drop prices to remain competitive, said Raymond Goodman, the Myrtle Beach market manager for 84 Lumber.

There have been some changes in lumber costs in the past couple of years, but overall prices have remained similar, but with new products continually becoming available, it’s hard to make a direct comparison, he said.

After a few slow years, there has been a slight uptick in sales this year, Goodman said.

“It’s tight. We’re certainly not to the levels we were before but we are seeing some improvement,” Goodman said.

Several builders said that they also are starting to see business improve, especially in the last month or two.

“We’ve seen a lot more interest,” said Rob Clemons, the director of operations for Dawol Homes Inc. “People are feeling a little more positive about the state of the economy.”

The number of building permits hasn’t shown that increase in activity. Horry County issued 162 building permits for new single-family homes in October and November, compared to the 160 it issued in those two months last year.

Many of Dawol’s clients are retirees moving to the area and the interest from those buyers hasn’t waned, he said.

Clients can buy lots at low prices and most are choosing to build a smaller house than buyers a few years ago, which allows them to pay less than they would have, Clemons said.

The reduced materials costs in the survey may in part be a reflection of the smaller home sizes, Clemons said. A smaller house will need less framing materials or electrical wiring, which brings the average cost of those products down, he said.

The NAHB survey found that the average house size nationally dropped from about 2,716 square feet in 2009 to about 2,311 square feet in 2011.

Clemons said he hasn’t seen the price reductions the survey found and has seen some prices, especially for petroleum-based products, go up as gas prices fluctuated.

Dawol has also trimmed costs and is making half the profit on each home that it made a few years ago to keep prices down and compete with existing properties and other builders, he said.

The low prices of homes on the market, especially distressed properties in foreclosure or going through a short sale, is putting pressure on builders and their suppliers to come up with the lowest prices possible, said Fred Coyne, the owner of Westbridge Homes.

Sales of foreclosures and short sales are driving down the properties used in appraisals, which is putting pressure on builders, he said. Getting homes to appraise at what they cost to build is a challenge, which impacts the buyer’s ability to get financing for a new house, Coyne said.

Coyne is about to start his first new home of the year - he’s been primarily remodeling houses this year - and despite the challenges, he said he is confident that there is pent-up demand that will translate to more building, he said.

“We’re going to keep seeing this gradual growth. Some months you’re going to look at it and permits will be down, others will be up. We’ll keep going forward,” he said.