Material costs could be the pin that busts recent building increase

sjones@thesunnews.comMarch 22, 2013 

— Last week the news was that Grand Strand homebuilders were having trouble keeping up with the demand for new homes.

This week, it’s the subcontractors.

“A lot of subcontractors have all they can do,” said Ed Friend, owner of Excalibur Construction, president of the Horry Georgetown Homebuilders Association and chairman of the Certified Master Builders of South Carolina Committee.

Subcontractors working for him that were previously operating with one three-man crew now have two crews and one on the original crew has been made a supervisor to oversee the extra work.

It’s a situation not only good for the builders, subcontractors and their employees, but the county’s economy as more money is spent, more people are paid and more dollars can go for things such as food, clothes, babysitters and entertainment, to name but a few.

But it could all come to a screeching halt if the cost of building materials keeps rising like it has since last fall.

Friend said that a standard sheet of plywood has gone from $6 to $13 in the last six months, drywall has gone up twice in the same time and overall, the price of lumber is up by 39 percent. Concrete is looking at its fourth price increase in the coming months, and the cost of steel has joined the upward march of other materials.

The situation isn’t helped by the rising cost of diesel fuel, which jumped 7.2 percent during February.

Builders are operating on profit margins of 2 percent to 3 percent, Friend said, an uncomfortable separation from the 5 percent to 10 percent margins in better times.

Additionally, lumber companies used to be able to assure contractors about future wood prices, guaranteeing them for at least 30 days. Now that’s down to 15 days, which means that there could be increases between the time a seller signs a construction contract and the time the wood is purchased.

Friend said that building contracts have clauses that allow builders to charge buyers for unusual price increases, but that’s not what anyone wants.

“It’s a touchy situation,” he said.

So while buyers have been unhappy about the unexpected costs, so far they’ve accepted them.

The continued low interest rates are what’s keeping buyers in the market, Friend is sure, but no one knows how long they will stay this low.

Nor, he said, can anyone predict when buyers will say enough is enough and put their home construction dollars back in their wallets.

More building needs more workers

The Associated General Contractors of America said recently that the nations’ building industry could find itself with a labor shortage if the construction business continues picking up in more of the 339 metropolitan areas it surveys.

The association’s information doesn’t say if the Myrtle Beach area is among them, but if it isn’t, some say it should be.

Friend said that some subcontractors have doubled their workforces in recent months and can’t take on any more jobs.

Nationally, according to the association, 145 of the 339 metro areas saw construction employment increase between January 2012 and January this year. Employment declined in another 141 of the metro areas and was stagnant in 53.

The association said that the construction labor supply is suffering as well because so many former workers either retired or took jobs in other sectors when times were bad.

“Between the challenges of attracting new recruits and retaining out-of-work ones, there aren’t that many skilled workers for a call-back in many parts of the country,” said Stephen E. Sandheer, AGCA’s CEO.

Clubhouse opens

Seasons at Prince Creek West, a 55+ community, has just opened a new, 15,000-square-foot clubhouse with an outdoor pool, library and card room.

A large ballroom space can be subdivided for simultaneous events.

The new clubhouse includes a billiards room with a large screen TV, pool and card tables and a wet bar. The facility also has a catering kitchen and dance floor for those times when residents want to kick up their heels.

Developed by Dock Street Communities, Seasons at Prince Creek West in Murrells Inlet has about 450 single-story homes and 700 residents.

Affordable housing grants

The Federal Home Loan Bank of Atlanta plans to award $21.3 million in grants in a competition that needs applications sent in by April 8, according to information from the bank.

The money will go to the bank’s member financial institutions and their community housing partners with up to $500,000 available per project.

The grants can be used to build affordable rental and owner-occupied housing or to help the financial institutions reach new customers, meet business development and community lending goals and facilitate economic development.

The Atlanta bank suggests that those who want to apply for grant money work with one of the its member financial institutions to complete the AHP Competitive program application.

The program that began in 1990 has awarded more than $424 million that helped to finance more than 70,000 units of affordable housing, according to the bank’s information.

Contact STEVE JONES at 444-1765.

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