Hurricanes Spike Local Material, Housing Costs

Hurricanes Katrina and Rita left a path of destruction that stretched farther than the Gulf Coast region. It had a widespread effect on construction materials across the nation. Costs have gone up across the board, and much has to do with basic supply and demand economics.

Northwest Arkansas, a region that is booming in development, has also felt a bit of the economic blow taken by the Gulf Coast states. Tim Graham II, a principal in Saddlewood Development in Rogers, said houses have gone up in price around $3 to $3.50 per SF, which varies from house to house.

“It’s not a huge number, but its pretty substantial,” Graham said. “That’s $6,000 to $7,000 either the consumer would pay less for or the builder would pay for, so instead it has to be caught up somewhere.”

Graham said the cost of some construction materials spiked in October but is now leveling off. He said framing went up to about $1.50 a SF per house. He said, overall, there was an increase in three major construction materials: concrete, drywall and lumber.

“The Sheetrock prices have gone up pretty substantially, 10 to 15 percent across the board depending on the size of the house you’re building, as well as concrete prices,” Graham said.

The cost of lumber has also gone up, but Graham noted that it fluctuates like the price of oil. Raw materials such as lumber are important because of the amount used in construction, he said. The industry is affected not only by the cost of the materials, but also the transportation of them.

“Oil has a huge thing to do with every material cost just because of transporting them into Northwest Arkansas,” Graham said. “We don’t have a lot of our own materials in here besides pretty much gravel and sand. We have to import everything for concrete and most of our lumber, so any time that gasoline prices go up, you’re either hit with higher prices for your materials or gas surcharges on your bills.”

Ken Simonson, chief economist for Associated General Contractors of America in Washington, D.C., released data showing some construction companies across the nation said they’ve experienced increases in services, labor and materials, along with carpet, cement, concrete, copper, lumber, PVC, roofing materials and steel.

Construction spending in the U.S. was up in September, reaching $1.12 trillion, which was 7 percent higher than September 2004, according to the U.S. Census Bureau.

“Crosscutting hurricane impacts on materials may have affected the construction spending total, and will likely have even bigger impacts in October: higher costs vs. reduced supply,” Simonson said in a Nov. 4 newsletter.

Graham said even though material costs will never flatten out to what they were before the hurricanes, it wouldn’t keep builders from building. So developers have tried to figure out ways to keep costs down.

One way, Graham said, was to use more trim material around windows instead of drywall, which has gone up in price quite a bit more than trim material. But it’s hard to cut down on costs and still make sure the quality is there.

“There’s not a whole lot else you can really do inside a house to cut the costs down to give the same quality as opposed to passing it on to the customer,” he said.

Previously:
• Katrina Raises Building Costs
• Contractors Brace for Hurricane Katrina Aftermath