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Rising cost of materials snags housing recovery

The power went out for much of the nation’s home-building machinery during the recession, forcing sawmills to stop turning logs to lumber, slowing operations that mine gypsum used in drywall and cutting production of oriented strand board.

Now that the housing market is seeing increased demand from newly confident buyers, prices have shot up for some key construction materials and builders are passing those costs onto consumers – both buyers of new homes and those remodeling kitchens and bathrooms.

“Materials have a big impact on new construction home prices,” said Jeff Burd, president of Tall Timber Group, a Pennsylvania research company that tracks new construction. “Half the cost of a new house is materials. If the cost of materials goes up, the price of the house goes up.

“During the recession, if the cost of materials went up, builders could not pass the cost on to the homebuyers. But now more people are trying to buy houses. The demand for new homes is growing faster than the supply to meet it, and those rising costs for materials are being passed on.”

Although the housing market is nowhere near back to pre-recession levels, residential builders are beginning to see a steady improvement. But many of the manufacturers that supply building materials have been operating at depressed levels and find themselves scrambling to meet the demands of the budding recovery.

The lag time in restarting closed plants and hiring workers is partly to blame for sending the prices of building materials soaring.

“The price increases have been massive,” said Jim Wyse, owner of Wyse Builders in Ross, Pa. “It has driven a lot of people out of the market for new homes and remodels.

“It’s not that builders are making more money, they have to raise prices to cover the cost of building a home.”

Wyse said Pennsylvania regulators tried to implement rules requiring builders to install sprinkler systems in all new homes, which would have added at least $10,000 to the purchase price. But state and national builder associations have managed to get those rules put on hold for now.

Nationwide, the volume of sales for new homes is up 30 percent for the first five months of this year compared to the same period a year ago, according to the National Association of Realtors in Washington, D.C.