Serving The Sacramento Region & Northern California

Working with the Increasing Costs of Building Products in 2021

If you’re ready to start building the custom home of your dreams, like most builders, you may be worried about dealing with the ongoing fallout from the coronavirus-related economic shutdown. Starting in March and April of 2020, some states halted all construction and homebuyers in other areas cancelled or postponed their projects. The sudden drop in demand led to plant closings throughout the building supply chain, from lumber mills to window, door, drywall and appliance manufacturers.

The housing industry bounced back quickly thanks to a lifting of restrictions and historically low mortgage interest rates. The U.S. Census Bureau reports that March 2021 new home starts were up 22.6% from the previous month and up 37.0% from March 2020. The ESI Builders team sees this growth as even higher in our Sacramento area as many Bay Area residents move East to seek a different quality of life and a lower cost of living.

Unfortunately, the supply chain has been slower to rebound. Some manufacturers have two-month order backlogs, and others have been struggling to get parts. For example, most refrigerator compressors are made in Mexico, where factories also closed for a time and are still catching up.

To make things more difficult, health regulations now limit the number of workers in some plants, and some workers have opted not to return. That means those plants can’t produce as much. Not surprisingly, manufacturers’ inability to keep up with demand has led to higher prices and delays in getting certain items.

 

COST WORKAROUNDS

The sharpest price rises have been for framing lumber, which by August 2020 had doubled compared to the beginning of 2020 and continues to rise in 2021. That has added $16,000 to $20,000 to the cost of an average new home, which the National Association of Homebuilders defines as having just over 2,200 square feet of living area. The cost increases for bigger custom homes are even more, unfortunately. 

Potential new homeowners who can’t absorb these increases might need to look for creative solutions. One option is a slightly smaller home. Another possibility is to work with the designer and builder to make a number of small adjustments that only minimally impact the way the new home looks and feels—otherwise known as “value engineering.”

As one of our specialties at ESI Builders, through the value engineering process we look for ways to economize without sacrificing through amenities or quality. One obvious solution is to choose less expensive products, but you can also tweak designs. For example, simplifying the exterior facade on all or part of the home—reducing the number or corners and trim details—will save labor and materials without crimping interior living space.

MAKING PROMPT CHOICES

As noted above, there have been delays in getting some manufactured products and options. For instance, some appliance companies are only making stainless-steel finishes at this time. That doesn’t mean you can’t get the items you want, but it does mean that you need to choose everything from the deck layout to the windows, doors, and carpeting as early as possible, and preferably before work begins.

Additionally, you may need to be extra patient due to unpredictable delays in the supply chain over the next few months. These delays are out of any builders’ control. If you need to move into the house by a certain date, it’s more important than ever to speed up those design and product selections.

 

One final point – material prices, order lead times, and available options can vary from market to market, so a news story or the experience of a friend in another state or another part of California may not apply to you and your experience. The only way to determine how these issues will impact you and your project—and what the proper response should be—is to discuss them with your custom home contractor. Our team at ESI Builders can help you through this process of how to mitigate and work around these price increases. Our number one priority is giving our clients the best experience possible and the custom home they’ve been dreaming of.