Construction prices are at historic lows, as described by Tom Russell of Hendricks Architecture.
Something unusual happened to me the other day. I walked out of the local lumber store and was shocked when I looked at the invoice for my purchase. Being shocked by the lumber invoice was not at all unusual, what was unusual is that I was shocked at how much it didn’t cost. My home is a perpetual remodel project, and because I have been buying a lot of material, I watch building material prices closely. I can’t remember when lumber prices have been this low, though it makes sense when you think about it – lumber suppliers have a large surplus due to the lack of demand this past year. Apparently the law of supply and demand is still being enforced.
Local builders that John Hendricks and I have been talking to are finding the same thing. Many of them report that they have been bidding projects 20%-30% lower than they were just a year ago. While lumber prices are a big part of the savings, many builders and their subcontractors are anxious to stay busy and are willing to forgo some profits to do so. Keeping good, valued employees working and maintaining momentum are oft cited rationale for reduced contractor fees. Increased completion is a factor as well. Most of the contractors I know in this area are staying busy preparing bids for clients, many of whom are shopping for the best value for their construction dollar.
RMR Group is a builder in Big Sky, Montana that we maintain contact with. They recently had a client come back to re-bid a home that was not built in 2007 because the price was too high. Due to subcontractor, material, and fuel price reductions, RMR Group’s 2009 price for the exact same house was an amazing 33% lower than it was in 2007.
Quality is as good as it ever was, even with the lower prices. Because of the economy, lower tiered employees and subcontractors have been weeded out. The best employees are being kept, meaning you get the best people on the job.
I’m not an economist, but my sense is that the pendulum of home prices and construction costs has shifted from a historical high point to a new relative low point. I would expect that prices will end up somewhere between the construction boom we were seeing 2 years ago and the bargains we are seeing today. For anyone sitting on the fence waiting to start a big construction project, it would seem that this is as good a time as any we will see in the foreseeable future. I intend to seize the opportunity and build that barn that I have been waiting so long for!
Tom Russell, LEED AP, Project Manager
Hendricks Architecture, mountain architects located in Sandpoint, Idaho.
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