Materials price increase adding to wild market
By Colin Anderson
It’s no secret that Idaho is one of the fastest growing states in the country. People are coming here for a myriad of reasons, but whatever the reason, the influx of new residents is having a dynamic impact on the real estate market. “Right now, we are in a seller’s market,” explained Jackie Suarez, an Associate Broker with Century21 Riverstone. “Low interest rates, people retiring or working remotely, and folks seeking more rural settings continue to create more demand than our market can supply.”
With such a tight market, and such low inventory, some are turning to a custom build as an alternative. Many are finding, however, that this segment is also proving very costly due to a number of factors. “As is true of any industry, the economic reality of supply and demand is a huge factor,” said Ramey Construction Assistant Project Manager and Marketing Director Doug Lutz. “The housing shortage in areas like our own, combined with the flight of folks leaving big cities, has contributed to this demand in a big way.”
Ramey Construction builds commercial properties as well as custom homes and remodels. Doug describes the demand as intense and at a frenetic pace, especially since the onset of the COVID-19 pandemic. Area builders are dealing with a large spike in the cost of building materials, everything from lumber to metal to PVC. A high demand from consumers combined with a pandemic shutdowns and other factors has created a perfect storm in pricing. “As a result, not only are the mills struggling to keep up with the demand, the tariffs between the U.S. and Canada have had an impact (with and without COVID). And, to add fuel to the fire, a couple of our distributors disclosed that many smaller suppliers are having a hard time getting materials since several of the big box stores are buying up inventory,” added Doug.
While some potential homebuyers are finding builders booked out often months in advance, many are deciding to take out equity in their home to pursue remodel projects themselves. There are all kinds of instructional videos available online for those wanting to add new flooring or tiling, a backsplash, a backyard patio or landscape. In response to these DIYers, big box chains are using their massive purchasing power to move to the front of the supply chain line, which in turn drives up material costs for smaller construction outfits.
Jackie keeps in close communications with several of these local contractors and doesn’t expect to see this markup change soon. “I’ve been told to expect higher pricing and delays not only in building supplies but appliances, generators and furnishings as well,” she said. “Some of our friends in the financial and construction industry have indicated that it may be a while before we see a reversal, but, as with all things, this can’t last forever,” added Doug. “Something’s got to give, whether folks get priced out, costs come down, or both.
If you are considering a custom build, be prepared to be in a near equally competitive market as existing home sales and also for a longer wait time than you might expect. It’s important to do a lot of information gathering before making this type of commitment. “If you’re just beginning the process of finding the perfect land to build on, it’s important to understand accessibility, available utilities, zoning, wetlands and geography, and, of course, identify your budget and timeline to see if this is the right place and time,” recommended Jackie.
Doug agrees and is hopeful that people don’t get caught up in the rush and stuck with overpaying for inferior quality. “Any builder worth his or her salt will help their clients set realistic expectations, be transparent about costs and offer what help they can to value-engineer costs in a way that benefits the client, not the pocketbook of the contractor.”