Homeowners downsizing their dreams
With residential building costs rocketing ever higher, price-conscious customers are dialing it back.
"Everyone has a budget, even people with more money," said Tim Alvarez, president of the Southern Oregon Builders Association. "Typically, with the price per square foot going up, the 2,200-square-foot house someone wanted ends up 1,800 square feet. If that's what they can afford, that's what they can afford."
In virtually every direction, from natural disasters and trade agreements to transportation and labor — not to mention demand — there's upward pressure on building costs.
"A lot of things are going on in the commodities market," said Mel Weeks, who manages Parr Lumber in Medford. "Right now, the biggest factor is shipping."
With pressure to reduce the number of trucks on the road, restrictions on driving hours, and other regulatory changes, major oriented-strand board (OSB) producers shifted shipments to rail.
But in the throes of winter, rail cars aren't necessarily available as trains are carrying coal and heating oil to Midwest and East Coast markets.
"There are three OSB plants in Canada where the panels are stacked to the gill," Weeks said. "One plant had to shut down, because there was no place to stack any more; it's a problem that doesn't have anything to do with demand. There's a lack of available trucking, the big money for rail companies right now is shipping fuel, and so the OSB just sits there."
The resulting shortage — creating price spikes — is likely to carry well into the spring.
"Everybody would like to say it's because of tariffs, but in reality those were already added into the pricing."
The waiting game goes on, because there aren't enough drivers, and existing truckers don't want to risk losing their commercial licenses by exceeding the federal government's hourly limits.
"There's just more work than what we have trucks for," Weeks said. "We'll have to wait out the winter to see how much we're out of the woods. As winter starts to recede, the need for heating oil will decline and it will self-correct, probably a lot quicker than if there was a lack of supply."
OSB is a substitute for plywood. The fallout is easy to calculate.
"What's going to happen is that builders are going to use more plywood," Weeks said.
At present, plywood is $9 per panel more expensive than OSB, making a $1,200 to $1,300 difference on a 2,000-square-foot house.
"Demand will eventually push OSB to the price of plywood, he said.
For those in need of dimensional lumber, Weeks suggests planning ahead.
"I was able to order two-by-fours and two-by-sixes at the mill and have a truck under them the first week in February. They're scarce in some territories, but a lot of it is just thinking ahead of time."
Bob Crews, a broker with Western Lumber in Medford, said escalating prices have gotten tougher for wholesalers and lumberyards to stomach.
"You can't print what they're telling us, but they don't have a choice," Crews said. "It's pretty simple supply and demand."
He said prices have trended upward, with stumpage prices soaring to as much as $1,100 per 1,000 board feet, up from $650 to $700 two years ago.
"Lumber products prices have gone up across the board around the world. When freight prices go up, it's going to get passed right down to the consumer. At some point it will get so expensive that it will choke itself off, but it remains to be seen where that is. The economy is good, business is good and lots employers are facing a labor shortage."
Alvarez builds three or four houses a year, with most of his work in remodels.
"With materials going up and labor going up, a lot of people are downsizing," Alvarez said.
Supply and demand is also coming into play in finding people to do the work.
"As a general (contractor), I pay labor to subcontractors," Alvarez said. "There just aren't enough people in the field doing work. There aren't enough trained plumbers, electricians, HVAC workers and framing crew. There's still a big void from the recession. For five years everyone who could stopped building and went to work for Costco, Harry & David, Lithia or moved out of the valley."
The result, he said, is that labor costs have spiked more in the past three years than the previous 10.
— Reach reporter Greg Stiles at 541-776-4463 or firstname.lastname@example.org. Follow him on Twitter at www.twitter.com/GregMTBusiness or www.facebook.com/greg.stiles.31.