I can honestly say I have never seen as many challenges or a better time to build.
Pricing is next to impossible, and I know how frustrating that is for customer as well as builders. You may have seen our budget worksheet, we have used it for years. We create it by looking backwards. For example I have a cost per square foot calculation for items like garages and decks and porches. Each year at the end of the year I look back at the stuff I built last year, how big and what the cost of it was to create these numbers then just add about 3% for year over year inflation. This is how the building industry has always approached pricing. This year we have seen over 25% increase in the combined cost of material and labor and still climbing. So as you and I sit and talk about numbers for the house you want to build next spring, will cost level off? drop some? or continue to climb? I have no idea. Which is weird.
So the question that comes up in ever conversation I have with a potential customer, ball park, how much do you think it will cost to build this house I want to build? If I answer them, there is a good chance I will be proven to be a liar. If I lie to them, there is a good chance they will not be a customer.
The next question is time line. Do you think I can be in by next Christmas? The construction is part of that answer, If I ordered your house today, then yes. However, we do not order a house until we finish the design, complete the specifications, come up with solid pricing and then do a contract. That contract then needs to go to a bank, who needs to send it to an appraiser to get a value of the house before they will complete the loan. Appraisers are backed up 2-3 months right now. Then with loan approval we need to go to the town and the county to get a permit. Some areas are still pretty on top of things, others are really backed up. Once we have funding secured and a permit in hand we can order a house. Assuming the pricing does not change between now and then. Manufactures backlogs are changing. If the market slows a bit this could hold at the 3 months it could be close to a normal build cycle. But if it stays busy we could see lead times in modular homes creep to 12-16 months like the Mobile home industry has.
So why now. Well, my crystal ball has never been very accurate but I do know some things. Pricing never goes down, so it will not get cheaper in the future, land is getting really hard to find, and interest rates are going to go up. So a few years from now, you will wait longer and pay more.
Recently I have had the conversation about timeline and workload over and over. We are in strange times and I am not talking just about COVID. COVID, plus extreme real estate market and building demands, the lowest mortgage rates in history and the strangest times to get things done have made for a very interesting soup. As it relates to time lines all I can say is my Crystal Ball is broken.
We are not to busy to build your house, we do not feel things are backed up so that we cannot get to your house, and while saying that, I am fully aware I might be lying at some point in the future because the landscape keeps changing. A few months ago we were told that windows and siding availability issues were likely going to protract production times. Before that happened that gap was filled and we had some houses actually get done early but the next warning was going to be appliances. Prices have gone up, we are told some will come back down and others may rise. All that said, the simple answer is we are uncertain. What I do know, without question, is that if you delay starting the process delaying the finish is guaranteed. If we start now, getting it done will be sooner then if we do not.
A really good illustration of this confusion is a letter we got today from one of our suppliers. You do not need to read the whole thing to understand how this has become a bit like nailing jello to a tree. So I am sharing it for those who enjoy the deeper understanding
February 6th, 2021
To our valued customers,
We appreciate your support and commitment to Curtis Lumber throughout these challenging times. Included in this communication is information on current market conditions, price changes, and what we anticipate happening in the near future. Please keep in mind that markets change rapidly and often without much notice.
Covid-19- I can’t stress enough the amount of disruption throughout all supply chains that continues to occur due to the pandemic. Mills and manufacturing facilities across the globe are struggling with surges in demand while simultaneously dealing with Covid outbreaks, raw materials shortages, and labor shortages. Ocean freight lines are struggling to manage ship and container availability which is leading to sharp price increases in freight all while reliability is decreasing. With housing demand strong and forecasted to remain that way, I believe we will be dealing with extreme price volatility, tight supply, and extended lead times for much of 2021 on many products.
Resin- There is a nationwide shortage of resin that is affecting many product lines, especially manufacturers of OSB, Engineered lumber, polyethylene, PVC, vinyl siding, and vinyl windows. This shortage is leading to higher prices and production delays.
Lumber Markets-SPF- Prices continue to climb steadily although the rate of increases has slowed compared to the last few weeks. Strong demand, favorable weather (until recently) across the country, high log costs, production issues, trucking and rail car delays, and log shortages at the mill are all factors in the current market. Price is secondary to availability in a market like this. There is no time to shop for the best price, if you find a mill that has what you want you buy it on the spot, or it will be gone. Most dealers are buying hand to mouth as no one wants a lot of inventory at these high prices. Current lead times are 3-4 weeks. The Random Lengths Framing Lumber Composite currently sits at $940. A year ago, it was at $388. It peaked in mid-September at $955. We expect prices to remain on a firm footing through mid-late March. While commodity markets are extremely difficult to predict further out, there are some signs that we may see some relief in pricing as we get closer to late Spring/early Summer.
SYP/Treated Lumber- Demand remains steady and prices are on a firm footing. Wet weather has made logging difficult throughout the South and is leading to a shortage of 2×12. Availability is tight and lead times are 3-4 weeks. Freight rates continue to climb, and delays are common in both rail and truck. Covid outbreaks and a shortage of logs have prevented mills from running at full capacity.
OSB- The OSB market continues to climb further into record territory as open market availability is virtually non-existent across North America. Most mills remain off the market while they try to catch up on late shipments. Transportation delays are only adding to the problem. Availability is more important than price. The Random Lengths OSB Composite is currently at $865. A year ago, it was at $263. Demand/Capacity ratios at the mills are running in the 92+% range. Availability will be tight, and prices are forecasted to be strong well into March.
Plywood- Similar to OSB, the plywood market continues to grind higher. Availability is limited and prices are expected to be firm into March.
Engineered Lumber- All manufacturers have implemented or announced upcoming price increases due to significant increases in raw materials, labor, and both inbound and outbound freight. Price increases for the most part are in the 8-15% range although we have heard of some manufacturers raising prices significantly more than that. All engineered lumber producers continue to struggle to keep up with the overwhelming demand and remain on allocation. The nationwide resin shortage is affecting some suppliers more than others however they are all dealing with it to some extent. Several suppliers are dealing with raw material shortages in addition to labor and trucking issues. Availability of all engineered wood products regardless of manufacturer is expected to remain tight for most of the year.
Roofing Market- The shingle market is extremely tight and will remain that way for most of the year. All manufacturers are struggling to keep up with demand and remain on allocation. GAF and CertainTeed continue to limit the amount of colors they are producing. Lead times on accessories remain extended up to 6 months in some cases.
Eastern White Pine- Pine prices continue to climb as strong demand and Covid related production issues have led to price increases, product shortages, and extended lead times. Availability is tight as wholesalers’ inventories have been picked over and mill direct lead times are out 6 weeks.
Steel/Metal Markets- Steel prices continue to climb which is affecting many products. Steel stud manufacturers had 10% increases Jan 1st and Feb 1st. They have announced future price increases of 10% March 1st and another 10% April 1st. Rebar pricing has jumped significantly in the last 60-90 days. Several Metal roofing manufacturers have had increases and continue to announce upcoming price increases. Expect prices to climb 10-20% or more over the next several months and plan on extended lead times. Expect to see double digit % increases on fasteners, trim coil, drip edge, fascia, adjustable and cement filled steel columns.
Insulation Markets- Strong demand, Covid, labor shortages, and trucking delays are leading to a shortage of fiberglass insulation. Lead times are running 8-12 weeks. Lead Times on Rockwool are currently running 10-12 weeks. Availability is expected to remain tight through much of 2021 due to strong demand and supply disruptions.
Drywall- Demand continues to outpace supply. Most, if not all suppliers are on allocation. Trucking delays are only adding to the problem and extending lead times even further. In a normal market, lead times are less than a week, but we are currently dealing with 8+ week lead times. Expect longer lead times to last well into Q2 or longer. We anticipate tight supply and strong demand through 2021.
Composite decking- We anticipate strong demand again in 2021. Trex increased their production capacity with the startup of their new production facility and barring any unforeseen issues, product availability should continue to increase throughout the year as they become fully operational.
Vinyl Siding- Strong demand, escalating raw material and labor costs, and production delays due to Covid continue to push lead times further out and costs up. Lead times are as much as 8-12 weeks on siding and 6 weeks on blocks, vents, and shutters. GP Vinyl Siding had a 6-8% price increase effective on 2/1. All brands produced by PlyGem including Mastic, Variform, and PlyGem had a similar increase. We have seen notices from other vinyl siding manufacturers experiencing the same issues and implementing similar increases. Expect extended lead times to last for at least the next 60-90 days. Plan accordingly and try to get ahead of any special-order jobs that you know of.
Composite and Fiber Cement Siding- Lead times are ranging anywhere from 3-8 weeks.
Boral TruExterior Trim and Versetta Stone- Lead times have really extended and are currently running 2-3 months on Versetta Stone. Expect extended lead times to persist well into 2021.
HB&G/Crown Columns- Lead times are up to 4+ weeks. HB&G has announced a price increase of 5-10% effective February 15th.
Perhaps the worst idea in this industry was the “Lot Model” house. You talk about your long failed experiment. Time to say goodbye.
“I can’t buy a house unless I can see it, I need to see stuff to know what I am getting”.
“I am very visual” I need to see it first. Yes we hear this all the time. Hogwash!!
The days when people in my industry had a limited offering are long gone. Look at the homes on our website. We have done everything from $150,000 homes to $950,000 and filled every gap between them. As a general rule if you have seen it in a house before the answer is yes you can have it in your house. Now, how do I show you that on a lot with 5 models?
I want to see the quality of the houses you build. Well you will never see that in a lot model. Do you know the zoning code does not allow me to set house on foundations. They are models for resale only and cannot be permanently installed. Oh and they do not have heat in them. So now, they are subjected to all of the elements. That is not good for houses. Frost heaves, hot, cold, condensation etc.
Second, what most people look at in models is the fit and finish. The “Quality” of the construction is behind the walls, under the floor and above the ceiling. What you are looking at inside the house is fit and finish choices that were made. Want better products, we can use those in your house.
I had someone call the other day and ask if we had any 4 bedroom houses. Of course we can build that. Do you have any on display so I can see if I like it? Um, no! And if I did and it was contemporary and you were looking for a rustic house does that mean I need to have a rustic 4 bedroom too? What about a Craftsman style? English Tudor? Farmhouse? Log Home? The reality is we have and can do any of these and I can show you electronically or draw yours and create 3D renderings of exactly the way it would look. But trying to show the breath of the product line in models would mean I would need to make an additional 25% on every house. Who want’s to pay more?
So yes, we have realized the error of our ways and we are fixing it. Wanna buy a lot model? Going fast!!
All that said, come in and see us and we can actually help you, visualize, create and design your house, the way you want it, this industry is really pretty amazing today. Oh yeah! and we can build it better, faster, and often for less money.
Hope to see you soon.
I have for a long time steered people away from focusing on Stock Plans as a way to save cost of significance when building a home. But I am changing my mind. It is not so much about the idea that that stock 28×48 house plan is less expensive then the custom design 28×48 ranch plan. The truth is they likely cost the same. But it is about a mind set.
Over the last few years we have seen a number of factors increase the cost of construction of any home. Building code changes, land cost escalation, the increases in minimum wages pushing wages up for skilled labor as well as the ever increasing cost of insurances and workman’s comp all impact the cost of building a home.
What does that have to do with custom versus stock models, well, nothing. But 5 years ago if a customer walked through my door with a $200,000 budget we had a lot of options we could provide them and stay in that number. Today, there is almost no way to get to that number. And if we can get there is requires a lot of restraint.
I have had a number of projects blow up in the last 2 years because we failed to stay focused on where we started. People who came to me with a limited budget and our first pass at it was under budget and made it look like it could happen. But flexibility is the devils playground. a few design tweaks, a couple of upgrade, all hard thought out and committed to. Little by little we creep the cost over the target while at the same time feeling each change is more necessary then ever before. Next thing we know our $198,000 target has crept up and up and now the house we love, the house we desperately need it to be, is at $220,000 and just out of reach.
It is always unfortunate to me when that happens, a customer who just is desperate for a house of their own, one simple and new, not needing years of upgrades and changes, one that is solid and efficient becomes out of reach for the need of a bigger closet and better interior doors, and laminate flooring and a porch on the front etc. These items that were not even part of the discussion to begin with become critical.
So if you know going in that the budget is tight, select a stock plan that was designed to be an affordable build, limit yourself to “standard” options, and get a great house you can live in today. Upgrades can always be done later when money allows. Keep it simple, make it easy and have a home of your own
I was in a meeting last week at one of the manufacturing plants and was reminded of a business strategy I was taught many years ago. As I listened to the Director of Sales argue with the operations manager about over promising and under delivering I was reminded of the words of one of my greatest mentors. He told me if your sales manager and your operations manager were not constantly complaining about each other your business was doomed.
The concept is really simple and it applies to all businesses. The sales departments job is to bring in work, to get work, to keep people happy, to value the customers, to thank them for their business and make sure people want to do business with them again. Operations side, the nuts and bolts of every business if left to their own, would minimize the work load, make sure everything was done to perfection and never push to do so much that standards were compromised. Either one of them on their own would destroy a business. But if they were constantly challenging each other they would bring the best of each other and get the best result for the business.
I own my own business now and in the beginning I had sales people, so that I could focus on making sure how we performed in the construction of the homes we sold were completed. It was a good plan as most of my experience was in the field. However, I constantly got told by customers that the salesman said we could do this, or we could do that when in fact we could not. I quickly realized that I did not want to trust the future of my businesses reputation on the words of someone other then me. So I let them go and moved into the office.
So when you come in here what you will find is the worst salesman in the world. I say more stupid things then you can imagine. I fail miserably at telling people what they want to hear, I do not hand out my business card at introduction and I do not write down your name to call you once a week until you submit to by. It does not mean I do not care, I need business to be successful, but what I have learned is this is not a sales business. People do not get talked into building a home. You do not fast talk someone out of the biggest investment they will make in their lives. Strangely, this has worked out perfectly.
People seem to really appreciate that they are talking to the builder not a salesman, they love that I will not call them but will be here when and if they chose to continue this process, and they like to know that who is telling them “this is what we will do for you” is the same guy that is in the field making sure that it is what we end up doing. So I apologize in advance for what might look like a clumsy sales approach, but I never have to apologize for not doing what the salesman told you we would do.
I think you will like it.
I am a Pragmatist. Sadly, that means I assume everyone is like me, which could not be more wrong. I go not buy out of emotions of any kind, I do not fall in love with things and have to have them, ever. When I buy a pack of gum I am looking at how many pieces you get for what cost and is it any good.
If everyone were like me, then car dealers would not insist you go and drive the car while they look at valuing your trade. The whole idea behind this sales technique is to get you to fall in love. Who does not love the smell and feel and gadgets in a shiny new car. Every car dealer knows that you will pay more for a car if you “have to have it”, so take the keys, go for a spin and we will crunch the numbers.
I love technology and new inventions, but I have a soft spot for tried and true. Everything that goes into the construction of your house is your choice. I will build it out of Bamboo and super glue if that is the house you really want. But I promise to advise you against it first.
Shinny new building product and techniques come out every day. Some of them prove to be revolutionary but many are not. Some of the products that are changing the industry in the south do not translate to the north. Terracotta tile roofs are big in the south, but they do not stand up to snow conditions. Panelized construction is huge in the inner city where labor rates are very high and labor is in short supply, but most of them are built in the north so they do not make a lot of sense to build ship in lift in your own back yard.
HGTV has made all of this really clear. People watch these hour long sales pitches on new product and techniques and then get frustrated when we advise against what they have been sold on. But the conditions where you are building may be very different then where the TV project was.
The goal is to get you the best product, we will advise as best we can but in the end it is your house.
I have conversations every day with people who have the next new idea that will make their house better for less money. Most often they are inherently flawed ideas that stem from good intent. Here is a good rule to consider. If you look around the building industry, and realize that all of the professionals that are in the business, have been for a long time all with the intent of trying to bring the best value to their customers all seem to be doing certain things the same way, chances are good that it is tried and proven.
Take Foundations for example, I have done wood foundations, block, ICF, and Superior Walls, but today I do 95% poured concrete foundations. Look around building sites of all types and you will see that is the method pretty much everyone is using. Why? Because it is clearly the best foundation system for cost effective solid foundation with a great long term track record of success. No need to re-invent it. Trust me, if someone comes out with a truly better mouse trap it will not take long for the industry to adopt it, but for now it has not happened.
The same tends to be true of other building product. If you look around today for the first time in years, OSB sheathing on the outside of the framing has largely been replaced by Zip Wall (the green stuff you see on houses during framing. It is a better product for site built construction that has weather resistance and gives a tighter seal to the house at a reasonable cost. There have been many attempts to come up with a better sheathing that achieve this but Zip wall nailed it and it did not take long for it to appear everywhere in the industry.
Stick with what works, give some time for new products to become established and for the industry to find the pitfalls of them, when it is proven then jump on the bandwagon.
There was a radio guy I used to listen too had a favorite expression. Sometimes you just need to say it out loud to have it sink in. If I were to summarize the conversations I have with most of my customers after I let them tell me what they are looking for (and I often do this for them) it would be the same for almost all of them. They would like a big but not to big house, they really want to just be done with it quickly without having to wait for ever for it, nothing to fancy but at least it should have all hard wood floors, a nice kitchen because they love to cook, an open floor plan with lots of natural light, they want it really well-built not some piece of junk but they have a limited budget. Summary, “Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.” Read that again and this time read it out loud……..”Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.” Now actually say the words out loud, they do in fact sound different when you say it out loud…..”Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.”
Of course I can…….is the answer any salesperson would feel obligated to give you. Sadly, I am a builder and not salesman and with that, here is what I know. The best subcontractors out there have earned the right to be discriminating and with that they chose not to work on jobs where they cannot make money and they take their time and will get it done when it can be done right. Most people intellectually understand this, yet in the middle of a project that they just want done, it goes away. The best materials out there are better, they install better, the work better, they wear better and they look better and they are a lot more expensive. The world is full of products that attempt to be most of these things but they are either very expensive of they fall short in some way. So does this mean it is hopeless? No!!! If you can have realistic expectations it is far from hopeless.
Modular home manufactures negotiate contracts with suppliers every year. They go to companies that make Cabinetry, flooring products, Doors and windows as well as lumber suppliers and roofing and siding companies and try to set competitive pricing agreements with them. They have all learned the lessons of cheap garbage products, ones that are difficult to install, fall apart easily and do not stand the test of time. They have learned that Cheap usually cost you money in repairs and service calls. What is interesting is if you were to go through 40 modular manufactures website, and look at the product lines they carry you will see the same names over and over again. Why because they are the BEST VALUE. In other words the manufactures have done the homework and research, product testing, market research and price negotiations for you. Combine all these products and put them together in a controlled and inspected facility, which will allow the completion of construction to happen more quickly on site and well you are headed in the right direction.
Then hire a contractor who knows the sub-contractors in your area, has worked with most of them, fired many, lost a few to high prices and has weeded through to find the best value in workmanship and you are well on your way. The end result of combining a quality Modular home with a Solid General contractor is you get most of what you want. It will not be perfect but it will be really solidly built, it will have the quality of products that you chose to pay for, it will be built considerably faster than the time it would take anyone else to build it right and it will likely save you a lot of money over building the same house another way.
That to me sounds like a really good choice.
You know for a long time I have said that you can buy more house on the open market then you can build new for the same money. Sorry, that has not changed yet.
This is another way of saying. old house are cheaper. But they may not cost you less to own. Cost of ownership is a function of what you pay for it, plus what you spend to keep it up and live in it less the money you sell it for. Let’s say you buy a house for $200,000 live in it for 10 years put about $40,000 ($4000/year) into improvements and maintenance and then sell it 10 years later and it sells for $240,000. Add in annual taxes, heat light and power and interest expense on your mortgage and you might have lived there for a cost of $100,000 which sounds like a lot but really is pretty cheap. Do the same math with a $1500/mnth apartment and you could be out more then double that. If you are really smart and buy a house right, do lots of maintenance work yourself over the years and the market grows you could live for free if you sell your house for enough over what you bought it for.
Now if you bought a new house for lets say $260,000, clearly a lot more money then the cost of buying the older house. But for the first 10 years your cost of Maintenance and improvements should be next to nothing so lets say $10,000. Theoretically a newer house should be more energy efficient so the cost of heat, light and power should be lower. Now when you go to sell it, it is likely a relatively new home compared to the old home. With that it likely more modern with a layout (floor plan) that is closer to what people are looking for today so it’s market value is considerably higher. If this is true and again assuming you made good choices you could sell this house with the same 20% value increase for $312,000 with lower operating cost and living expense and might well find yourself getting paid back with a net positive 10 years later.
So while the up front Cost to Buy was higher the Cost to OWN is much lower.
All of this comes from my own experience. My wife and I bought our second house a number of years ago and it was at the time the most popular house design on the market. The classic center hall colonial on a great lot in a great neighborhood. However, 10 year later we listened to a realtor tell us how no one wants a L/R and a Family room as well as a D/R with an eat in kitchen anymore. Additionally the rooms were small and cut up and now everyone wants a big open great space with less rooms. Our closets while they were the huge double door closets with lots of space, they were not walk in. Because of these things and despite all the time and money we had spent keeping the house like new and modern it was still a floor plan that was very hard to sell, worse yet, it did not carry high market value.
We bought this house used at a time when it was the end of that designs run. The needs of people are every changing and with it what holds value changes too.
I am a runner and I have been for many years. When I first started running I went out and bought a pair of Nike’s like you see in all the adds, the ones the professional athletes all use because they are the best. Six months into my running career I had my first injury and sought out the advice of an industry professional. My issue? I had the wrong shoes. 15 years later and hundreds of running shoes trial and error and I love shoes from a company called Mizuno. You have likely heard of them but most would assume they are a second rate company smaller and without the technology of the big boys. Yet, if you went to a road race you would see that many more seasoned athlete are running in shoes from companies like Mizuno, Saucany, and Asics then the big brands like Nike, Adidas and Under Armor.
As we go through the process of designing and spec-ing a house we are going to build for a customer the conversation eventually comes to windows. Everyone asks for Anderson, some say Pella or Marvin. Why? because these are companies that have branded themselves as manufactures of quality products that we are all familiar with. Yet if you go to builders job sites the brand you will see most builders using are from a company called Plygem. Why? because as a professional builder who has to offer a quality product we can stand behind without driving cost up this window is the industry standard. Is is sexy? No! Can you brag about the manufactures name? No! Is it a better window at a more reasonable cost. Ask anyone in the industry and you will get a resounding yes.
Modular builders are always fighting the stigma of be second rate construction quality because for the early years of the industry they were. However, today the modular industry is in many ways driving the choices the site built industry is making. They look at what the Mod guys are using, they know they did all the research to determine what the best value is and they just follow their lead. I believe some people feel that if they tell their friends they built a modular home but it has Anderson windows they get Street Cred for that. When was the last time you were in a beautiful home and went over to read the label you can barely read in the lower corner of the windows to see if they were a fraud? You don’t, you look at a beautiful well built house and think, Damn! this is nice.
Don’t get stuck on name brands, the simple business concept of most huge companies is that if they do an effective job branding their products they can charge extra without increasing the real cost of making the product and improve profits. Don’t pay extra for things that do not have any real added value.