Through the roof
DIMITRY ROSHKOVAN, a Woodland Hills contractor, believed he had a big job lined up last fall. But in the six months it took the client to hire an architect and have blueprints drawn for a large addition, Roshkovan’s estimate went from $170,000 to $250,000 and the Northridge homeowner abandoned the project.
The contractor blames at least part of the increase on the soaring prices of building materials, which generally account for about 30% of the cost of a major home-improvement project. Also figuring into the equation are rising energy, labor and insurance costs, including workers’ compensation.
“Everything went up drastically in the past year ... from nails to drywall,” said the owner of A to Z Construction & Remodeling Co.
Since April 2005, the price of copper pipe and tubing has risen nearly 71%; the gypsum products used in drywall, 24%; asphalt shingles for roofing, 19%; and ready-mix concrete for foundations, 12%, according to Reed Construction Data, a construction information company based in Norcross, Ga. The exceptions are framing lumber, which stabilized after rising sharply in 2004 and 2005 and is down 5%, and plywood, down 2%.
It’s all part of an upswing that has seen building supply costs outpace the rate of inflation for at least two years, largely because of strong demand, and that is adding to the cost of remodeling projects and new homes.
“Copper gutters, copper roofing, copper stuff we used to do 10 years ago as a design feature, we just don’t do it anymore because it’s prohibitive,” said Clint Whitman, chief estimator for Tarzana-based Matt Plaskoff Construction, which specializes in remodels costing from $300,000 to $700,000.
But the metal isn’t just a decorative option in home building. There are about 440 pounds of copper in a new 2,100-square-foot single family home, according to the Copper Development Assn., including about 200 pounds in wire and about 175 pounds in pipes and fixtures for homes with copper plumbing.
That alone would add $500 to the cost of a new home, said Michael Carliner, an economist with the National Assn. of Home Builders.
The increased cost of building materials will on average add $6,000 to the expense of building that 2,100-square-foot house this year, Carliner estimated. Nationally, in the last three years, the higher prices for construction supplies have added $20,000 to the cost of a new home, he said.
With this in mind, why the huge increases on some bids in just a matter of months?
Deciphering the economics of a contractor’s quote requires expertise that few homeowners possess. But to avoid overpaying, prosecutors, consumer affairs departments and the national Consumers Union recommend rigorous comparison shopping.
Get at least three bids, verify the contractor’s license with the state board, talk with at least three references, visit other jobs to determine the quality of craftsmanship, look for experience and credentials, check for proper liability insurance, don’t be rushed or pressured into signing a contract, make sure the contract includes all spoken promises and ask for a detailed timetable.
Specifying materials and their costs is another recommendation. But keep in mind, when compared to last year’s prices, most construction supplies cost more today.
Competition from other countries for building materials and the lingering demand from Hurricane Katrina rebuilding, as well as rising energy prices, are behind the price increases, according to experts.
“There was a great deal of extra demand last year in rapidly developing countries of the world like China and India,” said Jim Haughey, chief economist of Reed Construction Data, from his office in Waltham, Mass.
“Concrete is one of the big problems. Building in Latin America and Europe and the rest of Asia has picked up, and they are out looking for cement too.”
This is compounded by a lack of new cement plants to keep up with demand, said Ken Simonson, chief economist for Associated General Contractors of America, a national trade group. For environmental reasons, “nobody wants a cement plant in their backyard or the next county.”
U.S. contractors also depend on imported cement, which means competition for space on ships and adds freight costs, Simonson said. Southern California faces an additional problem: finding the gravel to mix with cement, he said. “It’s really hard to get the permits to open gravel pits.”
Meanwhile, the price of lumber is moving down a bit.
“Demand is off,” said Shawn Church, editor of Random Lengths, a Eugene, Ore.-based newsletter that tracks lumber prices. “And there has not been a commensurate reduction in output production.”
When a booming housing market, falling interest rates and aggressive speculation boosted demand, the price of framing lumber rose to $473 per thousand board feet in August 2004, from $271 in January 2001, about the time the run-up began. By April of this year, it had come down to $367, according to Random Lengths.
Because few prices are standing still, a matter of months between the date of the original estimate and the day the contract is signed can add thousands of dollars to the final cost.
Estimates are simply that. Until a contract is in place, any cost increases can be passed on to the homeowner. And that has left homeowners such as Cynthia Rosas-Cervantes unable to afford her dream.
“We had refinanced and pulled out quite a bit of money. We were going to add a second story, a master bedroom, two bedrooms with a Jack-and-Jill bath,” she said of her Northridge home. “It was about 1,100 square feet upstairs.”
After an early estimate came in at about $130,000, “we gave our ideas and plans to the architect,” she said. Nine months elapsed. “By the time I got the plans and I started calling contractors, nobody was under $300,000.”
Contractors who originally quoted $90 or $110 per square foot were now charging $220.
“I was sick to my stomach because I had already spent $10,000 on plans. We were either going to have to sell the house to get what we wanted or work something else out on a smaller scale,” Rosas-Cervantes said. “It was impossible to do the second story. One guy said, ‘You really needed about $400,000 and another hundred thousand for incidentals.’ ”
So instead of a second story, she opted for a larger dining room, hardwood floors in the living rooms and some skylights. It’s not what Rosas-Cervantes had envisioned.
“My dream is gone,” she said.
Woe unto anyone who received a quote but postponed the work.
“If they put it on hold for a couple of months, the prices changed,” said Mike Benavi, manager of Jonathan Builders Inc., based in Valley Village.
His company remodels kitchens and bathrooms, renovates homes and builds additions all over Los Angeles, especially in the San Fernando Valley.
“The prices of cabinets have increased a lot,” he said. As a rule of thumb, he said, homeowners who started planning last year can expect to tack on an additional $5,000 this year for a kitchen remodel. “If an average price was $30,000, it would be $35,000 today. If it was $40,000, it would be $45,000.”
His bids for additions are up too. “A year ago, I was willing to sell a job somewhere between $140 to $160 per square foot,” he said. “Today, it’s pretty close to $200 per square foot.”
By comparison, contractor Roshkovan said a job that two years ago would have cost $85 per square foot would now be quoted at $150 or more.
Materials are not the only thing going up in price -- gasoline and diesel fuel have too.
Builders “use a lot of diesel fuel for off-road equipment, earth-moving equipment and diesel-powered construction vehicles like dump trucks and cement mixers,” economist Simonson said. Reed Construction Data reports that diesel fuel has gone up 18% since April 2005.
Even the cost of the contractor getting to the job site has risen.
“It costs me more to get to the customer’s house,” said Roshkovan, who has four crews working on jobs around Los Angeles County. “It’s adding to the whole picture.”
Although Roshkovan stays busy, he has lost more than one job because of the higher prices, and some homeowners have had to put their grand visions on hold or downsize their plans.
“One lady is doing a smaller addition,” he said. “She couldn’t make her dream home because of the prices. They went up.”
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Pricier, from the ground up
Percentage change in the price of building materials from April 2005 to April 2006:
*--* Copper pipes and tubing +70.7% Gypsum products (wallboard) +23.9 Plastic construction products +19.9 Asphalt roofing (shingles) +18.6 Ready-mix concrete +12.1 Softwood plywood -1.8 Softwood lumber -5.0
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Source: Reed Construction Data
