Soaring lumber and materials costs disrupt home construction in Savannah


Homebuyers who have been waiting for years to build their dream home have to put their projects on hold even longer, not because of financing or other mortgage difficulties, but because of the costs of lumber and materials.

Jenny Rutherford, a local real estate agent, said she is already working with clients, browsing the real estate markets record low inventory for existing homes, but those who choose to build from scratch don’t find much relief either. In fact, it is quite the opposite.

Over the past year, the price of residential building materials, especially lumber, has hit record highs, disrupting construction and delaying buyers or fixing the price entirely to them. A combination of staff shortages at sawmills and continued demand is the culprit, according to area builders.

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The price of wood, which historically sits at $ 300 per thousand board feet, peaked at $ 1,607 This can. While that number has since declined to around $ 600, it’s still double the numbers before the pandemic.

Rutherford, who was drafting plans for his own home on the south end of Tybee Island, said construction costs tripled in less than a year, effectively putting his plans on hold.

“It became unrealistic to build the house I really wanted,” said Rutherford, who hoped to create a space to raise a family. “I predict it will take five years before construction.”

She is just one of many home buyers who choose to wait, according to local builders and national trends, who shows a 9.5% drop in housing production.

“Despite favorable interest rates, there are certainly a lot of people waiting on the sidelines,” said Matthew Johns, a local builder.

Usually, he said, three-quarters of his clients actively turn to construction after buying a property, but now “those numbers are probably reversed.”

“New construction is always a premium, but it’s reached a point beyond what most people can justify at this point,” Johns said.

Material cost exceeds buyers

New house building projects are underway just off Cottonvale Road.  Wood prices have led to an increase in construction costs.

Another crucial material adding to the already rising costs is oriented strand board (OSB) – compressed wood chip boards used for cladding walls, floors and roofs – which has been priced up by a factor of three. seven in the past year and keep climbing even when the wood falls, according to Bloomberg.

The copper wire also went through the roof, said Jerry Konter, vice president of the National Association of Home Builders (NAHB), which also oversees builders in Savannah.

But while other inputs may have increased by around 10% to 15%, lumber and OSB remain the outliers, Konter said.

“When lumber peaked nationally, on the median home size of $ 300,000, it added up to $ 36,000 to the cost of the home,” Konter said, “and that’s solely based on lumber. “

According to a NAHB Study 2021, every $ 1,000 increases prices on 191 households in the Savannah area. The income needed to qualify for the median home price of $ 309,020 is $ 70,810.

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“You set the price on a certain economic group,” said Matthew Byrd, president of the Home Builders Association of Greater Savannah, “they are first-time homebuyers, people who have been renting for a long time and were working on their credit and the workforce. “

Byrd highlights the multiple economic development projects, such as the industrial park in the county of Effingham, the Amazon installation at Pooler and the North Bryan County Development approved in May which aims to attract more workers.

“When you add, you know, $ 25,000 or $ 35,000 on a house, it’s going to cost a lot of people who are going to fill those positions and jobs,” Byrd said.

Tension on the residential construction industry

Framers work in a new house under construction on Cottonvale Road.

Ultimately, the costs are all passed on to the consumer, Konter said, but right now builders are also suffering because some haven’t raised prices as quickly as input costs have gone up.

“If you had written a contract and three months later you frame the house, you incur an additional $ 15,000 to $ 30,000 in costs over what you contracted for,” Konter explained.

If you add $ 36,000 to a $ 300,000 house, that’s more than 10%. According to Konter, most builders are working on a gross profit margin of around 15%. He says his margins have been slashed from 5% to 6%, forcing him to temporarily stop selling.

“We have a limited supply of lots and the only thing you have to guarantee success is your lot inventory,” Konter said.

In some cases, builders have had to suspend construction in the middle of construction, either due to abandoned contracts or delivery delays, leaving frame houses in place for an uncertain period.

The wild unpredictability has prompted more home builders than ever to add a pricing clause or escalation clause to their contracts, said Meagan Mowry of Integrity Real Estate.

The terms of the clause are negotiated between builders and buyers, offering both parties protection against costs incurred and options to terminate the contract.

“This is the first time in my career that all of these builders have to use a tariff clause, because for a while there the costs were a runaway freight train,” said Mowry, who works in the real estate for 17 years.

A wider look

But contrary to all the evidence, construction overall hasn’t slowed down as much as you might think, local realtors and builders said. This is because demand, for the most part, exceeds supply.

“People in large metropolitan areas like New York, New Jersey and California … have chosen, now that their jobs have moved away, to settle in the area,” Mowry said.

Those who can afford it will buy. She says builders, for the most part, have been able to recoup lost profit margins through higher prices, higher volume, or both.

“But the person who couldn’t recover and who may be suffering the most is this first time buyer from the Savannah area,” she said.

The runoff effect is also severe.

“What happens when you can’t afford to buy a house? You rent, “said Konter,” the increase in the multi-family market ultimately translates into rental rates and that puts a lot of pressure on affordable housing. Whether it’s renting or selling, we have an affordability crisis right now. “

Nancy Guan is the general-duty reporter covering Chatham County municipalities. Contact her at [email protected] or on Twitter @nancyguann.


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