To build or not to build

Building costs trend higher due to market pressures

By JILL SCHRAMM, Staff Writer, jschramm@minotdailynews.com
There’s good news and bad news for anyone wanting to build a house this summer.


The good news is the price of lumber is a bargain. However, the cost of nearly everything else is up – and up substantially in some cases.


Troy Huber, vice president at Minot Lumber & Hardware, said the cost estimates he’s been providing for new homes this year are about $35 to $40 a square foot for the basic structural work on the average home, excluding plumbing and electrical. That’s not changed much from last year.


Steve Heidrich, manager of Muus Lumber & Hardware in Minot, said it helps that lumber prices are at their lowest since 1998. If not for the rising fuel cost of transporting that lumber from Canada or the West Coast, prices would look even better, he said.


One reason behind the drop in lumber prices is the slowdown nationally in home construction, due largely to the home credit crisis.


Home furnishings such as flooring, lighting or cabinetry also aren’t seeing a lot of price change, Heidrich said. Overall, though, he said the cost of building a house to completion is likely to be up this summer once all factors are considered.


The dramatic rise in oil prices is having a ripple effect on nearly every industry, including construction. The cost of petroleum is a driving factor behind much of the inflation in construction, from asphalt to shingles.


The cost pressure is likely to affect not only home builders but also community projects, whether it’s future plans for a State Fair grandstand or a Minot community bowl.


In part, that’s due to the influence that the oil industry is having on labor costs. Contractors say the need to compete with the oil fields for workers has driven labor costs up over the past three years more than 35 percent in some cases.


Jeff Jacob, operations manager at Strata Corp.’s Dakota Concrete in Minot, said the costs have hit hard on businesses like his that rely on labor and equipment that runs on expensive diesel. In addition, the cost of concrete has been rising each year in the past few years.


“The customer can’t absorb it all. You have to figure out a way to tighten the ship a little bit,” Jacob said.


With many bid projects, contractors are having to absorb increased costs, said Bill Brunner, vice president at Main Electric Construction in Minot. With government contracts particularly, contractors are locked into their bids.


“It’s a struggle and what happens then is it basically comes out of overhead and labor,” he said.


Contractors try to estimate future prices when they bid, but prices have escalated beyond what many anticipated. Brunner said the steel used in electrical work is up 200  percent since the start of the year. Copper and plastic are up 40 to 50 percent. Plus, fuel costs are up, which affects travel on the job.


Brunner said in calculating bids, contractors have counted on prices of commodities such as copper and steel to be cyclical and follow a trend.


“This year it hasn’t been following the trend,” he said.


Prices for steel and copper should have been at their lowest in March and April but instead were at their highest.


Steel products are in short supply, which affects their prices. Manufacturers also are having to pass along high costs related to the iron ore. Some contractors are finding that steel is going up so rapidly that price quotes from their suppliers are good for only a few days.


John Coughlin, owner of Coughlin Construction in Minot, said a check of his costs shows lumber prices steady, while costs of siding, roofing and labor are up 5 to 10 percent over last year. Rebar, copper and a type of vinyl called PVC are up substantially.


Huber said plumbers are using more PVC pipe, despite the rising expense, because it still is cheaper than copper.


Higher costs don’t appear to be causing people of the Minot area to have second thoughts about building, though. The construction industry around Minot expects another good year.


“Nationwide housing is down but around Minot, the oil is going to keep the economy good,” Jacob said. “There’s plenty of work right now.”