Construction costs soar

CELINA - Anyone who's tried to buy a house or complete renovations lately has likely found their heads spinning, either due to a chaotic market or dizzying prices for supplies.

An imbalance in supply and demand, both in the housing and lumber industries, has played into the problems of the other, and industry experts are unsure when the situation might stabilize.

Demand has often overtaken supply of homes locally, at least in recent years. The lack of housing in Mercer and Auglaize counties has been cited as an issue by municipal government officials, many of whom have tried to encourage housing development, and local business leaders, who've stated the housing shortage is a barrier when trying to attract outside talent.

Deborah Borns, broker and owner of Lakeshore Realtors, said that in her 45 years in the real estate industry, she's never seen anything like the current market.

Properties are selling for more than their listed price, and many are under contract prior to going on the market. Homes are often being snatched up within a 24-48 hour window after hitting the market; very rarely does a house not get multiple offers shortly after being posted, Borns said.

The situation is not unique to Mercer and Auglaize counties.

The housing market has been turbulent across the nation for a number of reasons. With historically low interest rates and falling unemployment, more people have been looking into real estate. Demand has built up across the country, according to Borns.

Yet new inventory to meet that demand is lacking. With no new housing being created, many who would like to "move up" are staying in place because nothing is available, Borns said. New houses have to be built before existing houses can become available in the marketplace, but builders have not been building. Some developers are concerned about whether the economy will stay so robust, she said, but another issue is the availability of materials.

"The costs are outrageous," she said.

The National Association of Homebuilders recently reported that "unprecedented" spikes in lumber prices in particular had added nearly $36,000 to the price of a multifamily home since April 2020, with the association claiming the costs and shortage of various construction materials was slowing home construction. Surveys conducted by the NAHB found more than 90% of builders reported experiencing shortages of various construction materials, and a survey of single-family home builders reported an average increase in the price of materials of 26.1% during the past 12 months.

Greg Honigford of the Coldwater Lumber Company said prices for lumber had roughly tripled, with prices really beginning to escalate last summer. Some prices may have leveled off, but costs for most industry supplies continue to climb, he said. Prices for roofing, siding and doors were up anywhere from 9-14%. High demand also makes it difficult to get materials in at times, Honigford said.

Softwood lumber, produced by pine, spruce and fir trees, is most often used in housing construction, and is also the lumber most affected by the doubled or even tripled prices, though hardwood costs have also increased. Brad Perkins, executive director of the Ohio Forestry Association, said much of the country's softwood supply comes from the southeastern U.S., Pacific Northwest or Canada.

Perkins said prices have skyrocketed because wood was in high demand even when suppliers had pared down production, and due to both the pandemic and the recent labor shortage, it's been difficult to catch up.

When Americans were shut away in their homes and public events and gatherings were cancelled, many looked for other activities to occupy themselves. People began working on do-it-yourself projects and home renovations they may have put off, eating away at the larger supply at a time when sawmills and processing facilities were shutting down due to coronavirus, according to Perkins.

The gap in supply and demand has persisted in part because mills can't hire enough employees to run at full capacity, Perkins continued. He claimed there was plenty of wood available as a resource - in the Southeast, wood can't be harvest fast enough, he said. However, at least half of his industry contacts - from logging crews and sawmills to palleting and paper companies - reported difficulty finding and retaining employees.

As far as price stabilization goes, Perkins felt the supply of hardwood - the major portion of Ohio's forestry industry, which is used to create flooring, furniture and cabinetry - would probably still be catching up with demand through summer, and possibly through the fall. Demand remains high domestically, and also in certain large export countries. However, even if prices remain somewhat high, they are beginning to stabilize, he said.

Softwood prices are more uncertain. Perkins believed it would take a while for softwood production to catch up with demand.

While the prices may be stifling home construction at present, some prospective home owners are looking ahead.

Borns said that prior to the current market, the sale of vacant lots had been somewhat stagnant. Now, sales are reportedly being rejuvenated, with people grabbing land in anticipation of "the big build" whenever prices finally begin to fall.