As displaced Sonoma County homeowners begin reconstruction after last month’s wildfires, they’ll face a daunting price tag on building materials.
While the estimates vary widely — from roughly $250 per square foot for the basic homes of Coffey Park to double that or more for high-end residences in Fountaingrove — the price of materials such as lumber, drywall, concrete and roofing have done nothing but rise thanks in large part to a spate of natural disasters that has spiked demand.
And they haven’t hit the ceiling yet.
“It wouldn’t surprise me a bit to see materials go up 15 percent” more by the time workers start on the first lots next spring, said John Bly, executive vice president of the Northern California Engineering Contractors Association. “And I wouldn’t be surprised if it even doubled beyond that.”
Local residents, in fact, are about to get a crash course in the economics of building materials as they rebuild, a lesson about a market where supply and demand are greatly affected by natural disasters, trade disputes and even insects — such as the mountain pine beetle that has wiped out much of Canada’s timber supply in recent years.
“The building materials market is a fickle beast,” said David Logan, director of tax and trade policy at the National Association of Home Builders in Washington, D.C.
The price rise in certain materials — such as gypsum that is used in drywalls — is expected to continue in the rebuilding surge from Hurricane Harvey in Texas and Hurricane Irma in Florida. The effects of the North Bay fires aren’t likely to be truly figured into such costs until the building begins in earnest next year, industry officials said.
Local markets can vary widely, especially after a natural disaster, because contractors and retail locations in those areas typically source from local and regional suppliers, Logan said.
“I know for a fact with hurricanes in affected areas that prices tend to soar in those markets,” he said.
The price of materials has been trending up in recent years as the industry rebounded from the recession, which took the wind out of homebuilding’s sails. Weyerhaeuser Co., the nation’s largest lumber supplier, has seen its stock price rise 17 percent in the last year, while Eagle Materials Inc., a large producer of concrete and drywall, has had its stock price increase by 11 percent in the same time period.
Friedman’s Home Improvement has already received notices from suppliers for proposed price increases next year ranging from 5 to 15 percent for some building materials such as drywall, roof shingles and insulation because of market conditions that existed before the fires, said Barry Friedman, president and chief executive officer. The company has stores in Santa Rosa, Petaluma, Sonoma and Ukiah.
“As demand starts to increase for lumber and building material in our area, we can expect the market price to follow,” Friedman said. He did note that there had a been a price drop in the market for some materials such as lumber and plywood recently following initial spikes created after the hurricanes. But that hasn’t been the case for most of the year.
Lumber used for framing offers a good example of the pressures on the building materials market, as it’s so central to the construction of new homes.