Materials availability, drought concerns challenge California North Coast housing projects

Though the cost of materials to frame houses and build cabinets appears poised to fall considerably, longtime North Bay homebuilder Keith Christopherson has yet to see it.

“Lumber mills and distributors were ordering early on and buying at higher prices, so (the decreases) have not translated down to the builder yet,” Christopherson said. Santa Rosa-based Christopherson Builders has over two dozen single-family home projects in the pipeline for the next 12 months, mostly rebuilds from the 2020 North Bay wildfires in Sonoma, Napa and Solano counties.

The futures price on the Chicago Mercantile Exchange for September deliveries closed at $763.80 per thousand linear board feet at the close of trading Thursday. That’s up 3.6% on the day but down 54% from the peak of $1,686 in early May and down 40% just in June.

And it’s not just the lumber. Windows and other items have to be ordered up front. That not only creates project cash-flow challenges but also logistics loggerheads.

“If you’re on a city lot, there’s often no place to stockpile it,” Christopherson said.

In previous business cycles, the homebuilder had tried various ways to stockpile materials for jobs, such as renting local warehouses or storing materials in shipping containers. However, client last-minute changes would leave the company stuck with what was already purchased, and break-ins of materials containers was a problem.

So ordering items but keeping them with suppliers or subcontractors has been one solution, but those companies have their own challenges.

“Lumber right now is on a five-day hold,” Christopherson said. “When we go to start a house, they deliver (lumber for) the whole house, and we pay for it all up front. It’s the same with the trusses.”

Materials availability was a key factor in the time frame for projecting when work could resume on the 48-unit Napa Creek Village complex and how long it would take to finish.

“I’ve been doing this for 40 some odd years, and this is one of the toughest markets I’ve seen,” said Bill Wilhelm, president of R.D. Olson Construction.

Before work began again, general contractor R.D. Olson Construction spent three weeks taking stock of what had been built and what materials were available to complete the project in the current environment of skyrocketing prices and long delivery times, according to President Bill Wilhelm. In addition to lumber price inflation, the time frame for delivery of vinyl-covered-frame windows has swelled from two to six weeks to 22 to 24 weeks in some cases.

Impact of drought on homebuilding

So far, North Bay governments in the severe drought areas haven’t moved to limit new housing because of water supply concerns. But that could change soon.

Marin Municipal Water District’s board has been debating for the past month whether to implement a moratorium on new water connections and extensions during the drought, according to the Marin Independent Journal. The district last halted new hookups from 1973-1978 and 1989-1993, which included drought years.

District staff have proposed that suspending these new taps on the 191,000-customer water system would save 20 to 60 acre-feet annually but would amount to less than one-thousandth of yearly demand, the publication reported. By comparison, other water restrictions the district board did adopt — such as limits on irrigation use — are projected to save a quarter of district water demand.

The district board is considering information presented at its June meetings before returning to the issue, according to spokesperson Jeanne Mariani-Belding. No date for that has been determined so far.

A coalition of local business groups wrote a letter to the board opposing the moratorium, arguing that it would hurt efforts to create more housing and wouldn’t be as effective as other mitigation efforts.

“Many recall the moratorium of the 1970s as being incredibly disruptive and costly to many segments of our lives and our economy. Not just development was halted but businesses and retailers were prevented from opening or moving, homeowners could not remodel, and municipal planning was totally disrupted. That moratorium had a major impact on jobs, housing and economic vitality,” said the May 28 letter from Keep Marin Working, made up of North Bay Leadership Council, San Rafael Chamber of Commerce, Latino Council, Marin Realtors, Hispanic Chamber of Commerce of Marin County, Marin Builders Association and Marin Small Business Development Center.

“The county of Marin has offered incentives to waive (housing) permitting fees, and then the Marin water district has proposed a moratorium on new housing. That’s an interesting dichotomy,” said Rick Wells, president of Marin Builders Association. “We are experiencing a housing shortage in Marin County. We need more workforce housing.”

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.