According to the National Assn. of Home Builders, rising lumber costs are adding nearly $36,000 to the cost of an average newly built house and some developers are getting creative at passing that along.
When buying a newly built home, buyers before the pandemic typically signed up for a waiting list and then paid a set price for a builder to construct the house on a vacant lot in a new-home community. But an April survey from the trade group found a majority of builders now have “escalation” contracts that allow them — if construction costs rise — to increase the sales price after a buyer makes a down payment.
Doug Bauer, chief executive of national home builder Tri Pointe Homes, said that despite the price increases, he isn’t seeing buyer fatigue and noted that his company could sell homes faster.
Rather than escalation clauses, he said Tri Pointe has decided to slow the number of lots it releases to homeowners for sale. He said that enables Tri Pointe to price the homes at a point that better covers surging lumber costs. It’s a go-slow strategy more and more builders report employing.
Contractor Chris Williams said he’s consistently raised the price he charges to build backyard homes known as ADUs, an increasingly popular investment for homeowners after the state loosened development restrictions in recent years in a bid to ease the housing shortage. So far Williams said people are paying, but lumber prices sometimes move fast and don’t enable him to cover his costs.
“Once I sign that contract for that amount of money, say $300,000 or whatever it is, I have to stick to that,” he said. “I just got to take a hit and then on the next project put my prices up to adjust.”
Mike Moore, co-owner of Snap ADU in Oceanside, said he’s had to raise prices by about 30% on the ADUs his company builds, with a common 500-square-foot one-bedroom model rising from $125,000 to about $170,000.
In addition to the lumber issue, he said the costs of metal, windows and appliances are on the rise as well: “Almost on a weekly basis our supply houses and vendors are emailing us saying, ‘I’m so sorry, more price increases are coming.’”©2021 Los Angeles Times. Visit at latimes.com. Distributed by Tribune Content Agency, LLC.