The Expert Podcast

Sure we've all seen the articles about the increase in home values and home prices and even the articles about increase in building materials lumber cost but there's more to it than that going on with the construction industry. We're going to talk today about building materials in several categories hvac systems roofing appliances and even other accessory building materials that are often overlooked like fasteners paint and other construction adhesives.

So here's the thing if you're looking at any kind of building construction project a remodel an addition or even building a new home you know that the price that the project is going to cost this year is more than it would have been a couple years ago but there's more going on behind the scenes than that. In addition to a higher price of materials there's also a huge increase in the cost of labor and labor can make up to 20 or 30 percent of the home construction cost depending on the project sometimes 50 of the project can be labor.

And if that labor goes up 10 15 20 as minimum wages go up or is difficult to find quality employees that can affect the ultimate cost of the project by tens of thousands of dollars so a new home construction that may have cost let's say 350 or 400 000 can now be forty or fifty thousand dollars higher because of just labor.

What about materials? Well here's an article from association home builders one of the largest trade publications or trade organizations for the home building industry so the building materials increased fifteen point nine percent twenty one and eighteen point six percent since december of twenty and in the last month of 21 increased 1.5 percent well that almost puts it at 20 annualized 75-year high volatility it's expected that in 22 that increase rate is going to be sustained not only is the current price going to stay the level is going to stay where it is but the rate of increase will continue to go up.

Let's talk about components price of staying cool may increase as ac units jump in cost. You know a lot of people don't realize the hvac system in a house can be a 10 to 15 sometimes 20 000 cost component if you have three or four units and duct work and air handlers um not counting labor you could be 15 20 000 easily and if that price goes up 10 15 percent where they're talking prices can go up between 15 to 30 percent that can add another 10 or 15 000 to the price of a house each ac unit that used to cost 5 000 will now cost closer to 6.

Raw materials and labor rates again here's the manufacturers are talking about labor rates within their industry so labor rates are going to have a cascading and domino effect install manager is constantly trying to stay ahead of the curve because of finding good employees and also even when this article was written in june of 21 that's six or eight months ago there's something else that hadn't been factored in yet but it's referred to here fuel and transportation costs look all these goods have to get shipped to the job site by trucks and if the fuel rate goes from 280 or three dollars a gallon up to five or six dollars a gallon that may add a thousand or two to the shipping for all these goods.

Many things are blamed on pantemic but it doesn't matter what the the source of this problem is doesn't matter what the the whose fault it is whether it's pandemic or a war overseas or the labor market or any other or inflation for that matter the bottom line is going to affect your construction project.

Let's talk about roofing gaf is one of the largest producers of roofing materials shingles and other types of underlayment materials they sent a letter out the end of 21 dear customers thank you for your continued business and support we are responding to today's challenging market price increase six to eight percent on all residential roofing products effective january 31st 2022 shipped after that will be invoiced at the new level that's eight percent on a roof so if you have a thirty thousand dollar roof times eight percent that's two or three thousand for the roof you see how this adds up right a few thousand here a few thousand there ten thousand for label labor next thing you know you have a fifty or sixty thousand dollar price increase on a 350 or 400 uh project.

Last but not least appliances what's causing appliance inflation in 2022 latest cpi's consumer price index don't tell the whole story in the appliance industry first of all demand is making it harder to even find the products there's actually some homes that have been completed they can't get a co because there's no appliances that can be placed in the house but they're talking about major appliances costing 12 percent more than they did a year ago washer and dryer up 18 but that's not the whole story average cost to buy these products at wholesale has increased over 10 percent since last year um usually it's three percent a year every brand we sell ge whirlpool all the brands have much higher um prices you'll see that jump reflecting the price you find in the store reality prices could be 20 higher compared to 2020.

Expert tips to help you make a smart purchase now don't bottom line is if you need appliances anytime in the next couple years you should buy it now because this inflation rate is going to continue here's the thing appliances can be an eight to ten to twelve thousand dollar cost of a new home or a remodel of a kitchen add on ten percent of that now you're talking another couple thousand these things add up couple thousand here couple thousand air next thing you know big money.

Another place where cost increases are not reflected is in discounting even though the list price might have only gone up 10 in the past you could find deals you could find promotional sales if those sales don't happen anymore the effective transaction price is now higher than a 10 increase because not only did the price go up 10 but you can't find a discounted item price competition among retailers same thing retailers used to discount and put things on sale and if it had a list price of let's say 900 for a high-end dishwasher now they might have discounted it to 7.99 now it's going to be msrp that's what it's going to sell for just like car dealerships when they can't get inventory they sell everything that list good luck trying to wheel and deal can't get deals mail and rebates no remember how you used to always buy a dishwasher or or refrigerator and have a hundred dollar mail in rebate or fifty dollar mail in rebate maybe you can get it on a full suite but not on individual dishwasher or appliance.

So these price increases whether it's on general building materials air conditioning systems roofing or appliances are all adding up to make construction of a new home or remodeling of an existing home way higher than what it was even a couple years ago and that thirty or forty fifty thousand reflects in the ultimate sale price and if the builders gonna use the same markup the end price to the consumer could be 80 or 90 000 higher because you're going to be cost plus in most instances.

Keep that in mind if you have any project coming up as a client as a remodeling client a building client the earlier you can get that project into the pipeline the better because you may not have the ability to get something started for six or eight months and you want to be ahead of the curve on inflation so it doesn't blow your budget or you have to cut back on your project.