The surge in lumber prices has increased the average price of a new single-family home nearly $36K and the market value of an average new multifamily home almost $13K, according to the National Association of Home Builders (NAHB). While the pricing of residential construction has soared nationwide, in mountain regions contracts are now open-ended, particularly on the lumber portion of the bid, allowing builders to pass on lumber price increases to the homeowner, even while under contract! And contract acceptance has routinely moved from 60 – 90 days to just 30 days. The prices of structural steel used for steel trusses has not risen as quickly or radically, however availability of this product is now much more limited.
Flexibility is Key
The cost of construction materials and supply chain challenges is creating a higher demand for alternative products and opening the door to the use of other materials. Alternative materials which previously may have been out of reach financially are now becoming viable options — and they may actually perform better than traditional materials and be more readily available, which is a key consideration.
Versatility in construction (steel, wood, heavy timber, structural concrete, light-gauge steel, and masonry) is now on somewhat even footing with competing, previously more expensive insulated concrete forms (ICF), structural insulated panels (SIPS], panelized construction, and modular which have become viable contenders for use in upcoming construction projects. ICFs require concrete for assembly and concrete shortages are very limited and prices have increased minimally. Modular construction using mass timber, in which components are prefabricated in a factory and transported for onsite assembly, have become particularly attractive due to weight, ease of assembly, and safety considerations. Notwithstanding the availability and price of materials, one must consider the labor cost of construction — certain techniques and materials are quicker, easier, and require substantially less labor to construct, and can even deliver the project faster. In the end, materials that may have an increased upfront price tag may be cheaper to install and require less labor, which may end up costing about the same.
Over the last few decades base labor cost for any construction project has become more of an issue as fewer skilled people enter the trades. A diminishing labor pool coupled with lack of experienced tradesmen in certain construction methods adds further fuel to the problem while an exploding market for new construction and renovations is ramping the market. For instance, available crews assembling framing components are raising labor prices in response due to increased demand for steel.
“Prior to the pandemic, the biggest concern over the past five years of our home builder members was labor shortages, and the last 14 months has amplified that,” said NAHB’s Devin Perry, Executive Director, Business Improvement Programs.
With conventional materials in short supply and high demand driving cost, material alternatives look promising, and may deliver quicker speed to market and additional benefits, including energy and thermal cost savings down the road.
“Higher performing materials, which previously may not have been considered due to cost, are now more desirable and add value in energy cost savings and increased value to the project overall,” said Brian J. Sielaff, M.S.C.E., P.E., P.Eng.
Alternative Materials = Benefits
Tamarack Grove Engineering’s (TGE) approach has always been to provide options to clients up front in the initial planning process, presenting conventional and alternative materials on a project-specific basis. Having conversations early on allows the client to weigh in on what works best for their project and their application. These early discussions can examine whether ICF’s — which provide enhanced thermal benefits in cold climate areas significantly increasing life cycle benefits over conventional materials — may now be a project option. For owners and developers who plan to retain a property for several years, this is a huge benefit and cost savings and is attractive to future buyers.
TGE is pivoting in a variety of ways by providing options for materials, systems, products, and manufacturers to give clients ways to accommodate budgets, schedules, and levels of material availability and performance. With the overall industry experiencing unprecedented growth, timelines are being stretched and permit review periods are increasing to never-before-seen levels depending upon jurisdiction. This affects delivery of goods and allocation of labor, which seriously affects project schedules and requires an expert eye on phasing. Turnaround times for drawings has also increased for Tamarack Grove from the typical 2 – 3 weeks to 4 – 5 weeks, still well ahead of the industries’ current 10 – 15 weeks lead time required, but a clear indication that external influences continue to impact every project.
“Since time is money, TGE continues to outperform competitors with speed to market and meeting client’s project schedules much more efficiently.” said Doug Hardin, P.E.
The Future
Overall, a trend in booking projects out to 2023 and beyond has been noted. While most commodities have risen sharply in price amid growing demand and lessening availability, it is expected that prices will not fall to pre-pandemic levels. They will continue to hover at escalated rates but won’t go down significantly even once the market rights itself. TGE continues to monitor the trends and adjust to fluctuations to keep projects on track and financially viable.
“When you understand the market like we do, you know how to adapt your processes and methods to accommodate shifts and changes. It’s something we’ve always been dedicated to doing.” said Hardin.