The North Bay housing market remains scorching hot, but local housing construction has only become more unsafe for home builders and developers as the pandemic continues to shake the entire economy.
A deepening global supply chain crisis has led to a shortage of building materials and pushed prices up. And a shortage of skilled workers forces contractors to make an effort to hire enough workers. These factors have resulted in construction delays and increased budgets for new homes and projects, costs that in some cases pass on to buyers and potential renters.
This is worrying news for a region struggling to build enough housing to alleviate a seemingly persistent shortage of housing that residents can comfortably afford.
During the pandemic, Sonoma County’s already high housing costs have skyrocketed as home buyers continue to flock to the area and the county works to replace the roughly 6,000 homes that have been lost to forest fires in the past four years. About half of the destroyed houses were rebuilt.
Phil Wright, owner of Wright Builders in Santa Rosa, has been busy rebuilding homes throughout the pandemic that were razed to the ground during the 2017 Tubbs fire. He is currently seeing delays of up to two months for important items such as kitchen -pliances, cupboards and windows, which are causing him to postpone the construction plans.
“You almost have to have the COVID clause,” Wright said of his construction contracts. “We have to protect ourselves when we try to give someone a 10 month window.”
Long waiting times aren’t the only problem. Wright is also gr -pling with huge price hikes for everything from concrete to paint.
In October, the total cost of materials and components for construction increased 18% compared to the same month last year, according to the Bureau of Labor Statistics.
Timber prices, which have been extremely volatile this year, are up over 50% from pre-pandemic times. Trading in the futures markets has put prices around $ 640 per thousand board feet this month, up from a high of over $ 1,670 in May.
Wright said the longer lead times and rising costs have increased the budget of some homes he is building by up to 25% compared to similar properties completed two years ago.
Sonoma State University economist Robert Eyler said the reasons for the shortage of building materials and components were no different from the delays in l -tops or mountain bikes. These include coronavirus outbreaks in manufacturing facilities, a shortage of dockers and truck drivers, and r -idly changing demands from home-bound consumers, leading to warehouse bottlenecks, among other things.
The resulting inflation in material prices and slower housing construction could contribute to rising housing costs, Eyler said. This makes it even more difficult for first-time home buyers, which in turn could put pressure on rental prices.
“When you’re trying to break into the home market, it doesn’t look like there will be much relief,” Eyler said, adding that supply chains are not expected to normalize until next summer.
A relative shortage of homes for sale in recent months suggests that home builders are struggling to get new homes on the market. As of late September, only 605 single-family homes were available in Sonoma County, a 14% decrease from the previous month and a 12% decrease from the previous year, according to data from Compass Real Estate in Santa Rosa and Petaluma.
This likely contributed to the average price for single family homes in the county reaching $ 755,000 in September, up 5% from the same month last year and up 16% from September 2019.
Santa Rosa rental rates rose 11% year over year to $ 1,565 per month for a one-bedroom one-bedroom -artment in October, according to the rental website -artment List.
As in many other industries, another challenge for the housing business is finding and retaining workers, although recruitment in construction has recently returned to near pre-pandemic levels, according to government employment data. According to Eyler, a key difference for home builders is that they rely on more skilled workers, which means that contractors have a smaller pool of available labor than many other companies.
Mike Mayock, a drywall subcontractor in San Rafael, said he had to raise his workers’ wages to stay full with around 50 employees.
“You have to pay them well and treat them well, and you have to be a lot more flexible than ever,” Mayock said.
In downtown Santa Rosa, labor shortages helped delay the completion of the Art House Hotel, which local developer Hugh Futrell opened in September. The Art House was originally planned as a 21 rental and 15 long-stay -artment complex, but the pre-pandemic costs made it financially more sensible, at least for the time being, to open it as a hotel, Futrell said.
“I don’t think anyone expected the supply chain problems to last this long. But building costs have been rising for some time, ”said Futrell. “The pandemic made the problem a lot worse, but it didn’t start.”
Long-standing reasons for rising costs, according to developers, include fierce competition for mortgage lending, high land prices in North Bay, fees levied by local governments, and labor shortages.
Builders of subsidized affordable housing face further challenges. Specifically, the complicated and time-consuming process of securing public funding and wage requirements associated with that grant money, said Efren Carrillo, vice president of development for nonprofit developer Burbank Housing in Santa Rosa.
Carrillo said these factors – combined with rising material prices during the pandemic – contributed to a higher total cost of the 3575 Mendocino project, a 532-unit -artment complex set to break ground at the former Journey’s End RV park in Santa Rosa this month.
The cost per unit is estimated at about $ 650,000 per unit, compared to an average price of about $ 425,000 per unit five years ago, Carrillo said.
“What we plan for future development is a higher likelihood of responding to a predicted escalation in material and labor costs,” he said.
Mayock, the drywall contractor, isn’t worried about how long the labor and supply chain problems might last. He focuses on the things he can control, such as finding alternative manufacturers for the building components he needs.
“You don’t have a crystal bill, you just have to get it working,” he said.
You can reach Staff Writer Ethan Varian at [email protected] or 707-521-5412. On Twitter @ethanvarian
Comments are closed.