Humberto Cazares unloads lumber from a truck at Spenard Builders Supply in Kenai last fall. Builders are keeping a wary eye on the rising cost of construction materials.
Photo by M. Scott Moon
Costs for building new homes are rocketing up, but builders on the Kenai Peninsula keep finding plenty of work. In fact, one of the largest builders this side of Anchorage didn’t even have winter layoffs.
The definition of busy for Hall Quality Builders field supervisor Max May is “Having enough jobs in the wintertime, houses ahead of us that we know we can carry crews all the way through the winter,” he said. “Building is usually seasonal, but our company has been able to keep all of our employees on all winter long. Building is strong.”
Hall usually hires about 40 employees.
The situation is similar for smaller builders, like owners Justin Hanson of Hanson Construction and Patrick Reilly of Alaska Home Builders.
“The market is strong, has been strong for several years,” Reilly said. “New housing starts have been up for a couple of years, and the time that a house is on the market has been going down recently. The spec houses we’ve built have turned over pretty quickly.”
But Hanson has seen plenty of Alaskans trying to avoid the builder by doing it themselves. That, in turn, keeps him busy with what could easily be called “corrective construction.”
“Eighty-five percent of people are building their own homes, because it’s too expensive to hire a contractor,” Hanson said. “If you don’t want to spend the money to have it done right, most people are doing it themselves.
“More people want new. They’re willing to not get as much square footage. The bigger homes with square footage are not coming on the market. But I do see people that call and ask me what the best bang is for their buck. I hate to shoot myself in the foot but it is to buy.”
For May, the bang for the buck is in a new house.
“I like new, and personally, I’ve always bought a new house,” he said. “My wife and I have had eight or nine homes, and all new. You just can’t beat it, especially when the house has a warranty.
“If it’s not just your liking it, it’s going to cost you to remodel. If you build new, you can do it right off the bat. There are definitely pros and cons to both.”
But not all can meet the bank’s guidelines and build a new home. That leads to several situations.
“Part of my biggest difficulty is they are coming to me and they don’t have any cash to finance the project,” Hanson said. “They’re coming to me broke and still want to build a house. You might buy a house for 3 or 4 percent down, but the problem is they only want to finance 75 percent of the house. If they don’t have the money for that 20-25 percent, they can’t get the home built.”
That fuels homeowners doing it themselves.
“People don’t have the cash. They want to build houses, and some are still wanting to do it, but a lot are unlicensed. You can get away with a little more being unlicensed as long as you don’t do any bids, no regulations against that. It’s easier ... to find guys wiling to work by the hour who are not licensed. But most of the times when I’ve been behind them, it’s been a mess.”
Once upon a time, costs for materials and insurance used to run 50-50. Hanson said that figure now goes about 70 percent material and 30 percent labor.
“It’s hard to pay bills when you’re paying for subcontractors and material,” Hanson said.
The days of homes built with a cost of square footage from the low $90s to something below $120 are rarer to find and offer little more than a basic package.
“I don’t see it going down unless the price of building materials comes back down,” May said. “I don’t know what the chances of that are, what with the natural disasters down south. We’ve had tremendous cost climbs in materials, like sheet plywood, Sheetrock, any dimensional lumber. I don’t see that going down in the future.
“It’s been a steady increase in the last five years due to the building material costs. It’s just gone up and up and up. Hopefully that’s coming to a stop.”
In the meantime, shoppers will continue to fork out the going rate, build it themselves or settle for buying used. And likely, with the rise, do all three.
“Contractors aren’t all millionaires,” Hanson said. “We need to make money, too. That’s the biggest thing, (homeowners) want huge square footages but don’t want to pay for it. You go to a contractor to have it done right. You hire the guys by the hour, you’re holding the bag if it falls down, burns down. I’ve probably spent a year out of the last two behind people that have bad craftsmanship, fixing people’s mistakes. You have to watch who you hire.”
Reilly added that the overall economic picture will be a favorable indicator.
“Prices are going to stay where they belong for the market,” Reilly said. “If there is inflation, they go up. If not, they stay the same.”
Alan Wooten is a freelance writer who lives in Nikiski.
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