‘Land, labor and lumber’ raise home construction costs

MOSES LAKE — Even people who aren’t building houses have heard about it – the startling rise in the cost of building a house.

Joel White, executive officer of the Spokane Home Builders Association, of which the Grant County Home Builders is a chapter, said building material costs are part but not all of the reason construction costs have gone up.

White called it the three Ls.

“Land, labor and lumber,” he said. “All three of those elements are at a record high.”

The good news is prices for some of those elements – like the lumber – are starting to come down, he said.

The COVID-19 outbreak had an impact on the home construction industry, just like it did on everything else. Since March 2020, lumber prices jumped, started to come down and then jumped again, White said.

He cited the cost of oriented strand board (OSB), used as framing material, as an example. Back in March 2020, OSB was about $4 to $6 per sheet, and now it’s up to $70 to $80 per sheet. A sheet of OSB typically is 4-by-8 feet.

Trees were being harvested throughout the last 18 months, he said, but lumber mills were closed due to the pandemic. And there was competition for the materials available.

A lot of people worked from home, and as a result had a lot of time to look around the house. Many homeowners saw things they wanted to change and started improvement projects, competing with contractors for building materials.

“Mostly this goes back to pure supply and demand,” White said.

Material costs have started to come down, he said, but those price drops aren’t reflected at the retail level yet.

In addition, many people discovered they didn’t mind telecommuting, and further discovered they didn’t need to live in urban areas as a result. They looked to move out of those areas, and a lot of them chose eastern Washington as a new home.

That demand pushed up the cost of available property, as well as existing houses. In the end, the buyer sets the price, and so far buyers have been willing to pay the asking prices, he said. Grant County and the Spokane area are secondary markets – price and other trends are set in large urban areas like Seattle.

“We trail them,” White said.

Buyers have started stepping out of the market in those large urban areas, and prices have started to come down, he said.

The third factor affecting construction costs may be around for a while.

“There is a huge labor shortage, as well,” White said.

A lot of people who left the labor market during the pandemic have stayed out, although they’re starting to return. In the meantime, people who are willing to work are getting multiple offers from potential employers.

“There are just not enough skilled workers,” White said.

Experienced construction workers are starting to retire, and there aren’t enough young workers coming in to take their places, he said. The construction industry is working to train more people, he said, but it will take a while for supply to catch up with demand.