Record homebuilding raises costs

Hector Martinez, a subcrew foreman with Big Tex A/C, installs air-conditioning ducts in a house being built on Legend Trail in Leander.

Hector Martinez, a subcrew foreman with Big Tex A/C, installs air-conditioning ducts in a house being built on Legend Trail in Leander.

Some Williamson County residents are paying more and waiting longer for newly constructed homes because of increased demand for building materials and trade workers as well as a tighter lending market for developers.


In 2015 the county remained at the forefront of the Central Texas housing boom, with 1,176 new home permits issued in Leander and 457 new home permits issued in Cedar Park, according to the Home Builders Association of Greater Austin.


The median price for new homes in Williamson County increased from $227,525 in January 2015 to $239,500 in January 2016, according to the Williamson County Association of Realtors.


But local demand can raise new homes’ final prices even higher, said Geoffrey Tahuahua, vice president of public policy at HBAGA.


WCAR data show that 30 percent of new-built homes sold in January were priced at $200,000 or lower—the new- home cost HBAGA considers  to be affordable, Tahuahua said.


“For every $1,000 increase on the median home price, 1,285 families are priced out,” he said.


Residents expecting their new-construction home to be complete in six months often need to wait two to three months longer than anticipated, said Linda Alger, city of Leander building official.


“The owners are circling the block in a U-Haul, waiting for [builders] to finish,” Alger said.



Higher costs, more delays


Developers’ high demand for building materials is driving up costs and therefore creating postponed move-in dates, Alger said.


Builders purchase materials in bulk—such as concrete, drywall and pre-built roof frames—from wholesale companies. Those suppliers deliver house materials throughout the U.S. and to other nations such as China. Therefore orders from international developers can limit the availability of materials for Central Texas projects, Alger said.


“We’ve had issues with windows being backordered, roofing material being backordered, doors being backordered,” she said. “If the supply [of material] doesn’t have enough … to meet the demand, then [builders] have to wait for it.”


For example, she said a builder may start construction on five houses around the same time and make quick progress with earlier building phases, such as installing utility lines, pouring a foundation and erecting a wood frame. But if a building supplier cannot deliver premade windows on time, then the homebuilder cannot move to next construction phases, such as installing drywall and insulation, Alger said.


One delayed delivery may lead to other delays. For example, a scheduled delivery truck may leave a stack of lumber before the builder is ready to use it, forcing other delivery trucks and scheduled crews to work around the materials on the site, Alger said.


Scott Domangue, operations manager for local builder Grand Haven Homes, said builders pass along higher costs to customers, either for higher-priced building supplies or higher construction labor rates.



Trade labor market


Drees Homes Construction Manager Andrew Howells said homebuilding costs are also rising because fewer trade workers—such as electricians or tile installers—are available to work on homes.


“For whatever reason it’s really hard to find guys who install tile anymore,” Howells said.


Trade workers install utility lines and air conditioning as well as add custom architectural features, such as tile or stone work.


Unlike carpenters or drywall crews, trade laborers often have degrees from trade schools and must be certified to work on residential projects.


“[Companies are] going to high schools and vocational schools and trying to find people who might be interested in going down that [career] road,” Howells said. “It’s a bit of a bidding war for the available labor trades. And [certified trade workers are] maximizing that for their benefit.”


Domangue said these workers have been overbooked for homebuilding projects for the past year. But in early 2016 the demand for trade work is even higher, he said.


“[Trade workers] are really starting to feel the crunch,” Domangue said. “Our [air conditioning] vendors, for instance, were four to five days behind, beginning in January. Now they’re three to four weeks behind.”


Experienced trade workers want to work with builders they know, said Jake Glidewell, director of housing operations for Brookfield Residential, which bought Grand Haven in 2015­­. However, experienced workers can charge builders more for their work, he said.


“We do end up having to pass [along costs],” Glidewell said. “We don’t sacrifice our quality. We will pay a little more because the experienced trade workers know that they can charge more. Therefore that ends up adding onto the build time and the cost of the home. But at the end of the day we’re getting the trade workers who have the experience that we require.”


Some workers left their trades during the nationwide recession and housing downturn that began in 2008, said Mark Sprague, state director of information capital with Independence Title, an Austin-based firm that arranges real estate transactions.


Many trade workers hoped to find better earnings in the oil industry but did not return to their original jobs after the housing boom in Central Texas and other regions, Sprague said.


Howells said builders have trouble finding non-certified crews, such as drywallers, to work on larger houses.


“[Workers are] for the most part keeping up with [demand],” Howells said. “But there are momentary [times] when they’re struggling to keep up.”



Other cost obstacles


Sprague said development can also be constricted because fewer banks want to take risks on new homebuilding projects. He said 10 years ago, more banks were willing to loan a developer 80 percent of funds needed for a new neighborhood, but after the 2008 housing collapse, most banks in the U.S. are less willing to front the investment. Instead they want developers to provide at least 35 percent of the investment into a new neighborhood, Sprague said.


During housing growth governing entities may also raise development fees or add new regulations—costs that may be included in the home’s final price, HBAGA CEO Emily Lubbers said.


For example, Tahuahua said the Lower Colorado River Authority requires builders to follow specific landscaping rules. A home’s topsoil must be more than 6 inches high and include 25 percent or more organic material, but he said few suppliers can supply the required soil mix, which leads to landscaping delays.


Tahuahua said HBAGA wants to work more effectively with local governments to evaluate proposed fees on new home construction, which he said may help consumers.


“Every [fee] increase that [cities approve] does have an impact on the consumers,” Tahuahua said.


Sprague said that despite cost increases, Cedar Park and Leander have the most developable land among Central Texas cities. He said both cities should continue to see steady home construction, especially because more firms are eyeing land north of Austin as potential sites for new employment.


“We’re creating the same jobs San Francisco is,” Sprague said. “Cedar Park and Leander offer affordability that core Austin does not. … You all have a great leg up on the rest of the market.”

By Stephen Burnett
Stephen Burnett has been a community journalist since 2005. He joined Community Impact Newspaper as a reporter in November 2013. For the cities of Cedar Park, Leander and northwest Austin, he covers city and county government, business, development, events, transportation, utilities and more.


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