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Building-material costs on the rise may dampen the new-home market

Rising demand from homebuyers eager to take advantage of record-low mortgage-interest rates, and supply problems because of the shutdown of manufacturing plants in recent years has caused the cost of building materials to rise.
BY MARY SHANKLIN Modified: December 28, 2012 at 2:32 pm •  Published: December 29, 2012

Since then they have been creeping up; just this year, the median price has edged up from $221,700 in January to $237,700 in October.

Anirban Basu, chief economist of Associated Builders and Contractors, said he expects prices nationally to stabilize eventually, though the near-term effects of higher prices could dampen the recovery of the new-home market.

“I think it will slow the housing recovery, because new-home buyers are very price-conscious,” Basu said. “What builders might do is move their product to be more upscale; affluent buyers are more likely to spend 5 (percent) to 10 percent more to get what they want. Value-oriented buyers are more likely to purchase an existing home.”

Greg Hardwick, president of Hardwick General Contracting Inc. in Maitland, Fla., said a lack of skilled labor also will affect the new-home market in 2013.

“The thing that may get us next year is the labor. There is a huge theme throughout the industry that not enough masons, drywallers and framers are available to meet demands,” Hardwick said. “We've lost a lot of that labor and those resources. They've gone to different industries, and now the demand is going back up.”

MCT Information Services