As of late, it seems you can’t drive through a neighborhood and not see numerous ‘FOR SALE’ signs in front yards or vacant lots. The reason is the market is saturated with sellers and not enough buyers. Residential construction has declined significantly since last year, and experts say it will be another couple of years before we see growth in the housing market as a whole.

However, those same experts are saying that according to construction cost trends, the right time to build is NOW!

“Overall construction prices have been leveling off in most part due to the decline in the housing market,” said Chris Wojack, Construction Manager. “Now may be the most economical time to build,” added Wojack.
The supply and demand for certain building materials are way out of balance, causing prices to be less than anticipated. From July to December 2006, a number of major construction material prices have declined due to three major events, which are not likely to be repeated:

The plunge in new home construction

Prices of internationally traded commodities weakened with slowing of the world’s economy

Dropping of crude oil prices from over $70 per barrel to nearly $50

According to Wojack, we could expect it to be a buyer’s market, at least throughout the winter. “Investors looking to make the best of the current situation, need only look at the numbers to see what an opportunity this is” said Wojack.

The numbers at a glance...

13% fall in lumber prices
8% drop in plywood prices
5% fall in gypsum prices
15% fall in non-ferrous pipe prices
2% drop in structural steel costs
2% drop in plastic prices
15% drop in diesel fuel prices
Concrete prices have remained steady

As luck would have it, these numbers aren’t expected to stay level for long. Reed Construction Data forecasts a 5% to 7% annual inflation pace late in 2007 and through 2008. “Owners should be aware that construction material prices are still likely to continue rising at a faster rate than the 3-4% increase in the Consumer Price Index,” said Wojack. However, this will fall well short of the 2004-2006 inflation pace which was at 15% plus for many months. Should building owners elect to push construction from Spring 2007 to 2008, they should expect to pay a 7% premium, or $70,000 on a million dollar project.