Cost of labor driving material package prices up for new home builds in Central Minnesota
As businesses continue to increase prices due to input costs and labor expenses, Central Minnesota's new home buyers can't expect to be immune to rising costs.
The cost of building a new home went up more substantially than typical during the first year of the COVID-19 pandemic. At that time, those increases were more tied to commodities like lumber and sheeting. Those prices go up and down, and right now, they're lower than they were a few months ago, Noble Custom Homes CEO Steve Noble said in an August interview with the Times. But they won't stay that way forever, as other costs continue to push the price of home-building upward.
A big part of that is labor costs, both Noble and Schoenberg Construction Inc. owner Craig Schoenberg said. As wages increase to make entry-level jobs more competitive, that impacts the wage to make a hard labor job just as competitive, Noble said.
"It pushes those job prices up higher... because the other alternatives there that are on the same price point (are) where they could do much easier work," he said.
These labor costs also drive up the costs of manufactured items, like doors, windows and trim.
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"The problem is, they can't get an affordable home because we can't build an affordable home anymore," Noble said. He estimated that a split-level starter home that would have cost $190,000 about four years ago would now run about $350,000.
Brenny Custom Cabinets founder Mark Brenny said the company experienced a delay in material cost increases by about a year, but they still kicked in eventually.
"I don't think we're seeing the top of it yet," he said of his material prices.
Brenny stocks by quantity rather than by job, so the company had most of its material when needed, he said. Brenny is also seeing the impact of increased labor costs. His company has raised wages in an effort to keep its laborers.
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"You don't wanna lose your good people," he said.
Should I wait to build a new home?
Schoenberg, whose company does custom home builds and additions, said he's seen interest in building new homes cool off following the Federal Reserve's decision to bump up interest rates. He said the slowdown was almost a welcome change, as the increased interest was higher than he could accommodate.
"I've turned down more work than ever before," he said.
Schoenberg said when he quotes people the average cost of a home build these days, they can be surprised.
"When you tell somebody $450- to 500,000 for a nice home − but not anything real fancy either − they're a little taken aback," he said. "But I think they understand. And what I tell 'em is that the day you're done with it, the next day, in the real estate market, you'll be able to get that. It's still a good investment into a home. It's just a matter of if you can afford that home."
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However, despite the cost and the interest rate hike, he's still receiving a good number of inquiries about new projects, and he does think people are largely aware of the state of material prices these days.
"People will still build because they have to or want to," Schoenberg said.
And both Schoenberg and Noble said that waiting for costs to drop may be stoking a pipe dream. When prices on things like doors, windows and trim go up, they don't come back down, Noble said.
"Homes aren't gonna get any cheaper, and new construction is going to get more expensive," he said.
This article originally appeared on St. Cloud Times: How does the labor shortage affect the cost of your new home build?
