‘Everything has gone up’: Contractors observe increase in construction costs, Nevada County acutely affected by Bay Area migration
To locals, Nevada County is already known for the low inventory of homes to buy or rent. Now, with increasing construction costs, many hopeful homeowners are not only priced out of already available real estate options, but of building their own homes.
Matthew Sutherlin, president of Grass Valley-based Green Bee Construction Inc., said he has heard of lumber costs alone as having increased 125%.
A sales representative from Caseywood Lumber Yard estimated that a year ago the price of a half-inch OSB board was between $18 and $20 dollars. In April, when construction costs began to peak, the cost of the same half-inch OSB board was between $115 and $120. Now the price is $80.
Fred Kerksieck usually works with the wood customers bring him at Fred’s Custom Milling and Lumber in Grass Valley, but said he noticed a significant increase in cost for personal projects.
“I bought some deck boards for a friend, my son and myself — every 1,200 feet used to cost you $1,200,” Kerksieck said. “Now it’s double that.”
Sutherlin said the price increase, which can be observed across North America, has significantly increased the cost of lumber-intensive projects like home builds or decks.
But lumber is just one fraction of the overall costs spent to create a home.
“A lot of other building materials are getting hard to find and have longer lead times,” Sutherlin added. “It used to take three days to get something delivered. I’ve heard of some things taking two months.”
Sutherlin said a painter he contracts with told him that paint companies are having to use different brands of materials and tools than they normally use, just to get the job done.
Steve Piziali, a local builder and president of the Nevada County Contractors’ Association, said the price of wood was at least 100% higher than the year previous, adding that metal, plumbing fixtures and appliances have increased in cost and scarcity.
“Everything has gone up,” Piziali said.
On top of the materials, the people power is also limited, Piziali said.
“There’s a labor shortage, so labor costs have gone up,” Piziali said. “We have to pay more to retain our employees — it’s not material costs only.”
Piziali said he’s been in the building business 31 years and the demand is the highest he’s ever seen.
Green Bee’s Sutherlin believes that those who thought they might catch a break from California’s ever ascending real estate costs by buying land and building their own are in for a surprise.
“It’s no longer cost effective to build a new home,” Sutherlin said. “It’s pretty much going to cost more to build a home than it’s worth, in most cases.”
Sutherlin said projects continue for those who have no money issues.
“They are OK with coming in underwater — so to speak — on the other side of their building project,” Sutherlin explained. “For other people unable to buy a house in the first place, it’s just not happening.”
Sutherlin said since the beginning of the pandemic-related quarantine, he witnessed a marked increase in demand for building and remodeling services.
“People trying to convert their garages into apartments and so forth,” Sutherlin said, attributing the sudden interest in home projects to people spending more time in their home. “They’re making adjustments for home/work use, and also, because they’re at home all the time looking at their kitchen, they think, ‘Boy, I would like to have a new kitchen.’”
Sutherlin said he confers with domestic and Canadian contractors regularly, and his peers have reported a similar increase in demand for construction services throughout the duration of the pandemic.
Salesman Josh Van Matre of Caseywood Lumber Yard shared a similar observation as he worked to meet the needs of building professionals and hobbyists, adding that projects people put off for decades became priorities.
Sutherlin said the rising cost of building materials seemed to both peak and plateau around spring, when COVID-19 restrictions first started to loosen after the vaccine became more readily available.
“All the people who were hesitant to have people coming into their homes previous are less hesitant,” Sutherlin said.
To Sutherlin, the high construction costs are unfortunate for those seeking affordable homeownership by building ground up, but are also inevitable given the changing relationship between supply and demand.
“Demand is higher than manufacturers can keep up with,” Sutherlin said. “With demand high and supply low, the automatic result is prices go up.”
Lumber mills and wood product manufacturers responsible for processing timber into materials like plywood, beams, and 2-by-4s are the ones walking away with the cash, Sutherlin said.
“Price gouging is occurring at the lumber mills,” Sutherlin said, adding that the bulk of these mills are located in either Canada or the American South.
Piziali said the greatest profit margin is taking place at the wholesale level, as opposed to the retail level, and homeowners are eating the extra cost.
“Costs are up from a year ago and, you know, we’re combating it,” Van Matre said. “It’s just not great.”
Sutherlin said he is grateful that the industry he works in is doing well, especially in a time of unprecedented economic uncertainty, though he’s not making more per project than he was pre-COVID.
“There’s no shortage of work,” Sutherlin said. “In that respect, we’re making as much money.”
Sutherlin estimated 90% of his work over the last year has come from Bay Area transplants.
Sutherlin said the influx of outside money, from tech or otherwise, has created a fiscally hostile environment.
“I think ‘gentrified’ is the term I’ve heard used to describe what’s happening here,” Sutherlin said, referring to the fading affordability of homes in Nevada County and available housing options for longtime locals.
Sutherlin said the average cost of a home in the area last year was in the high $300,000 range. Over the course of the pandemic, just over one year, Sutherlin said the average price is now in the high $400,000s. Sutherlin said track homes are selling for near $500,000 in the area that were worth less than half that when they were constructed 10 years ago.
“The effect on the people that are up here already is, if you don’t already own a home, you’re pretty much screwed at this point,” Sutherlin said. “If you already have a home, you’re sitting pretty because your home’s worth has risen considerably.”
Barbara Bashall, with the contractors’ association, said the house next to her was bought for $50,000 over its asking price by Bay Area residents seeking a second home. Bashall said although construction costs are definitely a factor, the housing crisis will not be remedied by a subsidized increase in inventory from money outside the community.
“Materials have gone up substantially, and we have all the additional regulations on top of that,” Bashall said, referring to the marked increase in construction permits over the last decade. “(Recent Bay Area transplants) are really what’s pushing the market up more than anything.”
Bashall said the financial pressures begin for prospective homeowners before the actual construction, as the price of building permits has increased significantly over the last decade — around 20%, she estimated.
2019 — 721 permits
2020 — 655 permits
2021 — 389 permits, as of July 5
July 2018 – June 2019 — 3,148 permits
July 2019 – June 2020 — 3,727 permits
July 2020 – June 2021 — 4,310 permits
Sutherlin said he is grateful for the work, but said those inclined to choose the status quo over change might find the demographic shifts alarming.
“If I was not in the building industry, I would think of it as a negative thing because our cute, quaint community up here is getting overpriced and the culture will be influenced by that as well, for better or for worse,” he said.
Sutherlin said the Bay Area overflow, to primary or secondary residences, can be observed in Nevada City, Grass Valley, Truckee, Reno and Auburn over the last six months. Sutherlin said construction demand slowed only slightly in June, attributing it to a delayed response to rising material costs, which subsequently saw their first price drop in the last year.
Piziali of the contractors’ association said the pressure is on.
“It’s a great time to be a contractor, to stay busy, but also a hard time because it’s hard to procure the necessary materials to get the job done,” Piziali said.
Rebecca O’Neil is a staff writer with The Union. She can be reached at email@example.com
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