5 Reasons Why Construction is Expensive (And How to Combat It)

5 Reasons Home Construction is Expensive

Today’s construction industry puts contractors in a tough financial position that those outside of the market struggle to understand. Recent trends have driven up construction costs which have made it harder for contractors to earn money in the market. Here at Centurion Homes, we are committed to providing quality work and combating the struggles that put other contractors out of business. To help our readers better understand fluctuating construction trends, we have summed up a few of the factors below:

1. Labor shortage.

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In September 2013, 74% of U.S. construction companies reported having trouble finding qualified workers (see here). Compared to before the recession, national construction labor jobs are down 25% (see here ). The length and the depth of the 2007-2010 recession meant that a lot of carpenters, framers, and other laborers moved on—either geographically or to a whole new career—leaving the post-recession construction market with a much smaller pool of trained and experienced laborers. This shortage of workers drives up the cost for those laborers that are still available. Additionally, many of the highly trained workers are beginning to retire.

The average age of a skilled craftsman such as a carpenter is 49; welder, 55; plumber, 56; and stonemason, 69,” said Phil Crone, executive officer of the Dallas Builders Association. “Over the next five years, 20% of skilled laborers in the construction industry will retire. (Source here.)

How we combat: Centurion Homes is constantly seeking to find new talented laborers. Additionally, we will receive 3-5 bids for every facet of every project we take on. This extensive research process keeps our labor options higher and our prices lower. We are also well versed negotiators and employ that talent on behalf of our customers with every project we tackle.

2. Materials price increase. 

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In recent years this industry has been plagued with an alarming inflationary trend. Prices for basic materials, especially lumber and drywall, can hardly wait just a month before jumping significantly in price. Ken Simonson, chief economist for the construction trade association, said that January and February brought extremely high prices for materials, especially considering that is not the busiest time of year for construction.  Traditionally during the slower months you could count on a downward move in pricing while there is less demand on the supply. That has not held true these past few seasons.

For the second month in a row, contractors endured outsized price hikes for gypsum wallboard, lumber, and insulation materials,” he said. “In addition, soaring diesel prices mean contractors are paying more for fuel they buy and, vial fuel surcharges, for the thousands of deliveries of materials and equipment required for construction projects.

How we combat: As with our labor dilemma, we seek to receive materials bids from 3-5 vendors for each of our projects. We carefully weigh options for material pricing and determine what suppliers will be best suited for each project. We commit to finding and using the most cost-efficient materials without allowing the neck of quality to be placed on the chopping block.

3. Municipalities demand more. 

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Cities across the United States are demanding more and more from construction professionals. While stringent code requirements provide additional protection to the consumer it comes at a very high cost. While we are advocates of proper procedures and safe construction, there are some instances where cities take regulations too far and ultimately financially hurt the consumers that building codes were designed to protect. Similarly, the annual increases in permit, impact, and inspection fees place additional financial demands on builders, who then have no choice but to pass them on to the customer.

How we combat: We seek to develop harmonious relationships with all city building departments to alleviate headaches other contractors bring about and cause their customers to endure. This approach allows us to be highly successful in obtaining variances to costly requirements that may not be fully applicable in another circumstance or aren’t in the best interests of our customers. We are strong advocates of private property rights and recognize the importance of effective negotiation with governmental institutions to better fit the needs of our clients.

4. Evolving code requirements. 

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Contractors are expected to abide by the requirements of the International Code Council (ICC), International Building Code (IBC), and International Residential Code (IRC) which can become costly very quickly. These standards are designed to safeguard against risky or shoddy construction methods, but they do so at a high cost that also hinders desirability and creativity. Blogger David Eisenberg said:

The fact is that our current scale system is flawed, behind the microscopic codes money has become the ultimate measure for everything. Innovation is constrained by currencies and not lives. (Source here.)

How we combat: With a combined 30 plus years of experience in the construction industry, we have gained extensive knowledge in combing creativity and safety to create the best home for our clients. Despite the evolving code requirements placed on builders, we strive at every turn to create the highest quality and cost effective production through ingenuity, negotiation and efficient implementation.

5. Increase in cost due to Manual D&J design software.

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Prior to construction, every home is required to have a manual D&J report. This system design report is completed and submitted as part of the documents to obtain a permit. It tells the city what size of heating and air conditioning equipment is needed, where air ducts should be placed, and efficiency ratings for the equipment used in the new home. In 2008, national legislation was passed to tighten the requirements for manual D&J software. Due to these requirements, the cost of residential HVAC systems are nearly twice as much as they once were and in many cases, more than double. The drive behind these requirements was to reduce utility consumption while still appropriately and effectively heating and cooling the home. These systems are much better than they used to be and provide substantial utility savings. However, the upfront costs are borne entirely by the consumer.

How we combat: We have found the best HVAC (Heating, Ventilation, and Air Conditioning) contractors in Utah who run their shops like we do–lean and efficient in order to provide quality assessments for the most competitive of costs.

These trends make today’s construction market a tough place to survive let alone thrive. However, by focusing on these strategies, Centurion Homes continually finds ways to keep our prices low and our quality high—a combination most contractors struggle to find. Because cost efficiency and customer satisfaction are our top priorities in everything we do, Centurion Homes, your Utah general contractor, has done well to continue providing your best value in the Salt Lake and Utah County metro area. So for your next project, call on us to give you a bid–you’ll be glad you did!

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