Home price spike with shortage of supplies!

Home price spike with shortage of supplies!
Demand on building materials, labor from Katrina will impact area.Hang on for the shock.Home prices, already on a steep upward curve, are set to be hit with market forces beyond Southwest Florida's breakneck population growth.Rebuilding from Hurricane Katrina will add unprecedented demand to a building industry on overdrive to begin with.
Last month there were 2,000 building permits issued in unincorporated Lee County, yet another new record."It's absolutely going to impact the working people in Lee County," said Michael Reitmann, executive vice president of the Lee Building Industries Association. "People forget about the average person who works in the professions, I'm talking about building trades people, teachers, who can't afford a house. Katrina will cause a dramatic impact on the price of what's called an affordable house that's already $250,000 in Lehigh."
How much more are houses and materials going to cost?Even the smart guys with economics degrees in the industry can't say for sure. It's too early. The devastated regions are just beginning cleanup. Rebuilding will trail from six months to two years.And the breadth of the damage is beyond historical experience.
In August, annualized housing starts in the nation were 1.4 million, a record."Let's say we have about 200,000 homes or so destroyed. Say half are replaced over the next year. That means a 7 to 10 percent increase in building permits. If all of them are replaced, it's an increase of 14 to 20 percent," said Peter Stewart, president of Forest2Market Inc., a lumber pricing service based in North Carolina.
"We're looking, in the face of a restricted supply situation, at a tremendous demand situation. A demand shock of 10 percent is so unprecedented, nobody has a forecast long waits for materials for contractors. Roofing material has to be ordered up to nine months in advance, Reitmann said. Cement, too, is readily available only to big buyers.
Katrina will complicate supply lines and labor markets further, for a myriad of reasons. Fuel costs will raise transportation expense. Increases in oil affect the price of all petroleum products.
Frank Jenkins, president of Bonita Springs-based Harbourside Custom Homes, said labor shortages and demands problems still will decrease demand for new homes.
"The people are going to keep coming, but it'll take longer to finish their projects," he said.And it's not just material. The cost of people to work construction is going to head upward as well. Incentives for workers and companies to aid in Katrina recovery that President Bush hinted at Thursday will draw materials and skilled labor to Louisiana and Mississippi.
"If you pay more and the federal government is going to give incentives . . . people are going to go there. It's a natural phenomenon," Reitmann said.For the moment, building materials at retail and for some building suppliers are available and prices have stabilized, though at historic high levels.Chuck Walls, a salesman and buyer with Dixie Plywood & Lumber Co. of Fort Lauderdale, supplies builders in Southwest Florida. There's been one Katrina shock, he said, when consumers bought in anticipation of the hurricane.
"Prices at the mill level have all gone up quite a bit, because of people all buying at the same time," Walls said.Jenkins said Katrina hasn't impacted his business yet, but he expects problems in the near future. "I haven't seen it just yet, but it's coming," he said. "We all know it's just a matter of time."
Getting material to Southwest Florida is tougher."Where Katrina hit, that is a supply route. The port, the highway," Walls said. "Trucking was already brutal. We're anticipating trucking will become more of an issue."It's the things you don't think of that may trip up the process and lead to delays and cost increases never imagined.
Like septic tanks.Reitmann said more than half of the single-family home permits issued last month include a septic tank for waste treatment.
Builders dig a bed for the tank laterals to run and they must be lined with regulated aggregate sand. It's a component part of cement."Those are in short supply. All those things are going to add to housing costs," Reitmann said. "When you dig out a bed for the drain field, you have to have sand. The reason we've become so aware of it is because they just don't have the sand available."