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Builders weather rising fuel and supply costs

Central New York builders and those who supply them say they are keeping busy despite the constraints of higher gas prices and supply costs.

Michael J. Luber, president of Luber Associates and Royal Oaks Builders, Inc. in Camillus, says he's pleased by the demand for new homes, although he is somewhat perplexed by the mixed signals he sees in the local economy. "This is the busiest year since I've been in business, eight-and-a-half years," he reports.

"For some reason, the contracting has picked up this year, whether it's because people perceive that interest rates are low for a few months so they better act now ... it's been unbelievably busy for me, but other businesses have slowed down" because of the rising materials costs."

Luber says he just completed building a new home at Skyland Meadows on Onondaga Hill. "Our last house cost $325,000, and we saw an $18,000 to $25,000 increase in materials and fuels during the construction," he explains. "It's a substantial increase. It's terrible, but all builders must live with it. We have no choice but to pass it on to the customers."

The fluctuating gas prices are worrisome enough without the additional burden of higher prices on - supplies such as steel and lumber. That might be a contractor's immediate concern today. But if interest rates on loans and mortgages start rising, then it's going to directly affect homeowners first, and will then depress the demand for builders and contractors.

Luber's crew is taking advantage of mild weather and currently remodeling a kitchen in Fairmount. "Mortgage rates are relatively low and competitive, about 5.8 percent to 6.1 percent over the last four years, and that's fueling the homeremodeling business," he notes. "People are spending money because they can afford to borrow money."

Royal Oak Builders employs just one full-time lead carpenter/foreman and two part-timers, and rarely subcontracts other jobs.

Gas prices have put the biggest dent in contractors' costs. Luber points out that all his suppliers have added surcharges of about $10 on each delivery to compensate for increased gas prices.

"With gas prices, unfortunately, we don't have a choice ... our costs have gone up tremendously," Luber says. "We're spending $275 a month more now [on gas] this year."

The cost of steel has gone up 50 percent in the last year. "Suppliers are passing on their costs to me and I pass it on to my customers," Luber says. "You have to if you're going to maintain the same percentage profit as a year ago. You could compromise 'if necessary to keep your men and your business going. I can give a quote [to customers], but if they don't take it, I don't get the job. There's a very fine line there. I don't know what the answer is."

Dean Kelly, president of Jay-K Lumber in New Hartford, says lumber prices have jumped about 30 percent this year. "There's a high demand for materials because of the construction market, but the supply hasn't increased, so it pushes prices higher," he says. Most of the lumber Jay-K stocks comes from the western United States and Canada.

"Although lumber prices are down a bit from the summer, I don't think they'll go back to where they were a year or two years ago," be says. "There have been increases across the board in lumber, concrete, and steel."

Jay-K Lumber has been hit by increased fuel prices, but has taken the unusual stance of not passing on the cost to its customers. yet. "Our fuel bill has gone up about 15 percent to 18 percent this year," Kelly says.

"Our suppliers charge us either a flat fee or a percentage fee because of their fuel costs. We charge $18 for deliveries and it's been unchanged for about a year. We might consider charging $20 next year. We do a lot of deliveries. People appreciate the value of delivery."

Brady Endryck, executive officer of the Home Builders Association of the Mohawk Valley, concurred that contractors and suppliers have little choice but to pass on price increases.

"Unfortunately, the consumer doesn't understand it all the time, but [the homebuilders] are trying to make a living," he says.

The Home Builders Association of the Mohawk Valley has 107 members in Oneida, Herkimer, Madison, and Otsego counties.

Endryck notes that the higher materials costs impact everything from roofing to siding to windows and doors. Still, he says the increased costs haven't yet had a significant impact on new construction in the area.

"Our construction market is very strong ... but [the increases are] still taking a toll on everyone," he says. "In the past year. people have felt secure with their spendIng, but interest rates are starting to inch up. I think in the next two years we might see a drop in volume, but next year will still be strong. I'm not sure about the number of [building] applications for the year after that."