Steamboat Pilot & Today

Steamboat Springs — China's economy is heating up -- and the indirect result is an increase in the cost of building a home in Routt County.

The industrialization of the world's most populace country is demanding more and more steel, causing precipitous cost increases in the international marketplace. Suddenly, everything from 16-penny nails to sheets of corrugated roofing material cost 50 percent to even 70 percent more than they did in 2003.

The rising costs of steel can add thousands of dollars to the price of a single-family home in Steamboat Springs. The rebar that goes into concrete foundations, the structural steel that supports soaring cathedral ceilings, the corrugated steel roofing panels that shed snow and even the circular saw blades that carpenters depend on cost more money in 2004.

"Anything that has to do with metal has gone sky high," said Tom Fox of Fox Construction in Steamboat. "It's all the way through -- from all your connectors to metal roofing."

China is building new factories, a huge dam and sports venues for the 2008 Summer Olympics.

"It's affecting everything," agreed Ty Stewart, assistant manager of Steamboat Lumber. "From joist hangers to screwdrivers and hammers. Anything that's made out of metal."

Stewart said he has been trying to order six-month supplies of many metal products that go into homebuilding. Still, he sometimes finds the products his customers seek can be back-ordered for as much as four weeks.

The steel reinforcing bars that go into concrete foundations are a good example of an unglamorous product that can have a big impact on the cost of a home.

Steel cost nearly doubled

It's not an exaggeration to say that some of the large single-family homes being built in Routt County would require tons of rebar, Stewart said. A more modest home might need 300 "sticks" of it. Last summer, Steamboat Lumber was able to sell a stick of half-inch rebar for $2.89. Now, that same piece of steel retails for $5.77. Do the math -- it translates into an $800 cost increase in the cost of a new home here.

MEPS, a steel industry consulting firm based in the United Kingdom, is reporting that though China's appetite for steel has driven up prices worldwide, nowhere are prices as high as they are in the United States.

"All regions have been affected by the shortage of ferrous raw materials used by China's voracious demand," MEPS International Steel Review reports. "U.S. prices are now massively higher than those in the rest of the world."

MEPS is reporting the lowest benchmark price for hot rolled coil steel this month in the United States is $605 per ton compared to $360 in December 2003. Current prices in Japan are $431 a ton and in the European Union they are $443 per ton.

Fox said the trend toward custom homes with spacious great rooms featuring vaulted ceilings is colliding with steel prices. Those dramatic rooms demand more structural steel.

"We're seeing homes with greater open areas that require more structural steel," Fox said. "The designers are driving that."

It's not uncommon for the structural steel in a Steamboat single-family home to top $20,000, $30,000 or even $40,000, Fox said. The price of structural steel has nearly doubled, from 21 cents or 22 cents a pound last year to 40 cents a pound now, Fox said.

Lumber up 300 percent

Unfortunately, it's not just steel products but lumber, too, that is spiking the cost of homebuilding as the construction season gets under way.

The price of oriented strand board (also called wafer board) often installed in place of plywood in sheathing and roofing homes has jumped dramatically. A 4-by-8-foot sheet of wafer board that would have cost $5 to $6 in the fall of 2002 now retails for $20 at local lumberyards. That's an increase of 300 percent in 18 months, Stewart said.

Contractor Paul Flood, who builds entry-level homes in Hayden, said it's hard to pass the cost of OSB board along to consumers in his market. The increased cost of OSB board that goes into roofing, flooring and sheathing in 2003 added $1,600 to the construction cost of a 2,000-square-foot home, Flood said.

Fox said contractors have to keep an eye on price trends when ordering materials for a project. They typically protect themselves by writing contracts that make it clear the client must absorb fluctuations in the price of lumber and steel products. If a builder can see that the price of lumber is poised to go up, he might lock in a purchase order for all the materials needed for a typical home. However, in the case of a 10,000-square-foot home that would take years to build, it's impossible to store all those materials on site.

Ripple effects

Fox recently ordered for a new home a pack of sheet and dimensional lumber that came to $55,000. When you factor in a price increase of 3 percent to 4 percent on a 6,000-square-foot home, Fox said, the price difference can add $3 to $4 per square foot in construction costs. The cost of steel for the home could add another $2 per square foot.

Fox is waiting to buy plywood for a 2,400-square-foot addition to a trophy home because he thinks the price could moderate. When he uses the term "trophy home," he isn't using it in the typical sense. His client literally has hundreds of mounted game animal heads, and to hang them from the walls of his new addition requires expensive three-quarter inch plywood. Fox is waiting to bag lower prices for his client.

Wealthy clients may express dismay at increasing material costs that could add $40,000 to the cost of a home, Fox said. However, a less affluent client planning on a smaller home could be even harder hit. A $4,000 jump in price could mean the difference between qualifying for a construction loan or not.

As an employer, Fox said he's very sensitive to the impact increasingly expensive building materials are having on the attainability of housing here. In addition to his carpenters, Fox said he depends on painters, electricians and plumbers working for his subcontractors to be able to afford housing in the valley.

-- To reach Tom Ross call 871-4205

or e-mail tross@steamboatpilot.com