Significant increases in material and labor expenses have pushed reconstruction costs in the state of California to an all-time high, according to recent research from Castle Data Services, a provider of residential replacement cost data based in Salt Lake City.
“The Central Valley will see the most significant increase,” said Glenn Polignano, Castle's data and information manager. “Some areas have seen building costs increase more than 15 percent in the last year.”
The results of a statewide review of building costs showed that, while demand for housing in California already had swollen the area's high inflation, other factors, such as the short supply of materials and labor, are driving costs up as well. One example of material cost increases is the price of plywood, a major component of residential construction. Castle cited a Bureau of Labor Statistics figure that plywood has experienced a 53 percent average nationwide boost over the last year.
Although California often is considered a national barometer, Polignano said that the state's current situation does not necessarily mirror what is happening across the country. “I would say that, in certain areas, there are similar cost increases, but it's not been quite as drastic,” he said. “Certainly, the trends have shifted and housing is becoming more expensive, in a reconstruction scenario. But, at the same time, there have been some developments in California that are exacerbating the situation there.”
Lumber and labor affect pricing no matter where you are, Polignano noted. To some extent, the lumber shortage that has hit California is a result of increased construction throughout the United States. “A massive amount of building permits have been issued in the past year,” he said. “While I don't know how many permits will be issued in the future, new construction is at a high right now.”
Complications with lumber coming out of Canada also contribute to the high cost of timber materials, Polignano added.
In addition, labor costs, while they have not skyrocketed to the extent of wood products, are on the rise. “Labor shortages in cities where costs have risen have always been a problem,” Polignano said.
“Some of these same sort of difficulties that California is facing are being seen throughout the rest of the nation,” he added.
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