A Builder’s Perspective

Have you ever considered the close relationship between the real estate profession and the construction industry?    Both have a huge impact on each other and on the economy as a whole. Real estate trends dictate construction direction and new developments in construction affect real estate. To some extent, each industry relies on the other  to be successful. Given this close connection, I want to share some industry insights with you from the perspective of a builder.

Evan Fujimoto is the President of Graham Builders and also a past President of the Building Industry Association (BIA). He’s a smart guy. Knowledgeable and experienced.

I  asked Evan about some of the issues builders faced during the pandemic because we believe a look at past challenges provides insight into today’s challenges.

Builder Challenges

What were the biggest issues for builders during the pandemic? According to Evan, the following challenges were high on the list:

1.  Transitioning the staff to remote work; conducting business meetings and seminars online.
2.  Social distancing and safety protocols on job sites.
3.  Supply chain issues and the “Deep Freeze” of 2021 that affected chemical plants and forced shut downs. This impacted the manufacturing of PVC based materials like vinyl windows and doors, which in turn impacted lead times significantly.
4.  Material pricing. Everything from lumber and plywood to copper wire and vinyl windows went up. Way up! Plywood prices nearly quadrupled!

If you remodeled during the pandemic, you are already aware of the skyrocketing prices, the constant delays, and the many challenges that occurred. But, what’s happening in today’s climate? What’s changed and what are the current challenges?

Let’s hear from Evan:

1. All of our employees returned to the office in 2021, but two people still work remotely 2-3 days a week. We made this adjustment to accommodate staff and there has been no impact on productivity.
2. Supply chain issues still plague the industry. Doors, windows, and appliances can still take months instead of weeks. Some appliance brands have models that have been backordered for over a year.
3. Lumber prices have fallen back to historical averages, but plywood products remain high. Copper wire, drywall, paint, vinyl windows, doors, cabinets, and plumbing and electrical fixtures also remain high due to inflation.
4. Construction materials have very high energy costs in their manufacturing and transshipment, which also impacts pricing.

How Interest Rates Impact Construction

We all know that interest rates have impacted the real estate market. But, what about the construction industry?  According to Evan, they’ve felt the impact, too:

1. Rising interest rates caused several projects to be canceled. Homeowners couldn’t qualify to borrow enough to build. Higher borrowing costs mean that homeowners have to adjust their expectations. How much house can they build? What types of materials can they install? The challenge for builders is managing client expectations and finding ways to simplify designs.

Both the real estate industry and the construction industry continue to face challenges. For those of us in the real estate profession, we know that educating our clients about the market and the buying and selling process are key to a smooth transaction. It’s all about navigating a successful experience for our clients.

The same holds true in the construction business. Evan said that the most dreaded question for a builder is, “Can we still live here while you’re doing the remodel?” Unless you’re doing a small room addition at the back of the house or a limited kitchen or bath remodel, Evan advises against staying on the premises. Construction sites are noisy, dusty, and dangerous! You really don’t want to subject yourself to all the inconvenience and stress. It might also cost you more and take longer for your job to be completed if builders have to phase the work.

Tips for Homeowners

We can certainly learn a lot from those in the building industry. I asked Evan if he had any tips for homeowners and he shared the following:

1. Make sure to hire builders with remodeling experience. New home builders may not have the experience necessary to deal with all of the conditions and adjustments that have to be made doing remodels. There are a lot of hidden conditions and latent defects that pop up and some builders won’t anticipate those things — things that ultimately lead to change orders and higher overall costs.

2. Definitely hire builders who specialize in residential construction. Just because someone has a contractor’s license doesn’t mean he or she knows how to do a kitchen remodel. If you hire ABC Roadbuilders to do your kitchen, you might end up with concrete countertops, asphalt flooring, and yellow stripes on your backsplash. Did I mention that Evan has a sense of humor?

Yes, there are a lot of similarities between the real estate industry and the construction industry. Whether you are purchasing a home or remodeling one, you’ll want to use an experienced and trustworthy professional to help you navigate the process. Many thanks to Evan for sharing his mana’o with us. He’s a great builder and leader, but even more importantly, a great person and a friend!