Mainly clear skies. Low 51F. Winds light and variable..
Mainly clear skies. Low 51F. Winds light and variable.
Updated: August 22, 2022 @ 8:05 pm
A progress photo from a recent home addition completed by Matt Hamacher. Despite having a few new build projects underway, Hamacher said there’s a construction slowdown on the horizon.
The interior of a renovation completed by Hamacher. He said the slowdown is being driven by a rise in interest rates, and the rapidly increasing cost of materials like lumber and aluminum.
A progress photo from a recent home addition completed by Matt Hamacher. Despite having a few new build projects underway, Hamacher said there’s a construction slowdown on the horizon.
The interior of a renovation completed by Hamacher. He said the slowdown is being driven by a rise in interest rates, and the rapidly increasing cost of materials like lumber and aluminum.
MCBAIN — Interest rates are on the rise, and the cost of building materials are not much better. Work is steady now, but local construction companies are preparing for a slowdown.
The pandemic wreaked havoc on the real estate market, creating a buyer frenzy. But its impact on supply and demand has also made it difficult for those looking to build a home from the ground up.
“I don’t know if we’re ever going to see pre-COVID pricing on lumber,” said Matt Hamacher, owner of Matt Hamacher Builder, LLC.
Lumber costs have decreased with the calming of the pandemic, Hamacher said, but now that companies have seen what people are willing to pay, that number is not likely to drop.
Most of his clientele have remained undeterred, but for the everyday person, he knows they’ll be thinking twice.
“I did lose a big project during COVID, because they just decided to hold off on it,” he said. “So I don’t blame people for that.”
On average, Hamacher builds one new home per year, and the rest of his time is dedicated to home additions, remodels or small construction projects. His yearly quota has already been met, and plans for another new build are under way, but Hamacher isn’t fooled by what seems like business picking up; he said the slowdown is on its way.
“My phone has substantially slowed down,” he said. “I mean, substantially slowed down to what I normally would be receiving.”
As winter approaches, Hamacher said there’s always a handful of people looking to expedite home repairs, but as far as large-scale projects, he doesn’t see those becoming high demand. Thanks to his most recent build job, which he anticipates will take around six months, Hamacher said he’s in the clear for now, but it’ll be tough for his colleagues.
“We don’t know what to think of it,” he said. “All of us in our industry are kinda like, what’s gonna happen?”
It’s not just lumber that’s faced inflation. Hamacher said the price of steel is killing construction workers, along with aluminum. He said the average cost of an aluminum soffit — a piece of metal that bridges the gap between the roof of a home and its siding — doubled over the course of three months. The result of high-cost materials is an overall spike in the per-square-footage cost to build.
“I think pre-COVID, we could do something on the nicer end for like 175 bucks a square foot; $150 to $175 would be fair,” he said. “And now, I can’t hardly start anything for under $210, somewhere in that.”
Hamacher has been able to continue picking up work in and around Cadillac, but other builders, like Dustin Kearney of Kearns Construction Inc, can’t survive without taking jobs in more metropolitan areas.
Kearney said the lack of work in the Cadillac area is mostly due to its lower average income. To combat the issue, Kearney and his team have begun working with their clients’ insurance companies to help them get coverage on their roofs and afford the cost of the project.
Although they’ve seen some success from their efforts, they sometimes have to take on work in places like Traverse City to stay operational.
“We try not to take work from out of town, but the Traverse City market, and some other outskirts even farther north as well, we can actually charge what we need to be charging to stay in business,” he said. “Cadillac can be tough; they don’t really have the funding to pay a company what a company needs to make to stay in business.”
A majority of Kearney’s work is still completed in the Cadillac area, but he said travel has become the norm for many of his industry colleagues. There is cost involved with traveling, too, due to gas and materials, but the payout is still worth it, he said.
In the Reed City area, DT Construction Overseer Jordan Kailing said he’s been surprised to see the amount of work available. His most recent project was a new build in Big Rapids, and he’s gearing up to construct a home in the Swiss Alpine subdivision.
Despite having projects in motion, Kailing’s expectations are similar to those of Hamacher. Construction mellowed out during the pandemic, but the true slowdown has yet to come.
“I would assume that it’s going to be when this recession finally hits its peak that people are gonna start to kind of pull back,” he said. “I mean, you notice it a little bit, because people that stayed up-to-date, or keep track of the economy foresee this situation, but I don’t think that a lot of people actually realized it until right now.”
On top of the looming slowdown, the construction industry has also fallen victim to the ongoing worker shortage. Both Kearney and Kailing have struggled to fill in employment gaps.
Kearney said he has two very reliable employees on his payroll, but he believes good workers are few and far between right now. For Kailing, finding applicants has been easy, but when he calls to follow up, he said they don’t respond.
Looking ahead, Hamacher said he isn’t really sure how to push through the slowdown, but it’s going to be up to interest rates rather than material cost.
“I don’t like to blame everything on the interest rates, but for a lot of people that have the desire, they may not have a high enough score, or want to put that extra interest money in their loan,” he said. “I think that’s kind of a big deal; it would be for me.”
Kearney believes that whether things pick back up again will depend on an economic shift. In order for people to afford new builds, or any construction project, they need to have the income to supplement the work. However, admittedly a non-expert on economics, Kearney said he’s just staying hopeful.
“I think maybe in a few years, some things might get back on track,” he said. “Hopefully the next couple of years isn’t too detrimental to us in our community to where we see a recession like we had when I was coming out of high school.”
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