Higher Building Blowing In

October 7, 2005
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Though Michigan was not in the path of recent hurricanes Katrina and Rita, the state has begun to feel the ripple effects of the storms.

Local building supply companies are reporting higher prices and delays in deliveries. Linda Overfield, general manager of Miller Zeilstra Building Center, said delivery times have been extended for some products because of different routes and the use of delivery trucks in the relief effort.

“It’s affecting business to the point where people are putting off some of their projects,” she said. “They only buy a little bit to start it, figuring they’ll finish it later.”

Overfield said she believes prices on particleboard and other materials will be higher than usual for a few months.

“They’ll stay high until probably after the first of the year, until the initial novelty of the disaster wears off,” she said.

Though prices should come down next year, Overfield predicted they will never come back to where they were before the disasters.

Judy Barnes, executive vice president and CEO of the Home Builders Association Of Greater Grand Rapids (HGAGGR), said builders are expecting some shortages in materials because of the recent hurricanes.

“Really what we’re hoping is that we can use some imported material if our materials are pushed too much to the limit,” she said.

Aaron Kitson, vice president of Lee Kitson Homes and member of HBAGGR’s board of trustees, said that concrete and rough lumber are the two main areas of concern for builders. Kitson said price increases should be mild, from 8 percent to 9 percent, and then taper off.

To help alleviate the situation, Kitson said the National Association of Home Builders is working to get some tariffs reduced for lumber from Canada and concrete from Mexico.

“They both have vast supplies that could reduce the cost of building for a lot of people if we let a little more in,” he said.

With materials such as cement, Michigan should feel little direct long-term effect, though the effects of cement prices on the economy will be felt throughout the nation, according to Ed Sullivan, chief economist for the Portland Cement Association. The cement association represents cement companies in the United States and Canada, conducting market development, engineering, research, education and public affairs programs.

Because of the disruption of the New Orleans port, which imports about 10 percent of the nation’s cement, the lower Mississippi Valley region will feel the impact — but it should not reach as far north as Michigan, Sullivan said.

The disruption to river and railroad traffic caused by the hurricanes will likely mean a reduction of 700,000 tons of cement from the 3.5 million tons that travel along the Mississippi each year.

“For the most part that’s going to be concentrated in the middle and lower Mississippi Valley region,” he said.

There may be a 1 percent to 2 percent tightening in supply in the northern states, but it should not have a large impact, Sullivan said.

“It’s a little bit of tightening in a relatively soft market,” he said.

Though the direct effects will be minimal, Sullivan said Michigan and other northern states will be affected by the national economic performance that will be hurt by the cement shortages and the rise in energy prices due to the hurricanes.    

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