Here in Washington, D.C., a client of one of my favorite remodelers recently asked the remodeler to travel 1,000 miles to south Florida to rebuild homes damaged by Hurricane Irma. In Louisiana, lumberyard owners told me two weeks after Hurricane Harvey struck that they expected to see trucks show up at their stores soon, driven by people who hoped to buy all the drywall they could and tote it back to Houston for sale.
Winds of change, indeed. Those disasters, in addition to the wildfires on the West Coast, are likely to rattle your remodeling business even if you’re not located near the damage zones. Expectations run wild that prices for both products and labor will rise. Drywall, framing lumber, sheet goods, and asphalt shingles will see some of the biggest increases.
Odds are good that you are behind the eight ball already if you haven’t been updating the core data you use to build your estimates. We recently received the numbers for the cost half of our 2018 Cost vs. Value report. They show that, from mid-2016 to mid-2017, the amount a client should be expected to pay for 20 common professional remodeling projects had risen no less than 2.7% and as much as 6.5%. Note that the materials and people costs that went into this data were collected before the hurricanes arrived.
You should already have been raising your prices to meet the pre-hurricane cost increases. Now, for projects that won’t start until November, December, or early next year, expect that you’ll need to shell out even more money for materials and workers by the time those jobs begin.
But wait, there’s more: Texas and Florida could end up needing so much material that vendors and dealers will limit the amount they’ll sell to any one customer there. Those allocations usually are based on relationships that stem from how much you’ve bought from that vendor in recent years and how quickly you’ve paid your bill.
Graybeards who suffered through the 1970s’ double-digit inflation rates may remember how to operate in an era of constant price increases, even if it has been decades since they last used those skills. For the rest, prepare for an escalator ride that could be uncomfortably fast.
by Craig Webb