While hurricanes ravaged Florida, time was not on the side of home builders: Material and labor costs kept climbing.
By JEFF HARRINGTON
Published October 11, 2004
TAMPA - As construction superintendent for Hanna Bartoletta Homes, Kenny Matuza is charged with keeping the home builder's latest development on schedule and on budget.
In his 20-plus years in the industry, it's never been a tougher task.
Winding through the dusty streets of the emerging Tree Tops subdivision just north of Tampa's Westchase one morning last week, Matuza pointed out problem after problem.
Two roofless houses awaited delayed shipments of tiles. Down the street, a truck carrying trusses had just arrived for another house already a week-and-a-half behind schedule. When supplies arrive, they're often more expensive than they used to be. Gypsum used to make drywall, steel for reinforcing bars, cement for concrete and framing lumber have all gotten more expensive this past year. A $19 case of nails now costs close to $40.
It all adds up to delays on the job site and a squeeze on profits.
"The numbers that you try to achieve on a house?" Matuza said. "That's just not clicking."
Last spring, Florida's overheated construction industry faced the dual stresses of a labor squeeze and rising costs for raw material, particularly concrete. A summer of relentless rains delayed sod shipments and prevented crews from pouring foundation footers and other concrete.
But those strains on the industry were only the beginning. Four major hurricanes over six weeks were the back-breakers. Now, the number of construction projects vying for supplies has multiplied and the monthslong shortage of roofers and other trade contractors has grown critical as the lure of higher-paying repair jobs draws experienced contractors into Florida's many hurricane damage zones.
"Right now the industry is overwhelmed. I can say that without a doubt," said Lakeland builder Mike Hickman, president of the Florida Home Builders Association.
The delays go beyond the build process. Inspectors busy with hurricane-damaged homes have pushed back site checks of new homes. As storms loomed off-and-on for more than a month, many insurers weren't writing homeowners insurance, sparking a backlog in sales that couldn't close.
For home builder Mike Bartoletta, one of the biggest aggravations was trying to make up lost time from one hurricane only to fall further behind when another approached.
To prepare for each storm, builders lost precious days tying down supplies and taking tiles off partially-completed roofs so they wouldn't tear loose in heavy winds. Some building sites lost plywood to thieves who apparently took the wood to sell or board up their own homes and businesses. After each storm, trash bins overflowed, reflecting the massive clean-up of scrap-sheet metal, paper, and wood.
Bartoletta said the combined delays caused by the four storms was considerable. "Two hurricanes ago, I said eight weeks" behind schedule, he said. "You can almost double that now. It's probably 12 to 16 weeks."
Another builder, Westfield Homes, said long-term power outages contributed to a two-month delay on some closings.
The bottom line: some builders say the storms mean they will finish 5 to 10 percent fewer homes this year than they had projected.
"We were on pace to close 1,000 houses this year (before the hurricanes) and we'll probably end up in the 920 to 930 range," said David Pelletz, president of the Tampa bay division of Westfield Homes.
Materials pricey, workers scarce
Heading into the fall, two chief problems persist: high material costs and a labor shortage.
According to the Producer Price Index, the cost of steel mill products rose 46 percent from August, 2003, to last August; gypsum is up 24 percent; copper and brass up more than 30 percent; insulation materials up 12 percent.
Surprisingly, one of the few materials to drop in price over the year is plywood, though some areas in Florida continue to have a supply problem.
The Florida Home Builders Association is pushing state leaders for relief, seeking the elimination of a 40 percent tariff on Mexican cement, for one. "That would be a big part in keeping costs in," association president Hickman said.
But sparse or costly materials are of secondary concern to Michael Carliner, an economist with the National Association of Home Builders. The bigger issue, he said, is a severe worker shortage gripping the industry.
After 1992's Hurricane Andrew, entire companies abandoned new construction for the lure of making some quick money fixing roofs, cutting trees and installing windows. Plumbers, framers, carpenters and insulation companies all descended on south Florida.
That hasn't quite happened this time, builders say, as many contractors like keeping their steady relationships with home builders. Instead, trade contractors have lost part of their work force to the hurricane rebuild effort and are now using smaller crews on home building jobs.
The home builders association is circulating a field survey now, quizzing members about the severity of the worker shortage in Florida.
Hickman offers up Polk County as a prime illustration of the squeeze.
After hurricanes Charley, Frances and Jeanne, Polk County was left with more than 40,000 damaged homes, by one estimate. "In a county that does 6,000 new (housing) permits and 6,000 remodeling permits a year, you throw in 40,000 jobs that need to be done," Hickman said. "You just can't do it all with the resources you have."
Gov. Jeb Bush is working with the state's home building industry to bring in as many out-of-state builders, roofers, window installers and other construction workers as possible. Applications have poured in from as far away as Ireland.
"The concern is that you get quality workmanship," Hickman said. "Let's not create a second disaster."
A queasiness about poor quality and competition has led to a slow approach for letting construction workers in. But going too slow has its own problems.
If homeowners become frustrated waiting for a roofer or other contractor, "they'll take whatever comes to them" Hickman said. "Some guy will knock on the door and they'll say, "Yeah, I can't wait six months. Go fix my roof."'
New home buyers keep showing up
Builders have speculated about whether a fear of hurricanes will slow down the Florida building spree, dissuading Northerners from relocating to the Sunshine State.
There's no sign of that so far.
Despite Hurricane Charley, which made landfall in southwest Florida Aug. 13, Florida builders took out 20,028 permits for new construction in August, including 15,029 for single-family homes. That's up 7 percent from 18,739 permits, including 13,701 single-family home permits, in August, 2003.
"Even though people may have had to fight through a storm to get to the permit office, the number of permits was higher," said Carliner, the Association of Home Builders economist. "Florida has been a very active market all through the year and it didn't really slack off."
When the figure for August housing starts is released, Carliner expects it to show a large backlog of unused permits as builders struggled to get new homes out of the ground.
A report on Florida permits for September - the month of hurricanes Frances, Ivan and Jeanne - isn't out yet.
Nevertheless, there are other signs that Florida remains as popular as ever as a home despite construction delays, hurricane threats and land costs that have nearly doubled in some areas the past two years.
Pelletz of Westfield Homes said his Tampa Bay unit met its prehurricane goal of closing on 100 sales in September despite the stormy weather. He posted ten sales alone on Sept. 25, the day before Hurricane Jeanne made landfall on Florida's east coast.
"That was surprising to me," Pelletz said. "We thought there would be some fallout."
The fallout may come when buyers find there aren't enough homes to choose from. Pelletz estimated that there is less than a year's worth of inventory in the ground, deeming it the lowest level ever.
"If you can find anything under $200,000 these days, that's a big plus," he said.
