Ever since demand for home building and remodeling began to drop, we have been hearing about corresponding reductions in the cost of building materials and labor around the United States. Do such cost reductions apply to the custom home market?
CUSTOM HOME recently polled online readers about these purported construction cost reductions to find out how custom builders are handling clients expecting a deal on materials or labor. How are your peers convincing deal-seeking clients to pay them what they’re worth?
Seventy percent of survey respondents report that supplier and subcontractor prices in their markets have fallen, and the amounts range from 5 percent to 25 percent. Roughly 42 percent of respondents say costs have fallen by at least 10 percent. One builder reported that supplier and subcontractor prices have fallen by 50 percent since 2005 in his market. A few builders say that while subcontractors’ labor prices have fallen, materials supplier prices have remained relatively stable, with some even increasing.
Many custom builders have lowered their own prices during the recession, according to our survey. Nearly 59 percent of respondents said they have lowered their rates across the board, while almost 30 percent said they have reduced prices for some materials and services, but not all.
While some custom home clients may believe the industry is experiencing a buyer’s market, in areas where this is not the case most survey respondents say they are managing this perception by emphasizing their customer service and craftsmanship and by reminding clients that focusing only on the bottom line can result in an inferior product.
One builder said his company focuses on “making sure [clients’] decisions are based on good value for the cost and not simply on the bottom line, especially [if the client requests] an unknown vendor.”
“I give a fair price up front. It is a good price and I try not to dicker. Something will have to be left out or changed to a lesser product, and that leaves the job undone for me,” one respondent said. Another said his company is managing expectations of lower costs by “telling them you always get what you pay for.”
Still, some survey respondents indicated they are having trouble managing client expectations of lower costs across the board, while others said they have actively notified clients of reduced rates and materials price reductions, and are encouraging them to build now while prices remain lower.
