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Thursday, Mar 28, 2024

Drywall Prices to Increase, Builders Brace for Impact

Standing next to a bundle of recently purchased drywall, Northridge contractor Cortney Lofton compared his surplus to preparing for the “Big One.” Lofton is hunkering down for what promises to be yet another hurdle in the construction business: rising drywall prices. Major drywall manufacturers recently announced plans to slash job quotes and raise prices 35 percent in January. While the industry’s move hardly compares to a devastating earthquake, those in the construction business are raising questions about why the increase is so high and what impact it may have on an already struggling building industry. Valley area contractors are notifying their clients that they plan to pass along the costs. And some contractors are stocking up on drywall before the price increase takes effect. “The tough part is there is nothing we can do about it,” said Lofton, owner of Lofton Contracting Inc. “There is no substitute for drywall.” Lofton made some earlier-than-usual purchases, preparing for several remodeling contracts and museum jobs next year. By purchasing boards now, he said, “I might save myself $5,000 to $7,000 which we would (have) passed onto the client.” Drywall makers say the increases are needed to boost profitability amid a building supply industry that has struggled mightily during the downturn. But the increases have drawn criticism from a national trade group. The price increase is “definitely out of proportion with where prices currently are and the weak housing market,” said Peter Grist, senior economist with the National Association of Home Builders. Those costs will likely fall upon homebuyers, because builders already are struggling with tight profit margins in a slow economic recovery, he said. The price of a new home will likely rise about $600, Grist said, and with current low demand and tight lending restrictions such a rise “maybe the difference between being able to purchase a house or not.” Soaring costs North Carolina-based drywall maker National Gypsum announced in a September letter to its customers that it ended job quotes and will raise prices 35 percent in January. The company said its “present pricing levels and practices under such circumstances are not sustainable.” PABCO Gypsum, Lafarge North America and American Gypsum also have killed job quotes and will raise drywall prices 35 percent in January. USG Corporation also recently said job quotes have ended and it will be informing customers directly of 2012 price increases. “By eliminating job quotes and offering a single, stable price we are able to give customers price certainty without the administrative effort associated with tracking multiple job quotes,” USG spokesman Robert Williams said in an e-mail. Despite these announcements, many local contractors still are unaware of the manufacturers’ plans to hike drywall costs. “Wow that is a big jump!” Freddy Esquivel said when he learned of the increase. Esquivel, owner of Panorama City-based JVJ Construction Inc., said he likely will pass on the cost to his clients, taking special care to break down the increased costs for them when placing a bid. For Lofton, who has stockpiled some building materials and water heaters for clients in the event a large earthquake strikes, said the move to purchase early also was to preempt a potential drywall shortage in case contractors make a flood of last-minute orders before the New Year. “The mills and the fabrication facilities all shut down at the beginning of December just for their preparation (for the following year), and then they start back up in January,” he said. Lofton said he plans to pass the costs onto clients, unless a client cannot afford to pay the higher price. In that type of scenario, Lofton said he may look to trim costs elsewhere and absorb the increase, or else turn down the project entirely. At Santa Clarita-based AMG & Associates Inc., President Albert Giacomazzi said the contracting firm is looking to shore up its drywall projects before the increase hits. Giacomazzi said AMG may pay have to front a subcontractor $200,000 to purchase drywall for a large military project because the federal government can’t afford next year’s increased prices. The increases will be easier for the industry to absorb on smaller projects, but for “larger projects it could have quite a significant impact,” he said. Some industry observers, however, are not convinced the price increases will come. Avi Yakov, owner of National Material Supply, a Van Nuys drywall supplier, questions whether a 35 percent increase will take effect. Perhaps the manufacturers will shift to gradual increases, he said. “It’s not easy to increase,” Yakov said. “No one is making money.”

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