Lumber Prices Are Through the Roof, Punishing Apartment Builders.”
The Wall Street Journal (5/25/2021).

[Note to Readers: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway, or any other entity referenced. If you need legal advice, please consult an attorney.]
Home builders nationally are facing soaring costs.
That includes inputs such as lumber, copper, and steel; fuel prices; and, last but not least, spiking labor costs — assuming builders can find skilled workers (hundreds of thousands left the industry after the 2007-2012 housing bust).
Will those costs be passed through to clients?
“Absolutely,” at least prospectively (as if there were any doubt).
Which leaves homes currently under construction.
How do consumers know whether their home builder can legitimately pass along increased costs?
Step #1: read their contract.
Assuming such language: a) exists; and b) is reasonable, the answer would appear to be “Yes.”
The catch for consumers is that, even if the language isn’t reasonable, it will likely require a third-party — either arbitrator or court of law — to determine that.
Which means delay(s), potential legal fees, and sundry other headaches, complicating an already stressful process.
Practical Considerations
Even if the builder isn’t contractually allowed to recoup some or all of their increased costs, practically, clients face another risk (presumably greater with small(er) outfits): the builder doesn’t have the financial wherewithal to absorb the costs.
Which means their project(s) could potentially come to a halt.
All of which is why doing careful due diligence at the beginning of the process is more important than ever . . .
See also, “Doing Due Dilgence on Small Home Builders“; and “You Know You’re Working With a Quality, Cost-Conscious Builder When . . . “.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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