Inflation - Tulsa Home Builders Edition

SlugSlinger

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That's money and not materials.

Completely different deal.

I've hedged zinc dust before. eleven truck loads or 440,000 lbs. Hedging materials is different than hedging $'s. You also have to consider when you hedge, it's still a gamble.
Yeah, I was talking about covering the risk with dollars.
 

beardking

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They're going to get, and are getting, worse in the near term. Is there an end in sight? Not currently. Will it end? You damn right it will, with a loud crescendo. It's anybody's guess as to when though. I think it will be sooner rather than later, like this year, cause I think the bottom is going to fall out of the market and inventory will out pace ability to pay (notice I didn't say "supply").

I'm done building specs, for the near term any way. I'll have another look in a couple months. We're just doing it to piddle and have something to do and make some extra money. We're not an assembly line builder. We build 2000-2300 sq ft specs and we'll finish out a barn or do a custom on the owners const loan. I don't build starter homes, and I don't build anything bigger than 3300 sq for a custom. We just aren't that guy. We have a scant few trusted subs that do quality work, or they don't work for us, and we build as nice a home (and a lot better than most) as gets built in the neighborhoods we work in. The last 4 we've built were bought by the first buyer that walked thru them after they were finished. The one before that was bought when we were at the paint & floor covering stage. That turned into almost a full blown custom, and it was a complete PITA. It got so out of hand that we had to collect almost $50k in nonrefundable change orders because what they wanted would never be recoverable if they failed to close. It was a nightmare. I'll never do a custom on anything other than a cost plus basis.
On a slightly different note @jakeman ,do you happen to ever have a need for someone to do CAD work for your homes? I might know a guy. (hint, that guy is me)
 

dennishoddy

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I suspect most builders are not sophisticated enough or have the resource to hedge against price increases, but that is exactly what should have happened when there were market dynamics that started to indicate inflationary pressures.

At minimum they could have purchased some future contracts on lumber to help offset the potential increase.

The airlines would do this with fuel and it saved them a ton of capital when the prices went through the roof.


Any of the builders on here hedge for inflation?
I'm betting most don't. They can't afford to.
Edit: I have heard steel prices are coming down for metal buildings, and according to Zillow, our property prices have peaked out after over a year of climbing around $2000 a month. Yeah, I know it's zillow, but a buddy's mom is a top real eastate agent and she ran the same numbers.
When we had our 40X60 insulated building put up we had heard of many horror storied of materials delivered and months later the crew shows up to assemble.
We cut a deal with the assembler that when the steel showed up, we paid the driver. When the concrete was poured, we paid the concrete company. We let him use our tractor and any implements he needed at no charge, so basically, we paid him for his time and his crew's salary. They did a stellar job.
 
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old John

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This is one of the risk of doing business! They can't have it both ways, unless thay would give their customers a discount on the home price, if material went down between signing, and completion of the home, which we all know they wouldn't, I would take them to court!
 

CODE_3

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This is one of the risk of doing business! They can't have it both ways, unless thay would give their customers a discount on the home price, if material went down between signing, and completion of the home, which we all know they wouldn't, I would take them to court!
I agree you signed a contract which is a legal binding document. That's why I tell my clients not to use the builders contract
 

SlugSlinger

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I agree you signed a contract which is a legal binding document. That's why I tell my clients not to use the builders contract
We built a few years back with what started out as a great builder. During the construction, the original builder was bought out by a different builder. We signed a lump sum contract with the original builder, then the same contract again with the new builder.

During the construction, the new builder started adding cost for their overruns, like concrete and site prep. I met with the entire team including the original builder and the new owner. I told them the contract we both signed was a lump sum agreement and not a cost + and they just couldn't start adding costs to the agreement.

They told me they were losing money because of the amount of lot work that was needed. They were building on my property. I asked them if they had even been to the site before they provided the contracted quote. They all looked at each other and said no, which flat out astonished me. They shut up and ate their overages after that meeting.
 

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