Hike in drywall costs expected to hammer builders

With housing starts and residential permits at 40-year lows, the last thing builders need are increases in the costs of materials.

That, however, is just what they expect to be dealing with in early December, as major drywall producers plan a 25 percent price increase that likely will take effect in the first week of the month.

For builders and remodelers wrestling with ways to stay afloat until the housing market makes its promised recovery, higher materials prices are not welcome.

In fact, for most, they are a complete surprise.

"I wasn't even aware of it," said Michael J. Murphy Jr., vice president of Murphy Homes Inc., of Newtown Square.

He did find a memo from drywall producer USG Corp., "and now I have to figure out what to do," Murphy said.

"In this market, I find there's going to be some difficulty to increase pricing," he said. "However, we approached our pricing very aggressively this past year, and we will probably be adjusting our pricing by the new year to reflect cost adjustments."

Translation: This time around, Murphy may be forced to raise construction prices.

According to a report in Hanley-Wood's ProSales Online, USG's Nov. 3 announcement of a price increase was followed by similar announcements by CertainTeed Corp. in Valley Forge, National Gypsum Co., Lafarge, and Temple-Inland Inc.

USG, which reported $297 million in profit in the boom year of 2006, sustained huge losses in 2010's first three quarters - including $100 million in the third quarter, reflecting "continued weak market conditions and extraordinarily low shipping volumes," said chairman and chief executive officer William C. Foote.

In 2009, production of drywall industrywide was almost half that of 2006.

Obviously, because builders buy and use large quantities of drywall, their price has to be much less than a typical do-it-yourself homeowner pays.

USG said its third-quarter Sheetrock brand drywall price was $114.45 per thousand square feet - about 11.4 cents a square foot. In 2004, the price was $132.50 per thousand square feet.

At Lowe's Maple Shade store Thursday, USG's mold-resistant, half-inch Sheetrock brand wallboard was selling for 39 cents a square foot - $12.08 for an 8-foot-by-4-foot sheet retail.

According to the National Association of Home Builders, a 2,272-square-foot new home uses about 8,100 square feet of drywall for walls and ceilings, or about $927 worth.