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[tvoivozhd <tvoivozd AT infionline.net>]

A thirty percent hike in building costs in one year---and all the 
pundits say not to worry, or nothing at all?  When that many people are 
totally unconscious about building costs, I find it both worrying and 
ludicrous they cannot relate them to a crash.  The attention span of the 
American public and businessmen seems to get shorter by the day.


And construction executive John Janacek had to create a cost crisis 
book, which he updates every day.

"I've never had a cost crisis book on my desk," said Janacek, vice 
president of estimating at Pasadena-based C.W. Driver, a big commercial 
and industrial builder in Southern California.

But a book like Janacek's or a similar item is an important tool for 
those in the building business these days. Shortages of materials and 
rising prices have created a headache for development firms, 
construction companies and public agencies across Southern California.

It's a reaction in large part to China's ravenous appetite for materials 
needed to build the massive Three Gorges Dam, thousands of miles of 
roads and about eight cities equal in size to Indianapolis while 
preparing to host the Olympics.

Domestically there has been a surge in home building -- California's 
residential construction last year topped the 200,000-unit mark for the 
first time since 1989. And school and commercial construction also 
rebounded.

As a result, materials prices exploded last year, shortages developed 
and builders scrambled. The imbalance reached critical mass earlier in 
the first half of 2004, but the sector is still dealing with the afterglow.

Young, president of Rancho Cucamonga-based Young Homes LLC, which builds 
entry-level products in the Inland Empire, said that shortages were a 
bigger problem than rising prices, which could be passed on to consumers.

For example, in 2004 the company built 720 single-family homes and sales 
totaled $275 million, up from 618 units and sales of $182 million in 2003.

The construction schedule got a major tweaking, though because of what 
executives like Young call the "perfect storm" that engulfed the 
building materials sector.

Rather than build 15 units in a phase, the company cut back to six units.

"We had a difficult time getting wood trusses. Forget about price. They 
(manufacturers) just couldn't run the shifts fast enough or long 
enough," Yound said.

Sort of feels like the bad old days again, notes Engineering 
News-Record, a McGraw-Hill Companies publication that has been tracking 
materials costs and industry trends for decades.

"These new ground rules have let inflation back into the game and it put 
up numbers in 2004 that the construction industry has not seen since the 
1970s," senior economics editor Tim Grogan wrote in a recent article.

He found that 14 major industry cost indexes increased an average of 8.7 
percent annually through October. A year ago they increased 2.6 percent 
over the same period.

The industry will be dealing with high prices for a while.

"We don't see any rollback in the prices. We think we've hit a new 
plateau," Grogan said.

Nor does he think the rebuilding effort in the Asian tsunami disaster 
zone will make the price and supply situation any worse since most 
materials can be obtained locally.

The shortage and price spike certainly got the attention of San 
Bernardino school officials as materials prices are now 30 percent 
higher than a year ago, said spokeswoman Linda Hill.

Last March, voters were asked to approve a bond measure that would 
assure enough money to complete a $16.4 million elementary school.

"By the time we finished the environmental impact report and got 
approved, we didn't have enough funding for the multiuse room," Hill said.

The facility will cost about three times more than a similar one built 
in 1996, she said. Executives at Upland-based Randall Group of 
Companies, which develops master-planned communities, apartment 
complexes and shopping centers, also struggled with the price spike.

"It's put enormous pressure on the profitability of new projects and it 
will have an impact of either stopping or postponing some rental 
communities throughout the state," Randall Lewis, a principal in the 
company, said of the materials shortage and price hike.

Driver, which is ramrodding the $42 million expansion of the Grancell 
Village at the Jewish Home for the Aging in Reseda, felt the shock early.

Janacek said steel was the first price trip wire triggered at the 
beginning of 2004. The vast majority of steel used as shapes for 
buildings under construction now is recycled scrap product. And earlier 
in the year China inhaled just about all the world's production.

The increases kept coming and impacted just about anything needed to 
build something.

In response to that kind of market dynamic, Grancell Village costs 
jumped between 7 percent and 10 percent.

"That's a big amount. The contract had a contingency in it, but you 
don't want to burn up all your contingency when you start a job," 
Janacek said.

Gregory J. Wilcox, (818) 713-3743 gre <mailto:greg.wilcox AT dailynews.com>