Builders Facing Inflation, Ponder Bankruptcy

(SEATTLE) 04/05/04 - It's happening all across the country. Builders for all kinds of projects, from bridges to homes, are faced with skyrocketing prices for everything from plywood to steel. Now, according to industry insiders, builders and contractors may be facing bankruptcy.

Almost overnight, prices have skyrocketed, as American homebuilding jumps at record rates, and as Chinese factories--acting as factory floors for both US and Chinese production--consume at record rates.

The problem comes as various builders, anxious to meet demand, drew up contracts well in advance of procurement and actual construction. Especially hard hit are builders of steel-intensive structures such as bridges. But the impact goes far beyond just bridges. "Even steel rebar prices have gone way up, " says one insider--and rebar is used in most concrete casting.

US homebuilders may be especially hard hit, having planned backlogs of many months. But in some cases, costs may be passed along--according to an insider at a major construction bonding firm, state legislatures are being asked to fund the gap on public projects. Yet, higher funding might be difficult, with tight state budgets. Ultimately, some costs have to be absorbed by builders due to uncertain prices at subcontractors. If buyers end up paying, they face surcharges financed into mortgages, jacking up already high prices-charges that they might never recover. So much for "cheaper" low-interest mortgages.

The truth is, nobody knows what will happen over the next few months. "They' re talking about bankruptcies, " says the bond industry insider.

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