The easy explanation is that today's hot economy is allowing contractors to bid up their prices and make a killing off hapless homeowners who are so anxious to renovate that they'll pay top dollar. But like most "easy" answers, it doesn't really describe the realities or complexities of the marketplace, which include:

Shortage of trained labor: Roughly two-thirds of a typical construction project's total cost is labor and related overhead expenses, and one-third is materials. During the 1991-96 recession, which severely squeezed California's construction industry, small residential remodelers stopped hiring - and, more importantly, training - new tradecraft workers. New or marginally trained workers were laid off, and most took jobs in the high-growth sectors of the economy. Now that they've established careers in other fields, why would they return to the insecurities of the construction trades?

A narrowing of wage rewards for tradecraft skills: In the "good old days"of a decade ago, the wages paid by small residential renovation contractors ($8 to $10 per hour for unskilled, $12 to $18 per hour for skilled labor) were appreciably higher than many other nonwhite collar jobs. In today's booming economy, even wages of $20 to $25 per hour are not high enough to attract workers from jobs in the municipal, service or high-tech sectors.

Did I hear denigrating snorts, as if the idea that potential carpenters could possibly choose to learn computer programming or open a business instead is pure folly? Although it would be hard to support statistically, it's safe to say that the construction trades have typically attracted a share of the iconoclastic, the restless and the eccentric among artistic or entrepreneurial types - of all races, I might add. When work shriveled up in the trades, these individuals took their independence and drive elsewhere. As a result, small contractors must pay significantly higher wages just to hang on to their scarce skilled workers.
Baby-boom contractors are tiring / retiring: Some of the folks who first strapped on nail belts in the '60s and early '70s have moved on, cut back their business or "retired" to another entrepreneurial venture.

Contracting businesses require managers who can wear a dozen different hats, maintain their balance under financial and deadline stresses, and supervise often motley crews of mobile, independent workers. In a hot economy, some of these contractors have left the risks and physical / mental strains for easier businesses or "spec" building, where contractors build houses on their own account and then sell them.

Furthermore, in the famine years of the '90s, there simply wasn't enough work to encourage workers to take the risks of starting a contracting business. It's not surprising there's a shortage of both qualified workers and contractors.

Heightened expectations / shortened career paths: Harkening again to the distant past of a decade or two ago, workers entering the trades back then expected to work at least two to four years as apprentices before they learned enough to earn "the big bucks."

Now contractors report that former waiters, salespeople, etc., expect to make $20 per hour because they can level a board or drive a nail. Even workers who show an aptitude for tradecraft often move on (or back) to some other job after just a few months.

Without experienced workers who actually know the building codes and can read blueprints, projects cannot proceed, irrespective of the wages being offered or the number of low-skilled workers available.

Restoration of reasonable profit margins: During the lean years of the '90s, a lot more contractors went out of business than bought luxury cars. Even now, you won't find many contractors snapping up high-end homes for $100,000 over asking price. It continues to be a high-risk, high-cost business. During the recession years, "profit margin" often meant "gosh, I actually can pay my own wages this month."

Even in good times, a 10 percent net profit margin is considered pretty good in the construction industry; most contractors would think they'd expired and gone to heaven if they earned the 40 to 50 percent margins that are routine in the software business.