Some construction materials like Lumber dropped by half the price in 2021, giving people consolation. But are construction costs finally going down?
In July 2022, CBRE’s report predicted construction costs would increase by 14.1% year-over-year throughout this year. Consequently, you can expect a rise in construction prices before flattening through 2023 and 2024.
So, why are construction prices heightening?
1. Construction Materials Prices
Although Lumber prices have decreased by half, most materials are not following suit. For instance, gypsum is up by 20%, and concrete is almost hitting a 10% increase year-over-year.
Steel prices had dropped significantly earlier this year; however, they’ve skyrocketed by over 100% compared to January 2021. Moreover, BLS reports show that other construction inputs have increased based on last year’s costs.
2. Inflation
It is natural for people to withhold funds and cease purchasing property when there is inflation. Building from scratch is not any different, as most individuals planning to construct their dream homes are often cautious not to fall prey to high costs that may cause year-long delays.
Furthermore, 2022’s inflation digits are indicating a downturn for next year. Hence, you can expect higher prices for building inputs, exterior finishes, and other construction expenditures.
3. Labor Shortage
There are numerous jobs in construction with no matching skill level in the market. Moreover, the current demand faces an aging workforce with an average age of 42.5 years; specifically, 20% of the workers are 55 years and above.
According to BLS, there is a 3.7% unemployment rate and 330,000 jobs in construction. As a result, the industry has heightened wages to attract young and skilled workers and will continue to do this. With this turn of events, you can expect to witness an increase in construction prices.
Final Thoughts
Construction costs continue to increase due to the high material prices, numerous unfilled jobs in construction, and inflation. Fortunately, Kilgore Companies understand the challenges in building your dream home and therefore offers expert guidance and construction services!