Building Material Costs Up Nearly 20 Percent Since Last Year
Updated: Nov. 30, 2022
Residential construction has become really expensive over the last year, and the upward trend in costs worries some homebuilders.
According to the latest Producer Price Index data released by the Bureau of Labor Statistics, the cost of building materials in U.S. residential construction has risen nearly 20 percent in the last year. Building material costs have steadily trended upwards since the start of the year, increasing 4.9 percent in 2022 alone.
Costs of gypsum products, ready-mix concrete, softwood lumber and other materials fluctuated dramatically over the last year. Factors like inflation, persistent demand for housing and supply chain challenges created an unpredictable landscape in the construction industry.
That unpredictability concerns homebuilders. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), a measure of homebuilder confidence in the future of the housing market, has fallen for five consecutive months and just hit its lowest level since June 2020.
“The housing market is facing growing challenges,” said NAHB Chief Economist Robert Dietz. “Building material costs are up 19 percent from a year ago. In less than three months, mortgage rates have surged to a 12-year high. And based on current affordability conditions, less than 50 percent of new and existing home sales are affordable for a typical family.
“Entry-level and first-time home buyers are especially bearing the brunt of this rapid rise in mortgage rates.”
Faced with these mounting concerns over housing affordability, the Biden administration just announced a new plan to help revitalize the market. The newly-minted “Housing Supply Action Plan” aims to increase the supply of quality housing in the U.S over the next five years through legislative and administrative action.
“When aligned with other policies to reduce housing costs and ensure affordability, such as rental assistance and downpayment assistance, closing the gap will mean more affordable rents and more attainable homeownership for Americans in every community,” reads the official White House press release.
