In the May survey for the NAHB/Wells Fargo Housing Market Index, respondents were asked whether the total material costs for the construction of a given house had changed over the past 12 months. The most common response was chosen by 28% of builders, who reported that their material costs had risen between 20% and 29.99% over the past year.
However, over 35% reported sharper increases in the costs of building materials. Almost 16% indicated that their costs had risen between 30% and 39.99%, 5.9% reported costs had risen between 40% and 49.9%, and 15.2% indicated that home construction costs had risen by 50% or more. On average, builders reported that the cost of materials for the same house had risen by 26.1%.
“The supply chain headaches are far-reaching,” observes Ali Wolf, chief economist at Zonda. “Not only are building materials increasingly more expensive, but builders report product availability to be a challenge as well. Higher input costs are hitting the market at the same time that lots, labor, and regular fees are rising. For now, low interest rates have offered the perfect offset of these cost increases because they’ve softened the impact of on buyers of the rising prices. The most important thing the industry needs to do is acknowledge these challenges as our reality for now and continue to strategize on the best way to bring attainable product to the market in the face of these pressures.”
