The pandemic has certainly sparked a construction frenzy as more and more people have decided to either build from scratch or improve their current homes and places of business. A combination of factors has led to the perfect storm, which has driven up the costs of construction to an all-time high. First and foremost, it comes down to a matter of supply and demand. There is an incredibly high demand for construction related projects, and the supply of labor, building products, and materials are at an all-time low.
Needless to say, it’s not a good combination for people that are planning a construction project. The pandemic has caused a labor shortage. People are quitting their jobs at a record pace. It’s happening in every industry, including the construction industry. The pandemic has also negatively impacted the supply chain across the globe. Factories are producing products at a considerably slower pace compared to production outputs prior to the pandemic. Inflation is rising at a significant rate as well.
Soaring lumber prices alone have added approximately $36,000 to the cost of a newly constructed home. The bottom line is that construction costs, including labor and materials, rose 4.5 percent in 2021. We are now at the start of a new year. Does that mean things will settle down price wise in the construction industry? The answer is a resounding no. According to economists, the trend is projected to continue. For example, construction costs could easily go up another 4% over the next six months.
It is also projected that construction costs will go up by 7% within the next 12 months and beyond. Construction prices have been explosive in recent times. However, it is astonishing to actually envision how much the prices have increased. It has been a record-breaking year for multiple construction related commodities. In fact, construction related commodity prices have increased and will continue to increase across the board. For example, the increases in the prices of both lumber and steel are the highest since the federal government began recording such information.
The cost of plastic construction related products and materials are also at an all-time high. Labor wages have also made a large contribution to the rise of construction costs. In fact, labor has increased 4.5% from August 2020 to August 2021. This is based on the shortage of available labor. It feels as if there are more job openings than people who are willing to fill them. Economists predict that the next 12-24 months or even longer will be the same when it comes to construction related costs. This is due to the fact that the supply chain will continue to be misaligned, and labor shortages will remain to be a major problem. New strains and waves of Covid will also add fuel to the pandemic fire.
For more information about the rising costs of construction and or to schedule an initial project consultation in Connecticut or Massachusetts, please contact us today at 860-341-6373. DBC Solutions takes great pride in providing the highest quality custom carpentry and contracting services in the home improvement industry. Our business model has been the same for 17 years. Doing things, the right way the first time every time is the only way to do it.