Written by Melody Eve Ramos, AMAST Content
Companies across all industries have suffered supply shortages due to the COVID-19 pandemic. The construction industry, however, is especially vulnerable to supply shortages due to the heavy reliance on raw materials for their projects. While the demand for building has not gone down, limited access to supplies have caused soaring prices on materials such as steel and lumber, which has trickled down to increase costs across the board.
Here’s a quick look at how COVID-19 has impacted construction costs:
Cost of Materials
All materials used for construction have seen a hike in prices during the pandemic, but none as much as steel and lumber. In 2019 the average cost of rebar used for construction pours was $750 per short ton. In early 2021 that price increased to $900 per short ton. According to Mike Taylor, CEO of Florida-based general contractor Current Builders, that increase in price could lead to an additional $200,000 cost on a project.
The Producer Price Index, released by the Bureau of Labor Statistics, reports that the cost of softwood lumber has gone up 43% in the last year. Steel costs have increased 108.6% in the last 12 months. All other materials used, from wiring to plywood to glass and paint, have seen price increases of 20% or more.
Cost of Projects
The National Association of Home Builders found that the increase in materials cost has rippled down to affect the cost of purchasing a home. Since April 2020, the cost of a new single-family home has increased by $30,000, and the price of a lumber package for a home project that cost $35,000 last year is now being priced at $71,000.
This increase in cost is having a negative effect on the industry, causing many sales to fall through and forcing builders to put projects on hold. Alicia Huey, a high-end home builder based in Birmingham, AL, notes that the increase in prices has hurt her business and caused her to absorb much of the added cost. Overall, the increased cost of limited supplies has brought with it challenges for suppliers, buyers and contractors.
Industry experts have no predictions on when costs and supply demands will stabilize, but many are hopeful that equilibrium will return.
Sources
https://www.nahb.org/news-and-economics/housing-economics/National-Statistics/Framing-Lumber-Prices
https://www.bls.gov/news.release/ppi.t05.htm
https://www.constructconnect.com/blog/state-of-the-construction-industry-one-year-into-the-pandemic
