Easing Construction Cost Pressures: A Turning Point for Housing Affordability?
By Carissa Kristoff
Realtor, Berkshire Hathaway HomeServices Select Properties
The home building industry has faced a whirlwind of challenges in recent years, from material shortages to skyrocketing costs. However, there’s a glimmer of hope on the horizon: construction cost inflation is beginning to stabilize. While this is a positive shift, persistent high labor and energy costs remain key factors influencing housing affordability and supply.
Let’s dive into what this means for homebuyers, builders, and the broader housing market.
The State of Construction Costs
Over the past few years, the cost to build a home has been on a steep upward climb. Supply chain disruptions, driven by global events and increased demand, led to a surge in material prices, particularly lumber, steel, and concrete. Simultaneously, labor shortages and rising energy costs added more pressure, making affordability a growing concern for homebuyers.
Now, the good news: some of those pressures are easing. Lumber prices, for instance, have retreated significantly from their peak, and supply chains for many materials are beginning to normalize. This stabilization is giving builders more predictability and, hopefully, a chance to catch their breath.
Persistent Challenges: Labor and Energy
While material costs are stabilizing, labor and energy expenses continue to pose challenges:
- Labor Shortages: The construction industry has long struggled with a lack of skilled workers, a problem exacerbated by an aging workforce and fewer younger workers entering the trades. To attract and retain talent, companies are offering higher wages, which keeps labor costs elevated.
- Energy Costs: Energy prices remain volatile, with fuel costs for machinery and transportation affecting every stage of construction. This not only impacts builders but also filters down to homebuyers through higher overall costs.
How This Affects Housing Affordability
The interplay between stabilizing material costs and persistent labor and energy challenges creates a mixed picture for housing affordability. While the easing of material costs is a welcome relief, the high costs of labor and energy keep home prices out of reach for many buyers.
Builders are also grappling with how to balance these costs while meeting the demand for affordable housing. The result is often smaller homes or fewer upgrades, as builders work to create options that remain within buyers’ budgets.
Supply and Demand Dynamics
Housing supply is another crucial piece of the puzzle. For years, the U.S. has faced a significant housing shortage, particularly in entry-level homes. Stabilizing construction costs could encourage more builders to break ground on new projects, increasing supply and helping to meet demand.
However, high labor and energy costs mean builders are still cautious. Larger developments, especially in areas with strict zoning regulations or expensive permitting processes, may continue to lag.
A Bright Spot for Buyers?
For prospective homebuyers, this shifting landscape offers both challenges and opportunities:
- Challenges: High costs mean housing affordability remains a concern, especially for first-time buyers. Mortgage rates and rising energy costs further complicate the financial picture.
- Opportunities: Stabilizing material costs could lead to fewer price increases for new homes, giving buyers more time to plan and save. Additionally, builders may offer incentives or discounts to attract buyers in a competitive market.
My Perspective
As someone who has worked in residential real estate for nearly two decades, I’ve seen firsthand how economic factors influence the housing market. While the easing of material costs is a step in the right direction, it’s clear that high labor and energy costs will remain key challenges in the near term.
If you’re considering building or buying a home, this is a crucial time to stay informed and work closely with industry professionals. Whether you’re eyeing a new construction project or evaluating your options in the resale market, having a clear strategy can help you navigate these shifting dynamics.
Final Thoughts
The easing of construction cost pressures is a positive development, but it’s only part of the solution for improving housing affordability and supply. Continued focus on innovation, workforce development, and energy efficiency will be key to creating a more balanced and accessible housing market.
About Carissa Kristoff
With 19 years in residential real estate, Carissa Kristoff has built a reputation for providing clarity and confidence throughout every stage of buying, selling, or leasing a home. As part of the Berkshire Hathaway HomeServices Select Properties team, she collaborates with seasoned brokers, agents, and administrators to secure optimal outcomes for her clients. Carissa’s work ethic is matched by her commitment to enjoying life: she’s an avid sailor, snow skier, and certified yoga instructor. She also brings a hands-on approach to homeownership, thanks to her background running a residential cleaning and management company, where she honed her DIY skills in gardening, painting, and decorating. Whether guiding a first-time homebuyer or a seasoned investor, Carissa leverages her well-rounded experience to simplify the process and deliver top results.
