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Construction Cost Trends – 2023

Today’s housing market is a landscape of great activity and speculation. From the unexpected housing boom in 2021 to the rising shortage of homes and increasing home-building costs of 2022, it’s no surprise that commercial landowners considering a new construction project feel the need to test the waters financially. How much will it cost to invest in a new construction project this year that might see ground break in 2023? Are construction prices likely to fall in late 2022 or start to become more reasonable in 2023?

Discover the answers as Gateway Building Company dives into the current building materials market.

Supply Chain Interruptions and Ongoing Delays

As you are probably already aware, the initial spike in the cost and availability of building materials stems from COVID-era shortages and supply chain interruptions. From cutting lumber to manufacturing steel beams and building hardware, millions of workers in the building materials supply chain were isolated and prevented from working during COVID lockdowns. The parts and pieces of mechanical and electrical equipment especially were and continue to be affected by overseas lockdowns.

Afterward, many ports worldwide were understaffed or remained closed, and the global number of truck drivers was cut to unsustainable levels. This caused widespread delays, especially regarding materials that arrived through international trade routes. Getting shipping containers from the piers to inland locations has served to be an additional challenge.

While local industries are re-focusing on self-sufficiency and locally sourced materials, the building industry has been hit hard and still suffers from supply chain delays.

The Pandemic-Inspired Home Improvement Wave

As supply becomes short, demand also increases. Quarantine had millions spending more time at home than they had in years – and finding home improvement projects to keep busy. The new hybrid family life also emphasized the need for updated home designs more conducive to peaceful shared space and home office infrastructure.

From guest room remodels to back porch paradises to entire guest house additions, lumber and other building materials have been in higher demand than usual, and the home improvement craze has far faded.

Building Instead of Buying in a Tight Housing Market

At the same time, the record-low interest rates inspired many individuals to dive into the housing market – quickly buying up all the available homes with increasing demand for more.

Suddenly, it becomes apparent that the housing market has been under-producing new homes for the increasing number of households. Housing developers are pressured to quickly establish or complete new neighborhoods and condominium projects.

In addition, many would-be property buyers are instead investing in land all over the country and choosing interesting new alternatives to stick-built homes like modular homes, tiny homes, and even 3D-printed houses – changing the current and future pattern of material demand as new home constructions continue.

Commercial Demand for Post-Covid Redesign

Yet a third source of demand in the current building industry is the need that your business may be experiencing – to expand or adapt in response to changes that have occurred in the pandemic and post-pandemic marketplace. First, it was to develop workflows that could function with little to know breath-to-breath contact. Then it was adaptive curbside and quick service. Now, businesses face a world where a hybrid workforce requires a new approach to office and audio-visual design for every commercial location.

This, too, cuts into the choked supply lines, which have – so far – caused construction prices to rise.

Light on The Horizon: Future Lumber Prices are Dropping

The good news is that the supply chain is recovering. Today’s lumber prices have already rubber-banded and dropped below pre-pandemic costs. However, it may take a little time until clients – property owners looking to build or remodel – can see the benefit of project costing. This is because lumber is bought in the future, and suppliers often bid on lumber months in advance based on constantly fluctuating prices.

Will the cost of construction go down in 2023? We have reason to believe that you will see a trend of price normalization in 2023 based on influences already taking place today.

2023 May See Relief in the Price of New Construction Projects

Here at the Gateway Building Company, we are dedicated to helping clients craft the construction plan that best suits their needs and budget – including carefully timing to source your supplies for the best price.

Contact us today to begin planning your next new construction or commercial remodel with an eye toward affordable projects in the near future.

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