Are you planning to renovate your existing property or build a house in 2023? If so, you must be wondering about the construction costs and the current state of the housing market and economy. Will construction costs go down in 2023? Will building material prices go down?
While it’s hard to predict the immediate future, we will explain what to look for in a contractor and how to prepare for your home project so that you can continue to save in these turbulent times. We will discuss below the factors that impact construction costs, the current material and lumber costs, and how to combat potential rising prices.
Factors That Impact Construction Costs
Many factors have contributed to the rising construction costs and building materials over the past few years. The consequences of COVID-19 caused many industries to come to an immediate halt, while some still haven’t fully recovered.
Even though most businesses have reopened, the lack of employees and labor shortage, along with higher demand, have hindered the supply chain. As a result, material goods are scarce, and their prices are rising.
The pandemic has caused many factories to shut down worldwide which has resulted in delays in the production of various materials. On top of Covid 19, an unforeseen war in Ukraine, and continued China lockdowns, the worlds leading manufacturers, have created worldwide supply chain issues and disruptions with no ending in sight.
The Federal Reserve’s war on inflation has impacted interest rates which also indirectly affects construction costs and increases fears of a recession. Inflation has grown to a forty-year high, and with that have come significant price hikes in building supplies, raw materials, labor, and energy prices.
All of these issues stated above have caused worldwide constraints on the economy and have had a significant impact on home building and residential construction costs.
Will Building Material Prices Drop in 2023?
While many economists expect material prices to increase in the coming year, it’s hard to predict. In general, homeowners should expect material prices to continue to fluctuate.
The continued volatility of material prices has made it extremely difficult for contractors and homeowners to properly plan projects. It’s important to remember that the cost of construction materials does not all move in unison, which is the reason for mixed predictions across the industry.
While lumber prices have stabilized, materials like cement and concrete have started to rise with growing demand. As stated above, ongoing supply chain issues, labor shortages, and recession fears may imply rising prices.
Are Lumber Prices Expected To Drop In 2023?
The price of materials, particularly lumber, is one of the most significant factors influencing home construction costs. Before the virus’s worldwide spread, 1,000 board feet of lumber usually sold for $300. In early 2021, the same amount of lumber was five times more expensive than usual.
It was reported in September, that lumber prices were finally falling back to levels seen around their pre-pandemic levels, offering hope to homeowners. Current lumber futures ended the month of November at $429.40 per thousand board feet, around the lowest levels of the current year and down 30% from this same time last year.
These current prices are on par with what we have seen two years ago in January 2020, right before the pandemic hit. While it’s hard to predict the direction of lumber prices in 2023, many traders remain bullish on lumber prices with the overall sentiment that a healthier economy is coming in the new year.
What Can We Do to Prepare for a Construction Cost Increase?
If construction costs do go up in 2023, there are several steps you can take to prepare for the increase.
- Research the current market conditions and the cost of construction materials. Staying in tune with current market prices will help you to identify the potential areas where costs may go up and allow you to plan your renovation or build accordingly.
- Always look for ways to reduce the cost of construction materials. For example, you can use recycled materials or second-hand materials to reduce the overall cost of the project.
- Find a contractor that respects your budget and provides great communication. While you should be open to flexibility, your home builder should help you develop the right plan of action, from sourcing available materials and informing you of potential project delays.
It’s important to budget properly before beginning any home improvement projects as construction costs can pile up quickly. Getting a realistic estimate from multiple contractors of your project’s cost before you begin will help prevent further expenses down the line.
Will 2023 Be A Good Time To Build A House?
While it’s nearly impossible to predict where the housing market will go, there are some signs that show that it may be the right time to start building your house.
The National Association of Home Builders (NAHB) reports that while housing costs have risen over the last ten years, cost increases should return to the national average of between 2 and 4 % in 2023.
According to the California Association of Realtors, housing affordability is expected to drop 18% in 2023, which is 1% lower than in 2022. It is predicted that housing demand and home prices will continue to soften throughout the next year, with continued recession fears looming.
2023 Construction Outlook
With many supply chain disruptions and rising material costs hurting the construction industry worldwide, its been difficult for contractors to have materials budgeted accurately and ordered in time to avoid project delays.
Here at Build Method Construction, we understand that planning and building a home can be a tedious process, especially with economic uncertainties. This is why we have worked ruthlessly to put practices into place to prevent delays and meet the expectations of our clients.
For example, when we are pricing out a quote for our clients, we always use the prices for materials on that current day. Eventually, when it comes time to purchase them, we stick to our pricing with the client so it doesn’t fall back on them.
We keep our quote relevant for 30 days and if a client doesn’t sign within that time period, we have the right to adjust the price based on the current market. We want to keep our client’s expectations in line with what is really going on with delays within the industry, and this is just one of the ways we make sure that they aren’t blind-sighted with extra costs.
We would always rather outperform expectations than underdeliver for our clients.