2022 has been a year unlike any other within the construction industry, but at long last, relief is forecasted as the cost of construction materials in the U.S. stabilizes. Concrete and labor shortages, supply chain disruptions, inflation and the war in Ukraine have all contributed to record-high construction costs and delays that affected the development and homebuilding industries as well as vertical construction.
While increasing interest rates, high global energy prices, labor shortages and fuel and freight costs will likely delay reductions in the costs of commodities, many of these materials become more readily available and forecast relief for this coming year.
Lumber Returning to Normal The price of lumber skyrocketed early on during the pandemic. However, according to Linesight’s report, the average lumber prices fell sharply early this summer and are expected to fall another 12 percent by the third quarter as demand from the residential sector eases.
Copper and Steel
Along with lumber, the cost of copper has fallen 12.8 percent as an indirect result of increasing interest rates as demand eases. Copper and steel were among the materials that soared in recent years. Among the two, steel prices fell due to persistent oversupply in the market after steelmakers overshot demand in the fourth quarter of 2021.
Energy and Fuel
Energy prices, including oil, have driven up asphalt production costs over the last year due to the effects of the Russia-Ukraine war. In the previous quarter, prices fell 8.5 percent after a significant spike in 2021 as crude oil prices rose past $100 a barrel on the outbreak of the Russia-Ukraine conflict.
Rising Interest Rates
Rising U.S. interest rates are key reasons prices for materials have fallen. Falling demand has cooled a superhot market for both single and multifamily homes as interest rates rise. However, as the Federal Reserve attempts to slow down rising inflation, multifamily may be less impacted than other asset classes.
The Labor Shortage
While goods and materials are now more readily available, and many contractors are pre-purchasing materials to stave off material shortages and issues, a labor shortage remains within the industry. Recruiting firms offer effective and practical solutions for managing overhead, improving organizational performance and reducing construction costs for your business. Additionally, as the $1 trillion in federal infrastructure money starts to kick in for many of these construction projects, companies must become creative as they attract and retain workers at all levels.
Despite some of the snarls faced in recent years, the outlook is certainly bright for construction. Building operations are modifying projects rather than canceling or shelving them to wait for more favorable market conditions. As prices continue to fall and level off, many construction companies will present bids for future projects.
At Honour Consulting, we evaluate the current workforce with our strategic recruiting to help lower overall costs and access the skilled construction talent you need. If you need assistance with today’s talent pipeline in construction, don’t hesitate to reach out to us. We’re ready to help you.