The U.S. construction industry has been overwhelmed since late summer with exorbitant price increases. Total reconstruction costs, including materials and retail labor, surged 9.2 percent from October 2019 to October 2020. A 5 percent increase in total costs occurred in the third quarter of 2020 alone.
The key factors driving these increases include multi-month manufacturing shutdowns and manufacturing plants struggling to increase capacity, both of a which a result from outbreaks of COVID-19. The cost increases for lumber and building materials have been at record levels too. Lumber costs increased 60 percent during this time (October 2019 – October 2020) due to high demand and supply shortages related to the circumstances and economic responses to the coronavirus pandemic as well as U.S. tariffs on Canadian lumber. In addition, the supply chain has not been this broken and disjointed since August 2005, the period when Hurricane Katrina devastated the Gulf Coast.
The impact of these events has been devastating for many. These abnormal cost increases, due to a heightened demand emerging from a reduced material production, are forcing some businesses to close. Meanwhile, the demand for building material and labor created by the loss events, combined with reduced capacity, have meant significant cost estimation increases for several businesses to stay current with market conditions.
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