Construction Costs Comprise More Than 60% of Overall Housing Price

It’s not often that construction costs for single-family homes exceed 60% of the overall price, but this is one of those times. Inflation is alive and well for builders.

For only the fourth time since 1998, the National Association of Home Builders (NAHB)’s latest Cost of Construction Survey reveals that 60.8% of the average home sales price consisted of construction costs in 2022.

Others were 2019 at 61.1%; 2015 at 61.8%; and the all-time high in 2013 at 61.7%. The survey has been conducted since 1998.

Survey respondents broke down construction costs into eight major construction stages.

Interior finishes (24%) accounted for the largest share of construction costs, followed by framing (20.5%), major system rough-ins (17.9%), exterior finishes (11.8%), foundations (11%), site work (7.4%), final steps (5.9%), and other costs (1.5%).

Additionally, the finished lot cost was the second largest cost at 17.8% of the sales price, down from 18.5% in 2019.

Ready-Mix Concrete Pricing ‘Unprecedented’

Chris Kennedy, VP of Preconstruction at Suffolk, tells GlobeSt.com that last year, supply chain challenges led to rising construction costs as well as significant material and equipment shortages have stabilized.

Kennedy said there are exceptions such as ready-mix concrete in South Florida.

“Mix concrete is a local commodity because you can really only truck it so far,” he said.

Ready-mix concrete’s price has continued to increase significantly in the past year and Suffolk projects it will rise to $10 to $15 a cubic yard every quarter through this year, “which is unprecedented,” Kennedy said.

Additionally, Kennedy received notice from drywall manufacturers that there was a 20% increase across the board starting at the beginning of this year.

“The good news is that the supply chain is normalizing,” he said. “While there are still some materials with lengthier lead times, the situation is unlike what we faced 12 months ago and steadily improving.”