Fewer Multifamily Deals Are Repricing as Construction Materials Costs Moderate

Costs of most construction materials are still rising, albeit at a slower rate, according to a survey from the National Multifamily Housing Council.  

Respondents to the NMHC Quarterly Survey of Apartment Construction & Development Activity reported a 4% average increase in the price of exterior finishings and roofing (down from a 9% increase the previous quarter), a 9% increase in electrical components (down from 13%), a 7% increase in appliances (down from 9%), and a 3% increase in insulation (again down from 9%).

The exception to the price inflation trend is lumber. Respondents reported an average drop in lumber prices for the fourth straight quarter, down 5% over the last three months. 

Nearly half of respondents (47%) experienced deals repricing up over the past three months, down from 58% in December 2022 and 92% in March 2022. Conversely, 21% of respondents reported deals repricing down, up from 18% of respondents in December and 0% of respondents in March 2022.

Of those experiencing repricing (either up or down), respondents reported a 3% average increase over the last three months, down from 8% in the previous quarter.

To mitigate price increases and supply shortages for exterior finishes and roofing, respondents reported using such strategies as making design changes to their project; using alternative products/material types, brands or suppliers; and changing their purchasing schedules.

However, a  plurality of respondents reported that mitigation strategies were not applicable for price increases/shortages for insulation (44% of respondents) as well as for lumber (56% of respondents), indicating that shortages are not as prevalent for these materials.

Despite their improvements from recent quarters, high costs along with construction delays are impeding the building of much needed new housing, especially at the low and middle-income price points, NMHC cautioned in its report on the survey findings.