Sleeping Dog Properties is a Boston based construction company that develops luxury custom homes, commercial boutiques, and unique hospitality projects. Just like many consumers, construction companies are affected by inflation and rising costs, especially when it comes to increased pricing of building materials that cut into profit margins, paying workers, and providing customers fair pricing. In the article below, Sleep Dog Properties asks the question we all want to know – when will prices drop and how will it affect construction companies in the future?
Prices are skyrocketing in the industry of construction, leading to many contractors and investors alike to wonder: will this ever get better?
According to the National Association of Home Builders, there has been a significant rise in the price construction industry members must pay for materials. Sleeping Dogs Properties of Boston/ Andover says that this effects not only construction companies, but consumers, as well. Prices are not projected to drop in the year 2022, though lumber prices have lowered by 6% as of September 20th.
In this article Sleeping Dogs Properties of Boston/Andover discusses not only how much material costs have risen, but how this will affect construction companies and consumers. This article will also cover how new builds, renovations, and house flipping are affected by rising material costs.
Sleeping Dog Properties on How Have Material Costs Risen
With inflation, the prices of all goods and services typically fluctuate explains Sleeping Dog Properties. However, according to the National Association of Homebuilders, prices for building materials kicked the year of 2022 off by rising by around 8%.
This is surmised to have been affected by the pandemic, with a 33% increase in pricing for construction materials since the beginning of the global COVID-19 outbreak.
Gypsum products, according to Sleeping Dog Properties of Boston/ Andover, have increased by 1.6%, while lumber, one of the most commonly used materials, increased by around 6% in price.
The Effects of Material Costs Rising
Costs continue to climb, but this is generally the case for all goods and services during a period of economic inflation. Therefore, the question is, who is the material-pricing increase affecting, and how? Below, Sleeping Dogs Properties of Andover provides a list of topics in answer to that question:
- Effects on Consumers
- Effects on Construction Companies
- Effects on New Builds and Renovations
- Effects on House Flipping
Sleeping Dogs Properties takes a closer look at each of these entities in order to fully understand the effect rising material costs have across the construction industry!
Effects on Consumers
When any type of goods escalate in value, it must have a trickle-down effect to those who purchase the use of those goods. The same can easily be said of construction materials and their consumers.
According to statistics studied by SuretyPlace.com, 66% of construction companies charged consumers as much as 25% more for their services. As a result of the high pricing, according to new home construction statistics, more than half of buyers regret investing in the building of new homes due to high pricing explains Sleeping Dog Properties of Andover.
Effects on Construction Companies
In addition to having to upcharge their consumer customers, construction companies are finding a lack of motivation to embark on new projects.
According to the Atlantic Council Director of Global Business and Economics, developers aren’t confident in investing in and beginning projects that were not already underway before 2019.
Effects on New Builds and Renovations
Sleeping Dogs Properties of Andover says that supply cost increases have been exacerbated by supply shortages across the nation due to COVID-19. Because of these shortages, the uncertainty of when supplies will return to availability is compounded by the fact that homeowners have begun to give up on renovation projects and new building projects due to the same issues.
Effects on House Flipping
House flipping is already an incredibly complex and involved process. Not only is the cost of the actual flipping process often large, closing costs are typically 5% of an available property’s initial price at purchasing.
Add to this the rise in lumber costs, paint costs, and hardware costs, and the repairs needed to flip a house can become too much and lead to the abandonment of flipping projects explains Sleeping Dog Properties of Boston/ Andover.
When Will Prices Drop
Now that how much the price of materials are rising and their effects on the construction industry have been thoroughly examined, the question is: when will prices drop? Is there an end in sight?
All projections do not expect the cost of materials to drop any time in the near future. For example, SubContractors USA expects the expenditures of the construction industry to rise by 3.7% all the way through the year 2024.
Sleeping Dog Properties of Andover says the good news is that some materials have experienced smaller decreases in price recently. For example, ready-mix concrete has decreased in price by 0.6%, and steel products lowered by 4.9% during March of 2022.
To sum it all up, the cost of materials has risen and may continue to rise through the year 2024, most likely due to the construction industry’s repercussions from the effects of the COVID-19 pandemic.
The effects of this reach from the developers and construction companies down to the consumers, and not only do they include buyer’s regret for those who choose to build, but they also cause a lowering of certainty in contractors who would have otherwise gladly begun new building projects.
Though some materials may lessen in price, it is likely that material costs will continue to rise and affect all of these parts of the construction industry in the near future.