Home Building Costs Rise 10.4% in a Year

Building a house now costs more than the economy around it is inflating, and the gap is wide enough to drive a lumber truck through.

The Bureau of Labor Statistics said Friday that its Producer Price Index for final demand rose 0.3% in October and 6.5% over the past 12 months, the largest annual rise since November 2022 ^[1]. The price of everything that goes into a new home climbed faster still: up 10.4% from a year ago, according to National Association of Home Builders economist Jesse Wade, as reported by HousingWire ^[2].

Where the costs are piling up

• Building materials rose 0.5% in October and are 5.8% higher than a year earlier, according to the NAHB analysis ^[2].
• Service inputs for home construction, such as distribution and freight, climbed 0.7% for the month and 11.3% over the year ^[2].
• Softwood veneer and plywood, used for roof decks and wall sheathing, jumped 3.6% in October and 24.5% from a year ago ^[2].
• Diesel fell 4.6% in October but still costs 115.2% more than it did a year earlier, HousingWire reported ^[2].

But the picture depends on who is counting. Associated Builders and Contractors said construction input prices were flat in October, helped by falling oil and lumber, even though they sit 11.5% above last year, Bisnow reported ^[3]. ABC chief economist Anirban Basu pointed to iron, steel and copper as the materials still climbing quickly ^[3]. Meanwhile, contractor backlogs slipped to 8.1 months, and outside data centers they fell from 8.3 months to 7.6 months ^[3].

What it means for you

Higher input costs leave builders with less room to cut prices on new homes, and they can stall projects that were penciled a year ago. By our math, a house whose materials and services cost $300,000 to buy a year ago would cost about $331,200 today at the 10.4% pace ^[2]. If you are underwriting a development or a renovation, budget contingencies from last year's quotes may already be too thin. Financing adds to the bill: the 10-year Treasury yield sat at 5.1% on Nov. 12, according to the U.S. Treasury ^[4].

Zoom out

Permits were already running at a 1,398,000 annual rate in September, about 3.2% below a year earlier, according to the Census Bureau ^[4]. Costs that keep outrunning inflation make it harder for builders to close the housing shortage.