Has the cost of home building gone up or down?

April 22, 2008 12:03 PM

I'm going to be building a modest split-level home this spring – 1900 sqft – in Madison, WI. Should I expect the cost of materials to be lower or higher than it was to build the exact same house 6 months ago?

Essentially, I found a $205,000 spec house on the market that I like, but want to build it in on a different lot (with the same builder). According to the contract, cost of materials and labor is about $8,000 more than it was to build the exact same home 6 months ago – a 4% jump. I know petro is way up, but I still would have expected overall material prices to be waning.

I'd guess I'd just like to have some solid knowledge about material costs when we sit down for final negotiations so I know where I'm standing.

posted by BirdD0g to home & garden (10 comments total)

You can attempt to negotiate anything you want, but I wouldn't expect the cost of materials to have gone down in the past six months, and I would expect them to have gone up. On the other hand, the supply of labor should have increased in the building industry. But really, the price is whatever you can get the builder to agree to.
posted by thomas144 at 12:30 PM on April 22

I'm not an economist, but I guess it can't be surprising that the cost of materials have gone up 4% when the dollar has has lost more than 10% of its value since October.
posted by pjenks at 12:38 PM on April 22

Broadly speaking, prices will be higher.

If it's sufficiently important to you, ENR has a lot of data on this sort of thing. I have some, err, issues with elements of their coverage but for the most part it's reasonable considering the alternatives.
posted by aramaic at 12:45 PM on April 22

Yes - materials have gone up. PVC pipes, asphalt shingles and even carpet are made from petroleum-based materials, and the prices of these items have risen significantly for obvious reasons.

Anything made of metal has soared, too. I recently fixed up my bathroom in my new house and I was floored at the cost of fixtures (such as faucets and towel bars).
posted by Ostara at 12:52 PM on April 22

There are some deals to be had on lumber. According to this page, which tracks current prices as well as lumber futures, the April 18 prices were $255 per 1000 board feet (for a composite package of sizes), versus $268 on November 23. That price as as high as $270 November 30 and as low as $238 at times during February and March. You can also see that it's much lower than it was a couple of years back.

Other materials, like wiring, copper piping, etc., may well have gone up because of the runup in commodity pricing; fuel prices will affect costs for some materials and services; any petroleum-based materials like asphalt shingles will be higher, etc. The value of the dollar is impacting anything imported. As thomas144 notes, there may be some deals to be made on labor if builders are idle. Overall, this seems to add up to a pretty flat picture.

On other set of data point is here, which seems to support the idea that overall, costs are not increasing much in the short run and now might be a good time to build.
posted by beagle at 1:00 PM on April 22

Building material prices do fluctuate for many different reasons but rarely go down. Also be prepared for unseen events like national disasters on the scale of Katrina which will make all building materials skyrocket in price. Most likely working with a specific builder you won't have much leeway on his supply chain. You can choose different and inferior materials but other than that you will be pretty much stuck with what you have.
posted by JJ86 at 1:13 PM on April 22

i know the price of plywood has gone way up in the past 6 months. at least in the boston area.
posted by rmd1023 at 1:15 PM on April 22

In fact, if anything in that contract is waning, it's probably the cost of the labor. I know for a fact that the tanking real estate market has driven down the homebuilding industry almost everywhere (the employment rate amongst homebuilders in Florida went down 44% last year!) so guys seem to be a lot more competitive for projects. Of course, I don't really know whether that would impact a contract that'd already been written, but I do know that the guys you're hiring are competing with a lot of guys who are ten times as thirsty for work as they were a few months ago.
posted by Viomeda at 1:27 PM on April 22

What Ostara said. Petroleum is used to make a lot of building materials. Also, competition from demand in China is raising the prices of certain materials.
posted by salvia at 1:45 PM on April 22

Seems perfectly plausible to me.
posted by gjc at 3:21 PM on April 22