Cost of Building a New Home This Spring...

Dive Brief:

• Commercial contractors continue to battle material shortages brought on by the coronavirus pandemic, according to the Q4 2020 U.S. Chamber of Commerce Commercial Construction Index.
• The CCI increased by three points — from 57 in Q3 to 60 in Q4 — but is still far beneath 74, the first-quarter score prior to the pandemic.
• The difficulty in procuring some construction materials and the cost associated with shortages won’t go away anytime soon, experts say. (See related story: Skyrocketing steel, lumber costs threaten to slow construction jobs)

Dive Insight:

The three big drivers — backlog, revenue expectations and contractor confidence — in the business group’s report “nudged up” slightly from the third quarter, but failed to reach pre-pandemic numbers.  All three CCI scores were 70 or above in Q1, before the pandemic began to impact material shortages.

According to the report, 71% of contractors surveyed are facing at least one material shortage. Lumber was the most-cited material shortage (31%), followed by steel or electrical supplies other than copper wire (11%) and lighting supplies (10%).

Fuel, copper, steel and aluminum have each experienced modest price increases, while concrete’s price has slightly decreased, according to Atillo Rivetti, vice president at Turner Construction, who assembles the firm’s Building Cost Index. Additionally, Rivetti said, Turner has received notifications of further material and equipment price increases for 2021.

Steel and lumber price increases have been steep, jumping up several times this fall, according to a report from Ken Simonson, chief economist for the Associated General Contractors of America. 

Lumber prices have done an “N-turn,” Simonson said, rising rapidly like they did in the summer. In early December, the U.S. Commerce Department lowered the tariff on Canadian-imported lumber from 20% to 9%, which could impact pricing. However, increasing demand from home builders and remodelers could keep costs higher, he wrote.

The shortages are impacting not only costs but lead times, Rivetti said. Price increases for materials like scrap steel and gypsum drywall are expected to continue into 2021.

“Material availability is best managed through ongoing communications with manufacturers and distributors starting at the earliest design stages of a project,” he added.

The Chamber of Commerce's quarterly report also shows contractors face increasing challenges due to COVID-19:

• 83% experiencing product delays.
• 71% struggling to meet schedule requirements.
• 68% experiencing delays expected into Q2 of 2021.
• 58% putting in higher bids on projects.
• 53% saying major project shutdowns/delays are a top concern.
• 41% saying material shortages is a severe consequence of COVID-19.
• 39% turning down work opportunities.