The increases in the prices of lumber and steel, for example, are the largest seen since the government began recording the data in 1949. Not only has it been a record-breaking year for just one commodity, but commodity prices are increasing across the board.”
Henry D’Esposito, JLL construction research lead, told Commercial Property Executive: “While everyone knows prices have been volatile over the past year, it was remarkable to visualize how severe the price swings have been this year compared to any point over the past 70 years. Richard Branch, chief economist for Dodge Construction Network, said he expects price increases to continue until about mid-2022 before tapering off in the latter half of the year, while other experts predict more up and down volatility throughout 2022. According to the Bureau of Labor Statistics, construction material prices were up by 25% in 2021, and so far, the cost of construction in 2022 remains high. It takes a long time to build capacity.”Ĭlosely linked with the supply chain backlog is the rising cost of materials. He commented, “Even if COVID went away tomorrow and the Russia-Ukraine war ended, these supply chain troubles last into 2023 and in some cases 2024. has, there will continue to be a lag in production of materials due to COVID-19. Any of these events could further destabilize financial markets and disrupt the supply chain.Īssociated Builders and Contractors Chief Economist Anirban Basu opined that since many countries do not have access to the number of vaccines that the U.S. World affairs continue to cause concern as China demonstrates a new belligerence in the South Pacific, North Korea prepares for ballistic missile tests and Russia occupies Ukraine. Sheldon Yellen, CEO of disaster response company Belfor, believes that “supply chain issues and the COVID work stoppages in some of the manufacturing facilities and plants that are producing materials are probably more significant than the actual demand itself.”
The good news is that once they arrive, inventories not affected by chronic raw material shortages will be replenished. This year, contractors are facing many of the same obstacles as they did in 2021, with ongoing supply chain interruptions, workforce woes and soaring material costs compounded by rising inflation and interest rates.Īccording to a recent report by the American Supply Association, supply chain congestion is improving for some sectors, but there are still nearly two million containers headed inbound into the United States. The National Home Builders Association says increasing prices could cause the cost of an average new single-family home to increase by more than $18,600 in 2022. And while various sources speculated that housing inventory would improve this year, inventory levels actually fell further in the early part of the year due to, in part, a wave of first-time millennial homebuyers rushing to take advantage of low mortgage interest rates. Due to the prevailing cycle of low inventory and high demand, both Fannie Mae and Zillow walked back their housing forecasts for 2022, predicting home price growth of 11.2% and 17.3%, respectively. Ongoing social distancing measures kept many workers and students at home, and combined with historically low interest rates, demand for housing skyrocketed.Īs we enter the pandemic’s third year in 2022, the housing sector remains robust, though headwinds are starting to appear on the horizon. Thanks to government assistance, many businesses were able to survive, while others actually thrived in the pandemic-spawned consumer market. But not only did the housing market continue to boom, but the stock market also had a banner year, with the S&P 500 increasing by nearly 27 percent. Looking back on 2021, many economists predicted a slow economic recovery and a potential housing crash.
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