The dream of owning a home is getting further out of reach as the costs of new home building reach unprecedented heights.
A recent study by the National Association of Home Builders (NAHB), titled "Cost of Constructing a Home 2022-February 2023," unveils the startling statistics that underpin the surging prices in the housing market.
Labor Costs–A Struggle to Keep Up
According to the NAHB study, labor shortages have resulted in an 84% increase in wages for skilled workers in the construction industry since 2012. This alarming statistic
highlights the significant impact labor scarcity has on the overall cost of home construction. These higher labor costs are passed on directly to the consumer in the form of new homes sales prices.
Material Costs–Through the Roof
Additionally, the study reveals that material prices have surged by an average of 62% over the past two years, with lumber prices skyrocketing by a staggering 280% due to supply chain disruptions and increased demand. These statistics underscore the challenges faced by builders in managing escalating labor and material expenses, which are ultimately passed on to prospective homeowners.
Land Prices–A Steep Climb
The study further reveals that land values have experienced a sharp incline, with prices rising by an average of 17% across the country. In some desirable locations with limited availability, land prices have surged by 40% or more. This significant surge in land costs directly affects the affordability of new homes, putting homeownership further out of reach.
Regulatory Costs–Adding to the Burden
Regulatory costs imposed by local authorities play a substantial role in the escalating cost of home construction. The NAHB study uncovers that regulatory requirements account for approximately 25% of the final price of a new home. These costs include fees, permits, and compliance expenses, and can vary greatly across different regions.
What This Means for Homebuyers
All of these details paint a daunting picture for prospective homeowners. With labor and material costs surging, land prices reaching new heights, and regulatory costs adding an additional layer of burden, the dream of owning a home can become unattainable.
This stark reality means that navigating the housing market is more difficult than ever. The information from the NAHB study demands that communities, policymakers, and industry stakeholders must address these issues to ensure that housing remains accessible and affordable for all.