There is a lot to consider when you are thinking of buying or building a new house, or if you need building materials for a project.
One of the most significant issues is the price of building materials.
Building materials are expensive due to supply shortages, labor shortages, and manufacturing and shipping costs. The inflation, which is currently high, also plays a role in the final costs. Some construction materials, such as rare lumber types, are expensive because they are a limited resource.
Let’s dive into how these different aspects are affecting the price of building materials.
1. Supply Shortages
When the coronavirus pandemic hit in 2020, it resulted in a shortage of raw materials due to closedowns.
At the same time, people staying at home assaulted home improvement stores in an attempt to do something with their time.
While the supply of raw materials is not much of an issue at the moment, the unprecedented situation created by the health crises led to an increase of building material prices.
Most manufacturers and retailers didn’t lower the costs after the crisis ended.
2. Labor Shortages
Another direct effect of the pandemic on the building material costs is the shortage of workers in building material factories.
Not only did millions of Americans lose their jobs, but many companies have also cut down on employees.
Although the pandemic has ended, labor shortages continue to complicate the construction industry, including the manufacture of building materials.
With fewer materials produced and a high demand, the material prices go up.
3. Manufacturing Costs
Another factor that influences the price of construction materials is the material supplier costs.
Manufacturers have to buy raw materials and pay workers to turn them into construction supplies.
However, the pandemic and the war in Ukraine have destabilized most markets, and raw material costs have gone up.
Disruption in the supply chain caused by war or natural causes also contributes to shortages and even higher prices.
Producers also have to pay their employees and have additional taxes and fees. With a soaring in energy prices and increasing material costs, the manufacturing costs have also gone up.
4. Shipping Costs
Since building materials rely on logistics to get the product where it needs to go, shipping costs can affect the price of building materials.
Materials are delivered using trains, ships, and trucks. Since all of these transportation methods use fuel, the costs are enveloped into the material to help companies recoup their investment.
Since gas prices are at record-breaking highs in many parts of the world, and companies need fuel to transport materials, it makes sense that these costs would be absorbed into the purchase of building materials.
Currently, inflation is also at an all-time high. Everything is subject to cost more – just take a look at the milk when you grocery shop.
Inflation happens when there is a lot of money flowing around the country, but it is not being spent at the same rate. This causes prices to go up (inflate).
As companies anticipate higher prices, they include them into their goods so their businesses stay afloat. Inflation is also a contributor to the ever-increasing prices of building materials.
During 2020 and early 2021, mortgage rates dropped to an all-record low. Low interest rates spurred many people to hunt for houses or start building them.
While the demand for building materials increased, but the supply has diminished – due to the reasons highlighted above – the prices of building materials have gone up.
While the supply and demand game continues to affect the cost of materials, the inflation and disruptions in the supply chain also drive up building material prices.
As things slowly return to normal, it is likely to see them drop in the future.
For now, though, the post-pandemic effects, political instability, and imbalances in supply and demand keep building materials expensive.