I have been doing a lot of research on the current trend of construction costs.  I make it a point to have a better than average understanding of the trends that impact construction and building costs as it impacts all of our clients and all churches considering any type of construction project, renovation, remodeling or even general maintenance.  There is no escaping it when prices increase. It impacts our budgets…plain and simple. So, it does not do us any good to bury our head in the sand and pretend that we may not spend more for our construction projects and maintenance.

I subscribe to the Engineering News-Record (ENR) by McGraw Hill Construction which publishes their market research on a weekly basis on trends and news associated with the construction industry and markets.  They do an excellent job of tracking trends and cost fluctuations in the market.

As I have looked at the June reports, there are some trend that I am not sure that the typical consumer would think to be intuitive.  Here we are in one of the worst recessions in our country’s history…and yet construction costs are rising.  How can that be??? According to ENR, the overall cost of construction has increased 1.6% since January 2010 and approximately 2.7% since June 2009.  Can this be right?  Who is actually building?  Why are costs going up?

Well, the easy answer is…it is primarily due to the increase cost of materials.   There are a few factors for this:

1. We are shipping an inordinate amount of material overseas to places like Iraq, Afghanistan, Chile, Haiti..just to name some of the destinations. Between the war, earthquakes and other natural disasters, we are shipping much of our US made supplies elsewhere.

2. Supply and demand…when the economy slowed up, and building came crashing down, manufacturers slowed production…which means less stockpiling…which puts a drain on the supply chain as the demand picks up…thus inflation.

3. The construction market is picking up.  Maybe not in every sector or in every part of the country, but their are several sectors (mainly ties to stimulus money and GREEN initiatives) that are booming. Couple that with the 2 items above and you have an increase in prices.

Let’s looks at Lumber as an example, according to ENR, lumber prices have increase 7.6% in just 3 months…that is just under 30% annually.  That is a big jump.  So what is in the category of “lumber”?  In this research,   18 products covering lumber, plywood, plyform, particle board, gypsum wallboard and insulation were included. Lumber and plywood prices are posting strong rebounds supported by the modest recovery in the housing market, which rose 15% in March and was just 4% below the first quarter of last year’s total. Lumber prices tracked by ENR posted their third consecutive monthly increase and are now 2% above a year ago.

Lumber is not the only market segment seeing increases….here are some others (this is data as provided by ENR):

1. Concrete/Masonry: +1.3 % since January 2010

2. Steel: +5.1% (structural, pre-engineered, door frames, conduit, sprinkler pipe, rebar, etc) Since January 2010

3. Labor rates are up 3% since June 2009

4. PVC water pipe: +5% since February 2010

So, why am I telling you this….because this is real and we all need to be aware of the issues whether we like it or not or they meet our personal agenda.

Don’t be lulled to sleep with your hopes and “feelings” about market trends…know the facts and then act accordingly.

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