Construction Inflation: Why Now is the Time to Build or Remodel

In the ever-evolving landscape of construction, the decision to embark on building or remodeling your home now versus waiting is more critical than ever. With inflation playing a significant role in construction costs, understanding how it impacts your project budget is essential. Let’s dive into the nuances of construction inflation and explore why, in most cases, it’s more advantageous to start your construction projects sooner rather than later.

Understanding Construction Inflation

Construction inflation isn’t just a buzzword; it’s a reality that affects every aspect of building—from the cost of materials to labor rates. Unlike the Consumer Price Index (CPI), which tracks the price changes of goods and services typically purchased by households, construction inflation focuses on the costs directly related to building and remodeling projects. This includes materials like lumber, steel, concrete, and the wages for skilled labor needed to bring your vision to life.

In recent years, we’ve witnessed fluctuating inflation rates, with the construction sector often seeing higher inflation levels than the general economy. For example, while the CPI might increase by 2-3% annually, construction materials and labor costs can experience jumps of 5-10% or more in the same period. These variations are crucial for potential clients considering starting construction projects.

Why You Shouldn’t Wait to Build or Remodel

Inflation’s Impact on Budgets: If you’re planning a construction project, inflation means that the longer you wait, the more you’ll likely pay for the same project. A budget prepared today without accounting for inflation could fall short by the time construction begins, especially if there’s a delay in starting the project.
Midpoint of Construction Costs: Construction budgets should include an inflation factor from the current cost to the midpoint of construction. This accounts for the reality that half of the project cost occurs before this midpoint and half after, with inflation affecting early and later contracts differently. Ignoring this can lead to underestimating the true cost of your project.

Year-over-Year Inflation Data: The residential construction 8-year average inflation from 2013-2020 was 5.0%. In 2020 it was 4.5%. In 2021 it jumped to 14% and then in 2022 reached 15.7%. the highest on record. 2023 leveled off at around 4% and 2024 is expected to rise again 4-6%. illustrating the stark reality of inflation’s impact. These figures underscore the importance of starting sooner to lock in current prices before inflation escalates further.

Market Activity Levels: The level of construction activity in your area can also influence costs. High demand leads to higher prices due to competition for materials and labor. By starting your project now, you may avoid the peak periods of high activity and the associated cost increases.

The Bottom Line

Inflation in the construction sector is a complex phenomenon, influenced by a myriad of factors from material costs to labor rates and overall market demand. For those contemplating a new build or remodel, the message is clear: waiting can be costly. With inflation rates historically outpacing general economic inflation, delaying your project could mean paying significantly more for the same outcome.

To navigate this landscape, it’s advisable to work closely with a trusted builder who understands the intricacies of construction inflation and can help guide your budgeting process. By doing so, you can make informed decisions that align with your financial and personal timelines, ensuring your project not only meets your current needs but is also a wise investment into your future.

In the end, the choice to build or remodel now rather than waiting is not just about beating inflation—it’s about taking control of your investment and making strategic decisions that will pay off in the long run. With careful planning and the right team in place, your construction project can be a success, regardless of the economic climate

At Innovative Building Services, we recognize the importance of timely decision-making in construction projects. Our expertise not only lies in delivering quality craftsmanship but also in navigating the financial intricacies of building and remodeling in today’s economic climate. Let us help you make informed decisions that align with your vision and budget, ensuring that your home is not just a reflection of your personal style, but also a wise investment into the future. Schedule your consutlation today.