Replacement/Reproduction Costs are rising as government regulation and permit processes make it more expensive buying land and more expensive to build. Inflation is hitting wages as builders cannot find enough workers, forcing builders to now pay 40% more than in 2019.
"Lumber is 200% higher than last year causing
an additional $35,000 - $45,000 "
Steel rebar prices have increased 64% since the end of Q1 2020. Copper prices have increased 68% since the end of Q1 2020. North American lumber prices have increased 200% since the end of Q1 2020 causing an additional $35,000-$45,000 on a 2000 to 3000 square foot home. As replacement costs rise, lack of land, cost of land, and labor prices increase, home prices will rise on new and existing homes.
What we are seeing is costs increase on the regulatory level as well, which increases the replacement costs of housing units. A recent study from the NAHB found that regulations imposed by all levels of government on new homes account for $93,870, or 23.8%, of the current average sales price ($397,300). This increases costs and pushes developers to build more expensive homes and less starter homes. Regulatory costs can be absorbed easier on a more expensive property.
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