Many people who are contemplating building a new home are surprised at the cost of construction. This is especially so since the beginning of the pandemic.

Current Trends Affecting Construction Costs

Recently, I met with the Manufacturer’s Council of the American Institute of Architects (AIA). Among the topics discussed was the current housing market, building product prices and supply chain disruptions. Kermit Baker, Chief Economist, AIA said that spending on buildings in 2021 was $1.3 trillion with the majority of the spending on homes. This is almost 5% of our GDP.

Interestingly, homebuilding activity has been heavily concentrated in affordable Sunbelt markets. In metro areas that issued more than 1,000 permits, three of the top ten nationally,  in change  housing permits in the last year are Greenville, Columbia and Myrtle Beach.  We are experiencing tremendous growth here in Beaufort County, too.

There is a pent up demand for houses because of the low level of homebuilding during the last decade and the rising median age of the housing stock. The median age of houses in 1985 was 22 years and by 2017 the median age was 40 years.

But there are some issues facing the homebuilding market:

  • Rising demand coupled with a low inventory of homes has rapidly pushed up house prices.
  • Rampant inflation has made it more expensive to build homes, and rising mortgage rates makes it more expensive to buy them.
  • Supply chain disruptions have made some products available only with extremely long lead times.
  • There is an emerging construction labor shortage that is likely to get worse.
  • All of the above are all creating problems as housing demand promises to remain strong in the coming years.

The sources of construction cost inflation have been a moving target. Since April of 2021, the price of lumber has fallen over 90% after doubling in price in 2020. But steel, plastics, gypsum, glass and concrete have all doubled in price since April of 2021. Many of the manufacturers spoke of the need for supply chain resiliency with stockpiling materials to draw from in order to respond to demand as opposed to “Just in Time” inventory that was put in place during the great recession.

Designing for Hurricanes & Earthquakes add to the Construction Costs

Construction costs are higher in Beaufort County because we are in both a hurricane zone and an earthquake zone. The requirements to mitigate both of these hazards include the following:

  • Building the first floor above FEMA’s base flood elevation which adds to the foundation cost.
  • Structural Engineering fees to design code compliant structural systems.
  • Connecting the roof, through the walls to the foundation and footing with threaded rods, go-bolts, hurricane clips or other code approved methods. This adds to both the material and labor costs.
  • The shear walls required for lateral stability are more expensive than sheathing options available in other parts of the country.
  • Window and door openings must be protected from windblown debris. Impact rated windows can cost up to twice as much as non-impact openings.

Best Practices

There are several best practice options that will cost more initially but will either save money on your home insurance or utility bill that we recommend.

  • A secondary roof under a metal roof that ensure water tightness if the roof is compromised during high winds.
  • An U.L. certified lightning protection system will add $7,000 to $10,000 to a 2500 s.f. house but will protect your house and electronics from lightning strikes during our many lightning storms.
  • Spray foam insulation is typically 2 to 3 times more expensive than fiberglass insulation but is a far superior product. It stops air and moisture infiltration, will not sag, keeps dust and pollen out and reduces capacity requirements, maintenance and wear of heating and air conditioning equipment.

TV remodeling shows also add to unrealistic time and cost expectations. Those shows often have donated materials, low cost fees from the contractors and have pre-built a large portion in a warehouse prior to the show.

Cost, square footage (both inside and outside) and quality of materials and workmanship are the triad of construction. If cost is the driving issue in your project you must be flexible in the size of the project and the quality of materials and workmanship.