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Lumber Price Up 34% YOY as Overall Construction Costs Increase

Without reassessing a home's reconstruction cost value, homeowners may find themselves underinsured after an adverse event.
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lumber price up 34% yoy as overall construction costs increase

In 2020, the average cost of U.S. commercial building materials—such as lumber, masonry, steel, roofing, insulation plumbing and drywall—increased by 9.6%, according to CoreLogic®.

All construction material aggregates have seen cost increases from this time last year. Lumber, in particular, has seen a significant increase in year-over-year cost at nearly 34%. Additionally, labor costs continue to grow, with many key construction occupations experiencing earnings growth over 4%. Roofer costs have increased the most, up 5.6% from last December.

Materials in every state were more expensive in December 2020 than they were in December 2019. Costs grew by at least 3.3% in every state; Iowa (7.3%), New York (7%) and Utah (7%) saw the largest increases, while New Mexico (3.4%), North Dakota (3.3%) and Hawaii (3.3%) saw the smallest increase.

“Changes in material and labor costs can have a significant impact on property owners," the report said. “When costs to rebuild increase, owners may find that they are underinsured in the event of damages from natural hazards or accidents. Without reassessing a home's reconstruction cost value (RCV), homeowners may find themselves underinsured after an adverse event."

In commercial insurance, agents have cause to review policies with 83% of contractors experiencing delays on projects and 71% facing at least one material shortage. Specifically, 31% of contractors are reporting a current shortage of lumber.

Further, 68% of contractors are experiencing delays and expect them to continue into the second quarter of 2021 while two-fifths said delays, shortages and increasing costs were just as severe as the consequences from COVID-19.

Despite an uncertain economy, 85% of contractors believe there will be sufficient opportunities for new business in the next 12 months. Construction employment rallied in the fourth quarter, totaling 7,413,000 in December, up 152,000 from September. However, employment in construction was down by 142,000 jobs over the past 12 months, representing a 1.9% decline.

Will Jones is IA editor-in-chief.