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Why Is Housing So Expensive? Build Costs Alone Now Make Up 64%!

As labour costs, site establishment and rough-ins surge, the cost of timber frame and truss has progressively reduced over the last 30 years.


Fri 24 Jan 25

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Construction costs now account for more than 64% of single-family house prices—the highest since records were kept in the mid-to-late 1990s. And yet, despite a surge in labour costs, site work establishments, and major system rough-ins, the cost of timber frame and truss has progressively reduced in line with smaller house sizes over the past 30 years. That is according to the National Association of Home Builders (NAHB), which surveyed more than 4,000 builders nationwide.

The survey shows that, on average, 64.4% of the sales price is due to construction costs and 13.7% to finished lot costs, with the builder’s margin remaining stable at 11.0% of the sales price. The average size of a single-family home is 2,647 square feet—an increase of 86 square feet from 2022 but still below the average in 2015 and 2017.

“Historically, average square footage in the NAHB survey has tended to move in the same direction as in the Census Bureau’s series with a lag and much with wider fluctuations,” NAHB said. “The average home size in the NAHB survey dropped from 2,716 square feet in 2009 to 2,311 square feet in 2011, as demand eroded after the Great Recession. As the economy recovered, it rose steadily and peaked at 2,802 square feet in 2015.”

However, from 2015 to 2022, the average square footage trended downward, dropping to 2,776 square feet in 2017, 2,594 square feet In 2019, and 2,561 square feet in 2022, before rising slightly to 2,647 square feet in 2024: “The smaller square footage in recent years is a response by builders to meet the current housing affordability challenges, especially as the share of first-time new home,” according to the survey report.

According to the report, the average construction cost of a single-family home was $428,215, or about $162 per square foot—the highest in the history of this series – compared to $80 in 2011, $95 in 2013, $103 in 2015, $86 in 2017, $114 in 2019, and $153 in 2022.

“Even though inflation has been trending downward toward the Federal Reserve’s target of 2% recently, ongoing construction labour shortages have led to elevated wage growth in the home building industry. Overall, building material prices explained much of the cost increase in 2022, but these prices have been relatively well-behaved more recently.”

The report comes after Wood Central revealed that builders are bracing for a one-two gut punch after President Trump’s vowed to slap tariffs on imported building products and deport illegal immigrants – who now make up to 50% of construction workers in parts of Texas and California. That is according to a new report by the Pew Research Center and the Harvard Joint Center for Housing Studies, which warned that undocumented workers account for more than 13% of the US construction industry.

It comes as the Wall Street Journal (WSJ) reported that several economists and a cross-section of the country’s largest builders caution that mass deportations will lead to significant work shortages, drive up wages and disrupt projects. A study published by the University of Utah and the University of Wisconsin found that the deportation of over 300,000 undocumented immigrants between 2008 and 2013 left many construction positions unfilled, which in turn resulted in a year’s worth of construction loss in the average county and a 20% rise in new dwelling prices.

Author

  • Jason Ross

    Jason Ross, publisher, is a 15-year professional in building and construction, connecting with more than 400 specifiers. A Gottstein Fellowship recipient, he is passionate about growing the market for wood-based information. Jason is Wood Central's in-house emcee and is available for corporate host and MC services.

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