Building material costs are playing an increasingly significant role in shaping today's housing market. Recent data shows notable increases in construction input prices, creating ripple effects that influence everything from builder strategies to buyer decisions and renovation plans. Understanding these market shifts can help both industry professionals and prospective homeowners make informed decisions in today's evolving landscape.

Construction input prices by the numbers

The Associated Builders and Contractors reported that construction input prices increased at a 9.7% annualized rate through the first quarter of 2025.¹ Between March 2024 and March 2025, the prices of certain materials have steadily increased. Notably, copper wire and cable prices have jumped by 13.4%, softwood lumber by 12.6%, and construction materials like sand, gravel, and crushed stone by 8.3%.² When the cost of these and other materials rises, builders pass these costs onto buyers, resulting in higher prices for newly constructed homes.

Impact on new home construction

While rising material costs present challenges for builders by impacting profit margins, many are adapting through strategic planning and value engineering. Some builders may adjust project timelines or focus on optimizing their development mix to maintain quality while managing costs. This can affect the number of available homes in specific markets. "A slowdown in new home development leads to fewer options for homebuyers and real estate investors," said Brett Hively, Senior Vice President of Mortgage, Finance, and Strategy at Ameris Bancorp. Hively noted that when new construction declines, many potential buyers may switch their focus to the existing home market. "This can lead to a surge in demand for resale properties—specifically smaller, more affordable homes—creating competition among buyers and potentially driving up prices."

However, Mr. Hively noted that new construction continues to offer distinct advantages for homebuyers, including modern energy-efficient features, updated building codes, and warranty protections that can provide long-term value despite current market fluctuations. "While new construction may reflect higher costs due to modern amenities and upgraded finishes, we're seeing builders respond by offering various incentives," said Hively. "Programs like closing cost assistance and interest rate buydowns are helping maintain accessibility for homebuyers in today's market."

Impact on renovation decisions

While some homeowners are weighing the costs of new construction against renovation, both options remain viable depending on individual circumstances and market conditions. Rising material costs are also affecting renovation projects, with homeowners facing higher expenses for kitchen remodels, bathroom updates, and other improvements. Consequently, many are opting to transform their existing homes rather than venture into the market for a new property. "We're seeing homeowners who love their neighborhoods or don't necessarily want to move choose to stay and improve rather than relocate. They're financing these improvements through renovation loans or by tapping existing equity via cash-out refinances or HELOCs [home equity lines of credit]," Hively said. "This allows them to maximize their current property, while avoiding the challenges of today's competitive buying market, and often leads to higher resale value when it's time to sell."


Sources:
^{1, 2} https://www.newsweek.com/tariffs-hit-us-housing-market-construction-costs-keep-rising-2059828

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Ameris Bank is not affiliated with nor endorses Newsweek or the Associated Builders and Contractors.