How Will Inflation Affect the Price of Your New Home Build?


Rising inflation has now reached its highest level in almost six years. At 6.2%, we are above the 4% inflation target set by the Federal Reserve, and there is no clear sign that inflation will abate in the near future.

As a prospective home builder, you may be wondering how this increasing rate of inflation might affect your new home build project. There are many possible impacts on price, some beneficial and some detrimental to your bottom line. Here are seven ways that rising inflation can affect the cost of your new construction project:

  1. Rising material costs due to higher demand for building supplies. As demand for materials such as lumber and concrete increases, prices typically also increase as companies seek to maximize their profits in a competitive market. This can contribute significantly to the overall cost of your home build project, making it important to lock in prices for supplies as early as possible.
  2. Increased costs for land and other property due to inflation. Just as with any other commodity, when inflation rises so does the cost of land. If you are planning to purchase property on which to build your new home, expect to see a corresponding increase in price. This is one area where being prepared ahead of time can save you money down the road.
  3. Higher wages for laborers due to increased cost of living. As the cost of everyday goods and services rise, so too does the cost of labor. Many workers will demand higher wages in order to keep up with the rising cost of living, and this can add further expense to your home construction project.
  4. Higher costs for construction materials due to increased demand. When inflation rises, there is a corresponding increase in demand for building materials such as lumber and concrete. This can lead to higher prices from suppliers, which will be passed on to you as the home builder. To keep costs down, consider shopping around for alternative suppliers who may offer lower prices during periods of high demand.
  5. Increased labor costs if workers are paid by the hour or per project basis. If you choose to pay your laborers in hourly wages or on a per-project basis, expect those rates to rise along with inflation. This can add significantly to the overall cost of your home build project and should be taken into consideration when budgeting and planning ahead of time.
  6. Higher costs for contractor services due to increased demand. Contractors such as plumbers, electricians, and HVAC technicians will also be affected by inflationary pressures. As the cost of living rises, these professionals will seek to increase their rates in order to keep up with the rising expenses. This can add further expense to your home construction project, so be sure to factor this into your budgeting and planning.
  7. Increased financing costs if you choose to finance your home build project. If you take out a loan to finance your home construction project, be aware that the interest rate on that loan will likely rise along with inflation. This means that you will ultimately end up paying more in interest over the life of the loan, so it is important to make payments on time and pay off the loan as quickly as possible.

In conclusion, there are many ways that inflation can affect the price of your new home. Some of these impacts may be positive, such as lower interest rates on loans, while others may be negative, such as increased costs for land and building materials. By being aware of the potential impacts of inflation and planning accordingly, you can help ensure a successful home building project despite rising costs. If you have any questions or concerns about how inflation may affect your home build project, be sure to speak with a professional local home builder for more information and guidance.