Michael Hardman, who holds the position of Vice President at Turner & Townsend, a worldwide consultancy firm for real estate and infrastructure based in the United Kingdom, has predicted that the price escalation from one year to the next in 2022 will range from 9% to 12%. At the same time, it will further compound these difficulties with mounting inflation in the U.S. With a return to the long-term average of 2.7% in 2024, looking ahead into 2023, home building companies like Ozzy Construction are forecasting an escalation year-on-year of 7%. By 2024, people will have witnessed three years of dramatic price escalation. By equivalence in 2020, individuals will see material prices approximately 25% to 28% higher if projects and the compounding effect are true than they would have been.
Rob Cantando, national director of strategic supply chain at Skanska, a Sweden-based contractor, said that not all common construction materials have negative trajectories. On the list of problems builders faced last year, the price and availability of building materials again topped the list, but interest rates, general inflation, and negative media moved considerably up the list. For builders, materials remain the top challenge, but new issues are becoming increasingly problematic.
Based on the January 2023 survey results for the NAHB/Wells Fargo Housing Market Index (HMI), a significant majority of builders, that is 96%, reported that the most prominent challenge they faced in 2022 was related to building material prices, followed by difficulties in obtaining building materials due to their availability and timing, which was reported by 86% of the builders. These two issues held the top position on the list in 2021 as well. The shortage of labor in the construction industry and the corresponding cost and availability of labor have also been prevalent issues, with a significant percentage of builders, 82% in 2021 and 85% in 2022, citing it as a significant problem. This is not a surprising trend.
In 2022, some problems became significantly more widespread. High interest rates were a problem for only 2% of home building companies like Ozzy Construction in 2021 but affected 66% of builders in 2022. For 85% of builders in 2022, rising inflation in the U.S. economy was a significant problem, compared to 63% in 2021. And negative media reports compared to 26% in 2021, making buyers cautious, also affected 55% of builders in 2022. A greater number of home building companies, specifically 93%, anticipate that high interest rates will pose a challenge in 2023, as compared to 66% who predicted it to be a problem in 2022, indicating a significant increase. In the recent survey, both the current and expected numbers were much higher than at any time between 2011 and 2021.
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Contact:
Oseias Rodrigues
Ozzy Construction
857 800 4918