Verisk recently released its latest 360Value® Quarterly Reconstruction Cost Analysis, which offers an overview of current reconstruction cost trends at the national and state levels for the United States from July 2022 to July 2023.
Total reconstruction costs, including materials and retail labor, increased 4.3% from July 2022 to July 2023. This uptick follows the 3.1% increase from April 2022 to April 2023. Quarterly reconstruction costs increased by 1.0% from April 2023 to July 2023, a slight shift from the 1.4% increase last quarter. Costs continue to slow down and steady, with increases ranging close to pre-pandemic levels.
State changes for reconstruction costs
Every state saw higher residential and commercial reconstruction costs.
Residential costs, in total, increased 3.1% from July 2022 to July 2023 and 0.8% from April 2023 to July 2023. Florida had the largest increase at 7.8%, followed by Utah (6.1%) and Rhode Island (6.0%). South Dakota’s rank changed most significantly, decreasing from the 9th-highest cost increase in April 2023 to the 32nd-highest in July 2023.
Commercial costs, in total, increased 5.6% from July 2022 to July 2023 and 1.2% from April 2023 to July 2023. Utah had the largest increase at 10.1%, followed by Florida at 9.9%. Rhode Island had the largest shift in rank, up from the 32nd-highest cost increase in April 2023 to the 3rd-highest in July 2023, with prices rising 9.1%.
Material and labor cost changes
Combined costs for materials decreased 1.6% from July 2022 to July 2023—a shift from the 4.2% decrease recorded from April 2022 to April 2023. Lumber composite costs declined consistently over the 15 months—the only negative composite this quarter at 28.9%. However, the composite still stands 38% higher than pre-pandemic levels. Interior trim was the primary driver of materials, increasing 14.2%.
Combined hourly retail labor costs increased 8.6% from July 2022 to July 2023, on par with the 8.6% increase from April 2022 to April 2023. Labor costs have remained on a steady incline for the last few years. Concrete mason costs increased at 11.5%, the highest of the categories.
Impacts of Canadian Wildfires
Recent Canadian wildfires may soon influence reconstruction costs as lumber production and access experiences impact.
The United States generates between 60 to 70 percent of its softwood lumber domestically and imports the rest. The vast majority of those imports come from Canadian suppliers. Rising lumber prices could have a major impact on reconstruction costs many months after the fires ultimately subside.
In the fourth quarter of 2017, when similar fires broke out in Canada, lumber costs skyrocketed 14%.* The pricier lumber helped nudge year-over-year reconstruction costs up to 4.8% nationally (up from a general average of around two to three percent since 2015). The effects rolled on: In the first quarter of 2018, lumber costs climbed 18.2% ,and reconstruction costs rose 5%nationally. The second and third quarters of 2018 saw even higher lumber price increases of 19.9% and 21.6%, respectively—, leading to a 5.2% and a 5.1% increase in national reconstruction costs, respectively. In the fourth quarter of 2018, roughly a year after the fire season ended, lumber price increases dipped to 9% ,and the increase in reconstruction costs fell to 4.6% nationally.
If past is prologue, lumber prices—and reconstruction costs—may start to climb this fall and continue to increase through the summer of 2024.