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 2021 to July 2022.
Total reconstruction costs, including materials and retail labor, increased 3% from July 2021 to July 2022, down from a 13.5% jump recorded from April 2021 to April 2022. But the slowdown is less drastic than it appears because costs in July 2021 were at one of multiple peaks seen during the pandemic. More broadly, costs remain high amid continuing inflation and elevated fuel prices, which add expense to producing and transporting goods. One persistent cost driver in recent years, lumber, dropped 28.1% year-over-year in July—but again, from historic highs. Quarterly reconstruction costs dipped 1.1%, following a 7.1% increase in April.
More broadly, costs remain high amid continuing inflation and elevated fuel prices, which add expense to producing and transporting goods.
Residential and commercial reconstruction costs increased in all states. New Hampshire had the largest residential increase at 5.7%, and Oregon had the most significant change in rank, falling from the ninth highest cost increase in April 2022 to 48th in July 2022. For commercial properties, Nebraska had the largest increase at 8.9% and Maine had the largest shift in rank, down from the tenth highest cost increase in April 2022 to 45th in July 2022. Wyoming had the smallest increases for both residential and commercial reconstruction costs.
Paint suppliers struggle to cover demand
The continuing oil price surge—with gasoline topping $5 a gallon in mid-June—affected most categories of materials. This included paint, which increased 11.4%, reflecting both oil prices and broader raw material shortages caused by supply chain issues—plus high demand. Major paint manufacturers have reported difficult making their products. The Texas freeze in 2021 temporarily halted petroleum output in the region, and the export of resins was decreased amid limited production from Texas petrochemical plants. Hurricane Ida also affected paint production by interrupting supplies of needed chemicals and resins.
Trim costs run counter to lumber trends
Despite the overall drop in lumber prices, interior trim costs surged 27.2%, likely reflecting general inflationary pressures and rising labor costs. Compared with dimensional lumber, the decorative properties of interior trim make it more labor and resource intensive to produce, and those cost pressures may offset the effect of lower prices for the raw material. Both composites, however, still remain greatly above pre-pandemic levels.
Concrete, a building block commercial structures
Commercial buildings make more use of non-wood materials such as concrete than residential homes. Lumber’s fluctuations therefore haven’t affected commercial costs as dramatically as they have residential. But Verisk estimates show concrete increased 6% between July 2021 to July 2022.
Labor costs keep climbing
Combined hourly retail labor rates increased 9.8% from July 2021 to July 2022, down slightly from the 10.4% increase recorded from April 2021 to April 2022. Steel worker and drywall installer/finisher costs increased the most—12.1% and 11.8%, respectively—as overall supply of construction workers continues to fall short of demand and fuel costs spill over into wages.