Soaring Prices for Building Materials May Reduce Housing Market Growth

Erika Thompson
Published Apr 21, 2025


Throughout 2020, the housing market proved surprisingly robust. Despite fears the pandemic would lead to a horrible crash, housing prices continued to rise and plenty of new construction was made. In the new year, this trend seems to be coming to a halt. The reason for the residential construction slowdown is actually very surprising.
 

Costs for Materials Reach Record Highs


After remaining relatively stable for a few years, the pandemic saw a sharp increase in building supply costs. Lumber reached record highs in late 2020, and they do not appear to be going down any time soon. Softwood lumber had the most dramatic increase, but many other types of construction materials are also showing similar patterns. Costs for land, tools, stone, and various other components needed to build a house have soared.

There are several factors contributing to the increase in building material costs. First of all, there has been a big jump in demand. With so many people interested in housing, large amounts of builders were rushing to grab materials. All the added construction has outpaced previous demands for building materials. Unfortunately, most manufacturers are not creating building supplies at the same level they were pre-pandemic. COVID safety measures have decreased productivity for manufacturers, resulting in a massive shortage.

A final challenge has been shipping building materials. With truckers and other shipping providers overloaded with the new demand for online shopping, medical supplies, and other essential goods, it is harder for building material manufacturers to send out their supplies. All of these issues combined to cause jaw-droppingly high prices for building materials.
 

Builders Less Interested in Constructing New Properties


Due to the rising costs associated with building a new property, many builders are putting the brakes on their development plans. More and more builders are starting to pause construction plans while they look for more affordable supplies. The NAHB/Wells Fargo Housing Market Index, which surveys builders on their interest in development, dropped a sharp 7 points in the past few months.

Builders are mostly wanting to take a break because high costs for materials may cause already slim profits to disappear. Furthermore, there are huge delays in supplies and a bit of a shortage in labor, so developers who are willing to pay high supply costs might still struggle to construct homes. With all the general economic uncertainty, few builders like the idea of risking a lot of money on a project that may take forever and fail to attract future homeowners.

 

Housing Inventory Numbers Decline


The decline in new construction is leading to major challenges for the housing market. Around January of 2020, there were roughly 740,000 homes for sale. A year later, the total inventory of homes for sale in the US has dipped down to around 380,000. With so few single family homes on the market, prospective homeowners are finding it hard to get a home.

The decline in new construction or current available homes is having several negative effects. Home prices are rising in many parts of the nation, making it hard for people to find housing within their budget. This is creating a sellers market, where desperate buyers have to make a lot of compromises to get a home. Many report settling for older homes with more problems in need of repair, simply because they cannot find anything else on the market.
 

Areas With the Highest Level of Growth


In all parts of the nation, the housing market is struggling due to the combined difficulties of lowered supply and higher prices. There are a few areas where this problem is particularly bad. The pandemic has exacerbated the trend of urban dwellers moving to smaller towns. Mid-sized cities with a lot of outdoor living and a big tech sector are experiencing massive growth.

According to Zillow, Austin, Phoenix, Nashville, Tampa, and Denver are all likely to be hit especially hard by the increase in housing supply costs. These areas are dealing with a massive number of new inhabitants, yet less builders are able to develop new homes. Ultimately, this may lead to further contraction, with residents finding themselves unable to afford housing.

Related Articles

Montana Reopens Section 8 Voucher Waitlist After Successful Challenge to Fair Market Rent Calculation...

Montana has reopened its Housing Choice Voucher waitlist, also known as Section 8 vouchers, following a win in a crucial decision about how much rent these vouchers can he...

The State of Eviction Prevention in the U.S.: A Comprehensive Overview...

Since the outbreak of the COVID-19 pandemic, the United States faced an unprecedented need to keep people in their homes. To address this, cities across the nation swiftly enacted various eviction pre...

The Rise of Co-Buying: How Gen Z is Redefining Homeownership...

Homeownership is a dream for many, but Gen Z is introducing a new way to make it happen—co-buying. This strategy involves two or more people, such as close friends, family members, or unmarried partners, ...

More Property Tax Relief Are Coming for Select U.S. Citizens...

Texas lawmakers have approved big changes to property tax rules, aiming to reduce costs for homeowners and businesses. These new measures will now head to Governor Greg Abbott for his approval and then to Te...

Housing Costs Are Changing Career Choices...

The rising costs of housing in the U.S. are influencing how people make career decisions. Workers are now considering housing benefits as an important factor when deciding whether to accept a job, move to a new city, or return to...

Florida Homeowners Might Get Tax Help with a New Proposal...

In Florida, there's a new plan that could make owning a home more affordable. Republican Representative Vern Buchanan from Florida has introduced a bill that aims to bring back and make bigger a tax break that...