Construction materials and labor costs have begun to settle down this summer, according to a market report from The Weitz Co.
Current year-over-year-material prices are up 4.5%. That’s down from the 6.5% reported last quarter, the report from the construction company, general contractor, design-builder and construction manager noted.
“The public sector has outpaced the private sector and accounts for most of the positive movement in dollar volume in the first half of the year, which is up 11% since this time last year. However, we are seeing optimism in the private sector as hopes for a federal rate cut becomes more likely by year end,” wrote report authors Larry Graeve and Kyle Wegner.
Lumber prices have dropped to 2018 levels, which Weitz attributes primarily to high federal interest rates, which the company said have decreased the demand for new construction.
The backlog for new construction is approximately 8.4 months. That’s about a half a month longer than it was in June, but according to Weitz, it is still a half a month shorter than it was a year ago.
General contractors and construction managers “are more pessimistic as interest rates remain stubbornly high, thus causing lower demand for construction services,” Graeve and Wegner said.
Labor shortages remain prevalent within the construction industry, they noted. Unemployment within the industry sits at 3.3% as of the end of last month, with overall unemployment in the United States at 4.3%.
The experts at Weitz said that they “anticipate the overall escalation rate for the next 12 months to be in the 4% to 5% range.”
