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Widespread shortages on building materials continue to prompt home builders to raise their prices. Material prices have increased by 26% over the past year for building the same house, according to National Association of Home Builders data. That’s put pressure on new-home prices: In May, the median price of a newly built home was 18% higher than a year ago, at $374,400.
Material shortages have increased for appliances, paint, lumber, and more.
To help offset these higher prices, builders are raising their prices and pre-ordering items, according to the latest monthly survey of the NAHB/Wells Fargo Housing Market Index.
Forty-five percent of builders surveyed are also adding in price escalation clauses to protect themselves from rising prices during the process but passing those higher costs on to buyers.
Also, 39% of builders say they are waiting until late in the construction process to list a spec home in case prices increase more.
Some of the highest increases in material costs have been in lumber. Some builders have even changed their building methods as a result. Some builders are switching from traditional wood framing to other materials. Seventeen percent of builders said they were considering switching to steel, 16% to structural insulated panels, 14% to insulated concrete forms, and 8% to concrete masonry.
However, lumber prices have started to fall, now dropping for eight consecutive weeks. Lumber prices are now down more than 50% from their peak in early May.