Why construction costs remain high in the US today

TLDR

Construction costs in the US remain elevated because housing demand is still strong while labor shortages, material price volatility, and supply chain constraints continue to put pressure on pricing. Even as some congestion eases, higher wages, transportation costs, and limited resources keep building costs from returning to pre-pandemic levels.

Understanding what is driving construction costs

Demand for housing surged over the past several years, and as we move further into this year, that demand has not meaningfully slowed. A large portion of millennial buyers entered the housing market during periods of low interest rates, and many are still actively searching for homes despite higher borrowing costs and limited inventory.

This ongoing imbalance between supply and demand raises a common question across the industry. If housing demand eventually cools, will construction costs finally come down? For most contractors, the reality is more complex.

The ongoing strain on the supply chain

While some areas of the global supply chain have improved, congestion has not disappeared. Millions of shipping containers continue to move toward US ports, and once they arrive, inventories for certain products begin to normalize. However, this normalization does not automatically translate into lower costs.

Periods of lower pricing often trigger increased purchasing from both businesses and consumers. As demand rises again, suppliers adjust pricing upward to keep pace. In construction, this means material costs rarely fall for long before rebounding.

Transportation also remains a major factor. Fuel prices continue to influence the cost of moving materials from ports to suppliers and job sites, keeping downward pressure on pricing limited.

Material costs remain historically high

Supply chain disruption has a direct effect on material pricing. Lumber, steel, and plastics remain significantly more expensive than historical averages. In many cases, prices have reached levels not seen since record tracking began decades ago.

Oil prices play a major role as well. Higher fuel costs increase manufacturing and delivery expenses, which are ultimately passed down to contractors and clients.

Natural disasters also contribute to volatility. Hurricanes, wildfires, and severe storms increase demand for rebuilding materials while sometimes destroying the resources needed to produce them. This combination creates sudden spikes that ripple through the entire construction market.

Labor costs continue to rise

Labor remains one of the most persistent challenges facing construction businesses. Unemployment rates have stayed low, and the industry continues to experience a skills gap between available workers and the qualifications required on modern job sites.

When labor supply tightens, wages rise. While higher wages improve quality of life for workers, they also increase project costs. With demand still strong, contractors often have little choice but to absorb or pass along these increases.

In many regions, labor availability has become a bigger constraint than material supply, extending timelines and driving costs even higher.

Lumber, steel, and copper pricing pressures

Lumber, steel, and copper continue to play an outsized role in construction cost increases. Global demand for steel remains high, and fabrication capacity has not expanded quickly enough to meet it. Copper inventories remain low, meaning even modest increases in demand can drive prices up sharply.

In response, manufacturers are investing in efficiency and innovation, but these improvements take time to influence pricing at scale. In the meantime, contractors must continue working within a volatile materials environment.

What this means for contractors moving forward

Construction costs in the US are unlikely to return to pre-pandemic levels in the near future. Workforce shortages, material pricing pressure, and sustained demand all point toward continued volatility rather than dramatic relief.

For contractors, this makes accurate estimating, margin protection, and cost tracking more important than ever. Clear communication with clients, shorter quote validity periods, and modern estimating tools can help reduce risk in an unpredictable market.

If you are working in residential remodeling or new construction, Bolster can help you adapt. Bolster is a construction estimating software platform built to handle pricing volatility by creating clear, visual, interactive estimates that improve accuracy and client understanding. Contractors who invest in better systems are better positioned to protect profits and scale sustainably.