Construction Costs Back On The Rise

by Dean Dalvit on October 19, 2009

Well, good news and bad news…

The bad news first: Construction costs, which have declined on average 7.5% from September 2008 to August 2009, have stabilized, and are now back on the rise, posting a steady price index from August to October.

The good news: This is a sign that the overall economy has stabilized and is climbing out of the deep recession that has frozen construction in the last 18-24 months.

I guess you have to take the good with the bad…

This information is courtesy of RSMeans from Reed Construction Data, who tracks construction industry costs across the country for materials and labor in all markets.

Prices are expected to climb slightly through the Winter with modest growth forecasted beyond. Interestingly, construction materials costs are rising faster than inflation as shown by the chart below (also courtesy of RSMeans)

Construction Materials Costs

Even better news is that, according to RSMeans, the Construction Industry is expected to recover in early 2010, on the heels of the mid-2009 economic recovery. Single family housing is expected to lead the recovery with retail construction also being one of the first markets to come back (due to it being one of the first markets to collapse). Power construction and manufacturing will be of the last markets to recover.

The recovery is expected to be slow, but steady. The collapse of the capital markets will prohibit a speedy recovery, but compared to activity in 2009, there will be significant improvement.

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