Homeowners who shepherded construction projects during the last couple of years faced skyrocketing material and labor costs—a persistent challenge that appears to be lingering into 2022. In fact, in March, the National Association of Home Builders (NAHB) reported that construction materials prices have risen 8% since the start of January. For people building elective projects, these higher costs may be daunting and unpredictable but are still potentially manageable during the design, budgeting, and scheduling phases—long before construction begins. Unfortunately for those whose new kitchens, bathrooms, and total house rebuilds are the result of fire or some other damaging event, coping with unexpected and astronomical costs can be financially devastating—even when an insurance policy is already in place.
Understanding the interconnected factors that contribute to these higher costs may help homeowners prepare for contingencies that are likely to arise during any construction project taking place today.
Material scarcity
Soft wood lumber may have seen the most dramatic increase since the onset of the 2020 pandemic, but wood is hardly the only material subject to soaring costs. Shortages have driven up the price of gypsum, concrete, and steel as well as paint, hardware, tools, plastic, furnishings, and appliances. While some material costs are stabilizing, prices remain elevated overall.
Labor shortages
In addition to the millions of Americans who lost and never recovered jobs during the pandemic, millions more retired, and more still began to reevaluate their work-related priorities, walking away from employment in what has been dubbed, “The Great Resignation.” The sudden loss of skilled labor has not only slowed the pace on many construction projects, but has introduced greater exposure to potential on-the-job injuries as under-trained and exhausted workers struggle to deliver projects.
Supply chain instability
The lack of predictability in the flow of goods and services has stifled the global economy in ways analysts will be unraveling for years. For U.S. homeowners, an inability to source the right materials can grind the construction process to a halt, creating significant family disruption and extra expense when attempting to source alternate, available materials.
The economy is booming for many Americans and our real estate market is lightening hot—and that generally means home building and renovation. It’s important that homeowners undertaking construction projects today understand that they’ll be facing high material costs and unpredictable delivery schedules—especially as political events unfolding in Ukraine threaten to add new layers of instability to our already fractured global supply chain. And when construction is the result of fire or some other catastrophic event, many questions may arise related to replacement costs and liability.
Review your homeowner’s policy with a trusted partner
Pandemic-related material and labor shortages, supply chain disruptions, and other evolving global factors have driven up construction costs and ended the era of predictable project planning. Your partners at Eastern Insurance will work with you to make sure you have a policy that reflects your personal short- and long-term goals by protecting your biggest asset—your home. And why wait? Homeowners are invited to review their policies at any time to make sure its terms are compatible with contemporary risks. Review and update your existing homeowner's insurance policy today so you can relax—because you’re covered.