The costs of construction are increasing, but so is the demand for new projects. Clients are showing a willingness to pay for construction even with the rising prices. This is just one indication that the construction industry in the United States is thriving. The post-pandemic demand has returned, and the economy is recovering.

This increase in demand has also come with higher construction prices. Between increases in the cost of materials to those related to labor, construction costs are skyrocketing.

How Much Construction Costs Are Skyrocketing – And Predictions 

The JLL construction Outlook H2 2021 predicts that the costs will continue to climb. In the next year, the outlook estimates total construction costs will increase by 4 to 7 percent.

But we don’t even have to look at predictions to see changes to the cost of construction. The price of construction materials increased 20% between January 2021 and the same month of 2022.

Putting the Increases in Perspective

To put the extent of the increases in perspective, consider the recent figures. One notable piece of data comes from the U.S. Census Bureau. The organization’s data showed construction costs increased nearly 17.5% from 2020 to 2021. This is the largest year-to-year increase since 1970.

While that 17.5% figure is impressive, it is not the only relevant one. Comparing pre-pandemic construction costs in 2019 to 2021’s costs shows a 23% increase.

What Is Causing Costs to Skyrocket?  

There are multiple reasons that construction costs are skyrocketing. Many are outlined in the Associated General Contractors of America’s Construction Inflation Alert. These include:

  • Extreme material cost increases
  • An ever-tightening labor market
  • Supply chain disruptions
  • Inflation
  • Litigation from cost-cutting measures or material delays that delay the project

Project owners and contractors alike are struggling due to that combination of these factors. It leaves them with no choice but to increase their prices.

There Is Still Demand for Construction

Even as construction costs are skyrocketing, people are still building homes and other properties. People have shown their willingness to pay the increasing prices. After all, when 2021 came to an end, new build homes for sale increased 58% from the previous year.

The experts have a simple explanation for why the demand for construction is still so high even with rising prices. It comes down to a lack of inventory. There is not enough available inventory to meet the demand.


Between inflation, labor shortages, and supply chain issues, construction costs are skyrocketing. They increased by the largest percentage in decades. Even so, a lack of inventory means that demand for new construction is high.

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