Construction Cost Trends from 2024: What We Learned and What’s Ahead
Dec 16, 2024
As we close out 2024, it's the perfect time to reflect on how construction costs have evolved throughout the year. By identifying trends and lessons learned, we can better prepare for 2025 with better insights and confidence.
At The Rehabber’s Playbook, we pride ourselves on meticulously tracking construction costs. By updating our data multiple times a year—especially during volatile periods—we’re able to provide members with reliable insights that reflect current market conditions. Here’s a summary of the most significant trends we observed in 2024 and how they could impact your rehabbing or building business moving forward.
Disclaimer
The data we’ve collected primarily reflects trends in the Richmond, VA market, which we’ve found to be a solid benchmark for average construction costs across U.S. markets. That said, costs will vary depending on your local area, and adjustments may be necessary. While the trends highlighted here are likely to resonate universally, always consider your market’s unique circumstances when applying these insights.
What We Learned in 2024
- A Return to “Normal”?
The years 2021–2023 were defined by rapid inflation and unprecedented cost volatility due to supply chain disruptions, labor shortages, and economic uncertainty. In contrast, 2024 has been refreshingly stable. Inflation slowed significantly, and in some cases, prices even decreased, marking a return to more predictable cost patterns.
- Finally… Some Decreased Prices
Many materials saw price drops this year, including:
- Plumbing fixtures
- Electrical fixtures
- Windows
- Cabinets
- Doors
- Lumber
While some decreases were subtle, others were significant. For example, a toilet that might have cost $110 in 2022 could now be found for as low as $79. These shifts are a welcome relief for builders who’ve grown accustomed to soaring material costs.
- Labor Costs Remain High
Despite stabilization in material costs, labor expenses remain stubbornly high. Contractors and builders alike continue to struggle with underbudgeting for labor. Since labor prices aren’t as easily tracked or cataloged as materials, bids are often the first and only glimpse into current rates. My advice? Estimate high for labor—it’s better to overestimate than be caught off guard.
- A Material Rollercoaster Ride
While inflation slowed overall, material costs experienced a rollercoaster effect, with prices fluctuating multiple times throughout the year. This unpredictability highlights the ongoing influence of external factors such as interest rate speculation, housing market demand, supply chain disruptions, and even global economic news.
How to Adjust in 2025
- Embrace New Technology
The most forward-thinking builders are turning to technology to cut costs and boost efficiency. Tools like project management software, advanced building plan platforms, and innovative construction methods can help mitigate rising costs and inefficiencies. Adopting these technologies can provide you with a competitive edge regardless of economic conditions.
- Keep an Eye on the News
Although it’s not always enjoyable, staying informed about economic and industry news is crucial. Factors such as interest rate changes, global trade dynamics, and material shortages can directly impact costs. Being proactive about understanding these trends allows you to make better decisions for your projects.
- Track Material Costs and Make Smart Decisions
Regularly monitoring material prices can save you significant money over time. Whether through supplier websites, industry reports, or your own cost sheets, staying up-to-date ensures you buy at the right time and avoid overpaying. For instance, if you notice a seasonal trend in price drops for certain materials, you can strategically plan purchases.
- Build Relationships with Contractors and Suppliers
Strong relationships are invaluable in this business. Reliable contractors and suppliers are more likely to offer competitive pricing and prioritize your projects. Invest time in nurturing these partnerships by being consistent, professional, and communicative. It’s a win-win that can stabilize your costs and improve project outcomes.
A Final Word
While 2024 brought some much-needed stability, the road ahead is still uncertain. With economic factors like government spending, global affairs, and market speculation at play, we may not be entirely "out of the woods." As we enter 2025, it's critical to stay vigilant, informed, and adaptable.
That said, I remain optimistic about the long-term outlook for our industry. By leveraging the lessons from 2024 and making strategic adjustments, we can navigate whatever challenges the new year brings.
Here’s to a productive and profitable 2025!