Over the past year contractors have felt an average increase of 5% on Home Building Materials while associated costs for delivery have reduced profit margins even more.
In some cases contractors have been able to renegotiate their costs which is adding an average of $15,000 to a new home but for contracts already in place the almost $1 a gallon increase for fuel over the past few months has meant profitability can be totaly lost after paying for labor and associated fees.
Eventually this price is passed on to home buyers and remodelers but since many contractors can not pass costs on immediately it can mean the difference between being in or out of business.
The only positive side of increases in new home costs can be seen in sales of homes already on the market. Some areas have seen a 40% reduction in new home orders which should reduce the surplus of homes that were built on spec over the past 5 years if consumers are able to obtain loans.