Construction Costs Rising but U.S. Builder Confidence Remains Cautiously Upbeat

According to a recent article on CNBC’s website, construction costs grew in July, exposing a slight chink in the armor of builder confidence across the United States. From a regional perspective, according to the article, builder sentiment in the Northeast fell 4 points to 75. The index dropped 1 point to 71 in the Midwest and fell 2 points to 87 in the West. Builder sentiment in the South held steady at 85. 

The builder sentiment index findings were all based on a three-month rolling average. Any confidence reading above 50 is considered positive, so the industry is still clearly confident, though down from the November 2020 record high of 90. 

Demand for new home construction is also high, but rising costs are starting to price some consumers out of the market across the nation. 

Though lagging behind residential, commercial construction confidence is starting to rise as well, with some caveats, according to another recent article at ForConstructionPros.com. The June 2, 2021 article cites the latest Marcum Commercial Construction Index, with Joseph Natarelli, Marcum’s national construction leader, stating, “Contractor confidence is finally on the rise, with nearly two-thirds of contractors anticipating business growth in the coming months.” However, Natarelli goes on to add, “The lingering shortage of labor and commodities combined with higher materials prices will continue to depress profits for the foreseeable future.”

The construction labor picture is mirroring many other industries. There is a tremendous shortage of skilled workers and laborers ready to fill open construction positions nationally. A July 11, 2021, article in CNN Business lays it out plainly. There are roughly a million available construction jobs and no one to fill them. Young people moving into the workforce are either not choosing trade schooling or choosing other career pursuits. At the same time, the U.S. labor force is facing record retirement by aging workers, namely baby boomers. These veteran skilled trade workers in fields like construction, electrical, mechanical, and much more are taking their experience and expertise out of the workforce. The pandemic has only exacerbated the issue and increased the rate of retirement by older working Americans.

On top of high residential demand and an awakening commercial construction market, even a modest infrastructure package passed by Congress could mean substantial additional growth potential for the entire U.S. construction industry. But once again, high material costs and skilled labor shortages will make operating those construction projects more challenging than ever. Cap that off with global supply chain issues surrounding construction materials and equipment, and coaxing a profit out of your projects will be a never-ending pursuit by your job site management and office accounting teams alike. 

So, what is your construction firm doing right now to manage costs? Whether you operate as a general contractor or sub-contractor, there are things that CMPRO can help you do to manage and even reduce costs on every project.

CMPRO helps you improve and simplify:

1. Daily reporting and communication between the on-site project team and the office
   Poor communication and coordination between your project management team on the construction site and your office accounting team can cost your business thousands of dollars, possibly more, depending on the size and scope of the project. CMPRO helps you manage critical communications such as RFIs, Submittals, and Transmittals.

    

2. Project budgeting and forecasting
   Unknown or unforeseen costs can rob your construction project of its more complete contribution to your bottom-line profitability. CMPRO makes communicating the project budget and forecasting income and expenditures easy to manage. You can also easily manage Vendor Contracts and Pay Applications.

    

3. Change order documentation, reporting, and tracking
   Nothing eats away at construction project profitability like undocumented change orders. CMPRO makes tracking change orders simple and effective, whether from the owner, vendor, or internal ones.
   
   

And because CMPRO is easy to learn and use, you’ll save valuable time and money implementing it with your team and reducing ongoing training needs. To find out more about how CMPRO can help simplify your construction management documentation, reporting, tracking, and communication and schedule a demo, visit our website or contact us at [email protected].