Construction Costs and Labor Pressures in 2025
We’re halfway through 2025, and for those of us in the construction industry, the reality is clear: building costs are not easing up. From raw materials to reliable labor, the price of doing business has continued to climb—pushing contractors, subcontractors, and small firms to the edge.
Let’s begin with materials—because every job starts with what we can physically put on-site. Since January 2025, we’ve seen notable increases in the cost of key building inputs, most sharply in lumber, steel, and concrete.
Lumber prices have risen by roughly 18% year-to-date, driven by seasonal demand, ongoing wildfires across Canada and the Western U.S., and limited domestic sawmill output. While not as chaotic as the spikes we saw in 2021, this steady climb continues to affect framing, residential remodels, and even pallet and formwork costs.
Steel, particularly rebar and structural beams, is up 12–15% since January. Supply chains remain fragile, and domestic mills have been operating at high capacity but with little relief in price. Demand from federal infrastructure projects is also pulling supply toward large, union-backed builds—leaving smaller contractors paying premiums.
Concrete prices, including ready-mix and aggregates, have jumped another 8–10% since the start of the year. The biggest drivers? Higher transportation and fuel costs, tight cement supply, and surcharges tied to new emissions standards in California and other states. Concrete isn’t flashy, but when its price goes up, everything from foundations to sidewalks feels it.
These aren’t just numbers—they’re decisions. And for the average U.S. single-family home, they add up quickly.
In 2021, the National Association of Home Builders (NAHB) estimated that material and labor costs made up over 60% of total home construction costs. Today, based on 2025 data, the combined rise in lumber, steel, and concrete—along with rising labor costs—is estimated to have added $25,000–$35,000 to the total cost of building a standard new home compared to just six months ago. That’s on top of already inflated prices due to supply chain pressures over the last few years.
Then there’s labor, which has become the quiet crisis of 2025.
At the start of the year, many hoped the labor pool would stabilize. Instead, we’re seeing the opposite. Skilled labor is in short supply across nearly every trade. Electricians, masons, and HVAC techs are commanding higher wages—but many firms still can’t fill open positions.
Entry-level workers are even harder to come by. Rising costs of living, lack of accessible apprenticeships, and persistent barriers to legal work status for undocumented laborers have kept many Hispanic workers—the backbone of our workforce—on unstable footing. Subcontractors, particularly those running small, family-based crews, are being stretched thin trying to meet demand with limited people and rising overhead.
Wage increases are real—averaging 4–6% since January—but they’re not keeping pace with inflation or the cost of materials. For many firms, this means longer project timelines, reduced profit margins, and in some cases, lost contracts.
The bottom line: Building is more expensive today than it was six months ago—and there’s no immediate relief in sight.
We can’t keep absorbing these costs and expect small firms and minority contractors to stay afloat. If we want a more equitable and sustainable construction industry, we need serious investments in domestic material production, skilled labor pipelines, and inclusive procurement practices.
Because the people who build America deserve better than a system built to break them.