3 reasons why labor, material and land prices may ease in 2023
Press Release
by Leslie Shaver, Senior Reporter | Multifamily Dive
Construction costs for developers should moderate this year, experts say.
Most signs point to 2023 being a much slower year than 2022 for apartment starts. In addition to persistent commentary from development and lending executives saying that financing isn’t there for new construction, multifamily permits fell 16.4% in November, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Although they’re still at a robust annualized 561,000 pace, it is the lowest reading since September 2021.
“We think 2023 is going to slow down,” said Brian Oates, executive managing director of development at Atlanta-based apartment developer RangeWater Real Estate.
But some developers might see a benefit. Fewer starts could stall some of the astronomical pandemic-era price increases they were experiencing by limiting competition for materials, labor, and, eventually, land. Inflation, which has been an issue, is starting to level off.
In fact, construction input prices tumbled 2.7% in December from the previous month, the largest monthly drop since April 2020, according to an Associated Builders and Contractors (ABC) analysis. Despite that monthly drop, overall construction prices remain 7.9% higher than a year ago, according to the report.