Residential Market Update

Since Spring of last year, we have seen a significant uptick in inquiries for new builds. This trend has continued through Q1 2024, with the WA housing market showing a 3.4% overall cost increase YoY. In addition to increased demand for new build homes, construction costs are down across the board. Most major commodities are returning to stable pricing after a few years of volatility.

Locally, the buyer profile we're typically seeing right now is mostly ‘all cash’, due to high interest rates pricing leveraged buyers out of the market. The pace of construction starts has continued the downward trend we saw last year. As of March 2024, residential construction housing starts nationally were at a seasonally adjusted annual rate of 1,321,000. This is a 14.7% decrease MoM and 4.3% decrease YoY.

Most major commodities have returned to historically normalized pricing, and labor costs remain stable. Price elasticity in construction is limited due to the market environment of cost inputs. Materials are commodities traded in a hyper-competitive open and competitive marketplace, and they have a cost floor in most market conditions. Lumber, for example, will never cost less than what it actually costs to harvest and mill the timber, unless there’s an unusual environment of material surplus concurrent with low market demand.

Labor is also traded in a very competitive environment, and it has the nature of a cost floor due to the availability of unemployment benefits. In periods of economic recession, tradespeople can rely on unemployment income, so there is limited incentive to change the amount they are willing to accept to work. Because of these conditions, even in times of economic pullback, construction costs remain relatively stable.

producer price index

In March 2024, the Federal Reserve Bank of St. Louis indicates a 0.38% rise in the PPI for net inputs to residential construction goods. With a YoY increase of 1.87%, this is a bit higher than index pricing for the same time last year.

Lumber -3.46% YoY

The cost of lumber has been on a downward trend since 2020. However, increased building activity over the last quarter has driven costs up a bit.

Concrete +6.17% YoY

Prices for concrete are peaking with no signs of going down. This is primarily due to a high demand and limited supply.

Steel -5.8 % YoY

The cost of steel has continued to stabilize, currently sitting just below the 3-year highs we’ve seen.

Glazing +0.9% YoY

Glass has remained fairly stable in pricing, with no significant change since last year.

Local Labor Costs - Chelan, WA

We are seeing a steady increase in labor costs in Chelan, with the average residential labor rate going up 8.28% YoY. This is in contrast to the decrease we saw last Spring and the decreases being experienced in some of the harder-hit housing markets. In a select marketplace like Chelan, capable tradespeople are in high demand.