What’s Behind Rising Construction Prices in California?

Labor shortages, energy policies, and other factors behind rising construction costs.

Have you recently experienced sticker shock on a house project or construction job? Over the past four years, construction costs in California have gone up an average of 40%. That means a project that would’ve cost $100,000 a few years ago now could easily hit $140,000 or even more.

The common question I’m getting is "What in the world has happened to construction?" To answer that, I am sharing the reasons behind the rising costs, some of the incoming Trump policies, and a few other factors that will impact the cost of construction over the next several years:

1. New energy policies. If you’re looking for a silver lining, the good news is there’s a potential for prices to come down as Trump attempts to produce more oil and energy. This can lower transportation costs, which gives a chance for material prices to follow suit and also start decreasing.

“If you’re thinking about doing a house project, it’s a good time to take a serious look at it now before our labor market starts drying up.”

2. Labor shortages. The part I’m concerned about moving forward is the labor side of things. I think we’re probably going to see a shortage of labor in the next few years because of the potential deportations and slowing of immigration. Americans are going to need to step in to do the job, and that means the job is probably going to cost a little more. Not that it’s a bad thing, but it is something to keep in mind.

3. Contractor shortages. Another factor impacting labor, especially here in California, is the aftermath of the LA fires. As reconstruction efforts begin elsewhere, the availability of contractors here in Orange County is likely going to dry up.

So, what do these all mean for you? If you’re thinking about doing a house project, an add-on, a remodel, or even building from scratch, it’s probably a good time to take a serious look at it now before our labor market starts drying up. It can be a tough decision, but I’m here to answer any questions you have or I connect you with a trusted contractor if you need one. Just give me a call at (949) 835-4713 or send me an email.