Pallet of wood planks.

Widespread shortages on building materials continue to prompt home builders to raise their prices. Material prices have increased by 26% over the past year for building the same house, according to National Association of Home Builders data. That’s put pressure on new-home prices: In May, the median price of a newly built home was 18% higher than a year ago, at $374,400.

Material shortages have increased for appliancespaint, lumber, and more.

To help offset these higher prices, builders are raising their prices and pre-ordering items, according to the latest monthly survey of the NAHB/Wells Fargo Housing Market Index.

Forty-five percent of builders surveyed are also adding in price escalation clauses to protect themselves from rising prices during the process but passing those higher costs on to buyers.

A bar chart graphing the various build reactions to shortages and price increases in building materials

Also, 39% of builders say they are waiting until late in the construction process to list a spec home in case prices increase more.

Some of the highest increases in material costs have been in lumber. Some builders have even changed their building methods as a result. Some builders are switching from traditional wood framing to other materials. Seventeen percent of builders said they were considering switching to steel, 16% to structural insulated panels, 14% to insulated concrete forms, and 8% to concrete masonry.

However, lumber prices have started to fall, now dropping for eight consecutive weeks. Lumber prices are now down more than 50% from their peak in early May.

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