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Impact of Inflation and Supply Chain Problems on Residential Construction 

February 25, 2022




Since the outbreak of the COVID-19 pandemic, many industries have had to deal with supply chain problems, shortages of materials, and rising inflation rates. Additionally, labor shortages and natural disasters have further compounded these problems, resulting in a market where materials are expensive and sometimes difficult to acquire. In this article, we will discuss the impact of rising inflation rates and supply chain problems on the residential construction industry.

What Is Inflation?

To begin this discussion, we first must define exactly what inflation is, and why it can be a bad thing. Economic inflation generally refers to an increase in the prices of goods and services, resulting in a decrease in the buying power of one dollar. Some inflation is actually a good thing, as an inflation rate of about 2% is generally indicative of a healthy and growing economy. In the US, our average inflation rates for 2018, 2019, and 2020 were 2.4%, 1.8%, and 1.2%, respectively. However, 2021’s average inflation rate came in at 4.7%, with rates as high as 7% in December. This results in the cost of goods increasing, making new construction and home renovations more expensive.

Supply Chain Problems

A supply chain is the sequence of steps involved in the production and distribution of a good. The supply chain for construction materials is still suffering from the impact of COVID-19; labor shortages, social distancing protocols, and facility closures have greatly reduced the production capacity of the goods needed in residential construction. These labor shortages have also impacted the transportation industry, resulting in increased freight costs across all industries. Additionally, many ports are still struggling with significant congestion as a result of last year’s hurricanes, further delaying goods from reaching their destinations. The issues experienced in the supply chain of construction materials ultimately result in higher prices, meaning that building or remodeling your home will cost more.

What Should I Do?

While it may be tempting to try and wait out the current increase in prices of materials, the reality is that prices are likely to continue to increase for the foreseeable future. This means that if you have a renovation project you have been wanting to do, now is the best time to get started. While working with experienced and trustworthy contractors is always important, it is absolutely crucial to find the right team for your renovation during periods of inflation and material shortages. For the best experience in Middle Tennessee, trust RSU Contractors with your next big project! RSU offers a unique pricing model called the “Cost Plus Program.” This system leverages the 40 years of experience RSU has to offer – RSU will propose a budget based on the scope of your project. Once the project begins, RSU will communicate all of the costs of the renovation and bill twice monthly – this maximizes transparency by showing where every dollar you spend goes. This program also allows you to get started on your project faster by not having to wait for the plans to be fully fleshed out. There are always going to be fluctuations in the budget based on changes and unknown factors, but this program allows the customer to stay in constant communication with RSU throughout the process. RSU Contractors has been servicing Middle Tennessee for 40 years – with high quality results and impeccable service, you can trust us with your dream renovation.

Furthur reading: Why You Should Stop Waiting to Renovate Your Home