Construction Costs Have Risen Sharply

The Cotality Cordell Construction Cost Index recorded a 1.7 percent increase during the September quarter.

Updated on Oct. 7, 2026 in Construction

Isometric editorial illustration of steel I-beams and wooden lumber stacks on a construction site, symbolizing rising building costs. — Rising material costs and global supply chain pressures pushed construction expenses for new homes up by 1.7 percent during the third quarter of 2026. AI Illustration. Upload story photo >

Live Poll

Do you believe now is a good time to build a new house?

Building costs for new homes rose 1.7 percent in the third quarter of 2026, reaching an annual growth rate of 4.8 percent. These price hikes follow a period where construction firms were forced to pass on increased expenses for fuel, freight, and materials.

Why it matters

The rise in construction expenses is largely attributed to higher surcharges resulting from the US-Iran conflict, which impacted global supply chains. As costs remain elevated, builders are moving away from fixed-price contracts to ensure these economic pressures are accounted for in final project pricing.

Materials account for 50 percent of the construction cost index, while labor wages represent 40 percent. Meanwhile, 12-month dwelling consents have surged from 34,000 to over 40,000.

The players

Cotality Cordell Construction Cost Index

This index tracks and reports fluctuations in the costs associated with the construction industry.

The details

Building firms are increasingly passing costs for freight, fuel, and materials to end consumers after previously absorbing these expenses on fixed contracts. While new home construction remains active, these ongoing price pressures continue to challenge builders.

Construction costs rose 1.7 percent in the September 2026 quarter.
The last period with a faster quarterly cost increase occurred in 2022.

Construction
Sept. 18
Single-Family Housing Starts Rose in August
Residential
Sept. 29
National Home Prices Rose 1.9 Percent in July
Residential
Sept. 18
30-Year Mortgage Rates Have Reached 6.95 Percent

Market Landscape

The current quarterly cost increase of 1.7 percent remains below the record-setting pace established by the 2022 construction cost index peak. This shift forces building firms to reconsider contract structures as they navigate ongoing volatility in global material pricing.

Homebuyers can expect upward pressure on the final price of new residential projects as builders continue to pass on elevated material and fuel costs. These changes make it increasingly difficult to secure the fixed-price contracts that were common in previous years.

The takeaway

Builders are increasingly moving away from fixed-price models to protect against volatile material and fuel surcharges. Prospective homeowners should account for potential price fluctuations when planning new residential construction projects.