Smaller Homebuilders Face Higher Construction Material Costs

U.S. homebuilding costs increased by a median 6.7% over the past 12 months, according to results from the July 2026 NAHB/Wells Fargo Housing Market Index survey, but the increase varied sharply by builder size. Builders that started five or fewer homes in 2025 reported a median 9.1% increase, compared with 1.8% among builders with 100 or more starts.

Key Takeaways

• Building material costs for the same house increased by a median 6.7% over the past year.
• A total of 72.9% of surveyed builders reported material-cost increases of up to 15%.
• Builders with five or fewer home starts in 2025 reported a median material-cost increase of 9.1%.
• Builders with 100 or more starts reported a median increase of 1.8%.
• The July Producer Price Index showed a 6.7% annual increase in goods used in new residential construction, including energy.

Material Costs Increased 6.7% for the Same House

The July 2026 NAHB/Wells Fargo Housing Market Index survey found that the median annual increase in material costs for the same house was 6.7%. The survey measured how homebuilders reported changes in the cost of materials used for comparable construction over the previous 12 months.

The survey also showed that material-cost increases were widespread among participating builders. A total of 72.9% reported that the cost of materials for the same house had increased by up to 15% during the year.

The largest group of respondents, representing 28.4% of builders, reported material-price increases between 5% and 9.99%. Another 22.4% reported an increase of less than 5%.

A further 22.1% of respondents reported increases between 10% and 14.99%. Together, those figures account for the 72.9% of builders reporting increases of up to 15%.

The survey’s median figure provides a measure of the typical reported change, while the distribution of responses shows that individual builders experienced different levels of cost increases.

The 6.7% median increase also matched the annual increase in the price of goods used in new residential construction, including energy, reported in the July Producer Price Index. That comparison places the builder survey results alongside a federal measure of prices for construction inputs.

Recent coverage of higher construction material costs has also examined expenses for materials including copper, lumber, diesel fuel and aluminum, providing additional context for the costs builders face across different stages of residential construction. 

Smaller Builders Reported the Largest Cost Increases

Builder size was associated with a substantial difference in reported material-cost increases. Companies that started five or fewer homes in 2025 reported a median annual increase of 9.1%.

That figure was the highest median increase identified in the NAHB survey’s breakdown by builder size. It was also 2.4 percentage points above the overall 6.7% median reported across the survey.

The difference becomes more pronounced when compared with the largest builder category. Companies that started 100 or more homes in 2025 reported a median material-cost increase of 1.8%.

The gap between the two groups was 7.3 percentage points. The survey therefore showed that the reported increase in material costs varied considerably according to the number of homes a builder started.

The results concern material costs for the same house, rather than a comparison of the prices of different types or sizes of homes. This distinction is relevant because the survey is measuring changes in construction-material expenses rather than changes in the selling price of completed homes.

The survey also does not establish that every small builder experienced a 9.1% increase or that every large builder experienced a 1.8% increase. The figures are median results for the respective builder-size categories.

Larger Builders Recorded Lower Material-Cost Growth

The NAHB survey recorded a substantially lower median material-cost increase among builders with 100 or more starts in 2025. Their reported increase was 1.8%, compared with 9.1% for builders with five or fewer starts.

NAHB identified several factors that may help explain the difference in reported costs. Larger homebuilders may have greater capacity to stockpile materials when they anticipate price increases.

Stockpiling can give a builder access to materials purchased before a subsequent price increase. The NAHB report identifies this as one possible factor behind the lower median increase reported by larger builders.

Longer-term supplier contracts were another factor cited by NAHB. Such contracts can lock in current prices for an extended period, which can affect the timing at which higher material prices reach a builder’s costs.

Supplier relationships were another factor identified by NAHB. Larger builders may be more likely to have established relationships with particular suppliers, giving them opportunities to negotiate deferred price increases.

These factors relate to purchasing arrangements and supply management rather than a change in the underlying material itself. The survey results show the difference in reported costs by builder size, while the NAHB analysis provides possible explanations for that difference.

The distinction matters when interpreting the survey. The reported 9.1% and 1.8% figures describe median annual changes in material costs for two different builder-size groups. They do not represent a national price increase that applies equally to all homebuilders.

Builder Size Affects Access to Materials and Supplier Terms

NAHB’s explanation of the survey results focuses on the purchasing advantages that can be available to larger homebuilders. The organization said larger builders may have more ability to stockpile materials when they anticipate price increases.

Stockpiling can give a builder access to materials purchased before a subsequent price increase. The NAHB report identifies this as one possible factor behind the lower median increase reported by larger builders.

Longer-term supplier contracts were another factor cited by NAHB. Such contracts can lock in current prices for an extended period, which can affect the timing at which higher material prices reach a builder’s costs.

NAHB also cited supplier relationships. Larger builders may have special relationships with certain suppliers that allow them to negotiate deferred price increases.

The survey does not assign a specific portion of the 7.3-percentage-point difference between the smallest and largest builder groups to any one of these factors. Instead, NAHB identifies them as possible reasons that material-cost increases differed according to builder size.

The distinction is relevant to the measurement of homebuilding costs because the price paid for a material can depend on the purchasing arrangements available to a builder. Builders operating at different scales may therefore report different cost changes even when they are purchasing materials for residential construction.

Recent housing coverage has also examined new home construction and supply, including the role residential building plays in expanding the number of homes available to buyers. 

The survey results therefore provide a cost-side measure of conditions affecting builders, while housing-supply data provide a separate measure of how construction activity affects available homes.

Construction Input Prices Also Increased in July

The builder survey’s 6.7% median increase corresponds with the annual change in goods used in new residential construction reported in the July Producer Price Index. The PPI measure included energy and showed a 6.7% increase over the same period.

When energy was excluded, the PPI for goods used in new residential construction increased by 5%.

The comparison provides two measures of construction input costs. The NAHB/Wells Fargo survey captures builders’ reported changes in material costs for the same house, while the PPI tracks changes in prices for goods used in new residential construction.

The two measures therefore do not represent identical data. The matching 6.7% annual figure provides a direct comparison between the median material-cost increase reported by builders and the PPI increase that included energy.

The difference between the overall PPI measure and its energy-excluded figure also shows the effect of energy prices within the broader measure. Goods used in new residential construction increased 6.7% when energy was included and 5% when energy was excluded.

For homebuilders, the NAHB survey provides the more direct measure of reported changes in material costs for the same house. Its builder-size breakdown adds information that is not contained in the single overall median.

The reported figures establish that smaller builders experienced the highest median increase among the size categories identified in the survey. They also show that the difference was substantial compared with the reported result for builders with 100 or more starts.

Construction expenses also intersect with housing affordability. A recent analysis of U.S. housing affordability reported that higher construction costs were among the factors affecting affordability alongside mortgage rates and home prices. 

Frequently Asked Questions

How much did homebuilding material costs increase in 2026?

The July 2026 NAHB/Wells Fargo Housing Market Index survey reported a median 6.7% annual increase in material costs for the same house. The figure covered the previous 12 months.

Which U.S. homebuilders reported the highest material-cost increases?

Builders that started five or fewer homes in 2025 reported the highest median increase among the builder-size categories identified in the survey. Their median annual increase was 9.1%.

How much did material costs rise for smaller homebuilders?

The smallest builders in the NAHB survey reported a median 9.1% increase in material costs over the previous 12 months. This compared with a 1.8% median increase among builders with 100 or more starts.

Why were material-cost increases lower among larger builders?

NAHB identified several possible factors, including larger builders’ ability to stockpile materials, negotiate longer-term supplier contracts and maintain supplier relationships. The survey does not assign a specific share of the difference to any one factor.

How did July construction-material prices compare with the previous year?

The July Producer Price Index showed a 6.7% annual increase in goods used in new residential construction when energy was included. Excluding energy, the increase was 5%.