Total U.S. Reconstruction Costs Up 5.2% Over Past Year: Report

Total reconstruction costs in the U.S., including materials and retail labor, increased by 5.2% from July 2023 to July 2024, according to Verisk’s “360Value Quarterly Reconstruction Cost Analysis Q3 2024: United States” report. “This represents a significant increase over cost growth from July 2022 to July 2023 (4.0%) and over cost growth in Q2 2024 (1.6%).” Meanwhile, for the first time in years, labor costs grew less than material costs. “While labor costs grew 4.31% from July 2023 to July 2024, material costs rose 4.35% in that time frame.” 

Residential Reconstruction Costs

“Total residential costs increased 4.9% from July 2023 to July 2024 and 1.4% from April 2024 to July 2024,” the report states. “Residential reconstruction costs increased year over year in all states. New Hampshire had the largest increase at 9.59%, followed by Colorado (9.05%) and Nebraska (6.37%).”

According to the report, “Nevada’s rank changed most significantly, going from lowest cost increase in April 2024 to the 12^th-highest in July 2024; costs were up 5.58% in the state year-over-year.” Likewise, South and North Dakota had drastic changes, rising to fifth and 14^th highest, respectively, with residential costs rising by 6.29% in South Dakota and 5.43% in North Dakota.

Vermont, the report notes, experienced the largest drop, however, moving from eighth to 36^th place with a residential cost increase of 4.13%. Likewise, “Wisconsin went from 30^th to 50^th place with a cost increase of 3.54%, and Michigan dropped from 14^th to 33^rd with a 4.19% increase.”

Commercial Reconstruction Costs

“Total commercial reconstruction costs increased 5.5% from July 2023 to July 2024 and 1.8% from April 2024 to July 2024,” according to the report. “Commercial reconstruction costs increased by at least 3.42% in all states. As with residential costs, New Hampshire had the largest increase at 12.38%, followed by Colorado at 11.57%. Massachusetts had the third-highest commercial cost increase at 8.89%.”

Nevada, the report finds, “had the most significant rank jump, moving from 46^th to ninth place with increases of 6.91%. South Dakota rose from 36^th to 12^th with cost increases of 6.47%, while Oregon rose from 28^th to eighth, rising by 6.97%. Michigan saw the largest downward change, going from 16^th to 46^th place with a 3.73% increase, and Illinois dropped from 24^th to 43^rd place with a 3.95% cost increase.”

Material Cost Analysis

“Material costs rose by 4.35% from July 2023 to July 2024, though that growth wasn’t evenly distributed by month. Material cost increases are accelerating compared to 2023: growth from January 2024 to July 2024 has already surpassed the total growth for 2023, increasing 1.75% compared to 2023’s total of 1.20%,” according to the report. If this trend continues, material costs will have an increase of 3.00% in the U.S. for 2024—over double 2023’s growth, the report notes.

Labor Cost Analysis

Combined hourly retail labor costs increased by 4.3% from July 2023 to July 2024, a significant drop from their 6.2% increase from July 2023 to January 2024, according to the report. “However, the quarterly change was 1.36% compared to last quarter’s 1.05% increase.”

This quarter, according to the study, labor costs had the largest monthly growth in July, increasing 0.55%. “Last quarter, the largest monthly increase was 0.38%. Similarly, the average monthly increase this quarter was 0.43%, while the average monthly change last quarter was 0.25%.”

“The report highlights what consumers already know—that the cost of construction and building materials is climbing rapidly, which, of course, will translate into higher property insurance costs as carriers are forced to adjust premiums to account for this cost escalation,” says CLM Member James H. Cole, Esq., assistant director of the Professional Liability Department and chair of the Insurance Services Practice Group at Marshall Dennehey.