A newly built house costs more than it did a year ago, and only a small share of builders avoided any increase. According to the July 2026 NAHB/Wells Fargo Housing Market Index, material costs rose 6.7% compared with the same period in 2025. That matched the 6.7% increase in the Producer Price Index tracking materials for newly built homes, including energy costs.
Builders were asked how much more they paid to construct the identical house this year versus last year. 72.9% said the cost of materials required to build the same house had risen by 15% or less. That means the price squeeze was widespread, not limited to one region or type of builder.
The degree of pain varied considerably. The largest share of builders, 28.4%, saw costs rise between 5% and 9.99%. Another 22.4% reported an increase under 5%, while 22.1% experienced a jump of 10% to 14.99%.
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Meaningful. Even when energy is excluded, the Producer Price Index for residential construction goods rose 5.0%. The median annual increase was 6.7%, which lines up with the broader index. The spread across categories shows that some companies managed to contain yawning while others faced much steeper bills.
The size of a construction firm was a major factor in the cost climb. For builders who began no more than five homes in 2025, the median material-cost increase was 9.1%; for firms with at least 100 starts, it was 1.8%. That stark gap reflected purchasing power.
Larger firms can often lock in supplier contracts, buy in bulk, and carry larger inventories. Smaller operations do not have that type of market leverage. They tend to pay the prevailing price each time they purchase lumber, concrete, and electrical supplies. As those prevailing prices climb, the smaller builder feels the pressure more quickly.
For investors, the difference between 1.8% and 9.1% is important. Public homebuilders may be able to shield their margins from a modest cost increase. But smaller private contractors, who make up a substantial part of the housing market, cannot easily do so. Those higher costs may push up home prices or reduce builder profit margins.
For context, the survey asks builders to compare the cost of building the same house year over year. The July 2026 reading therefore reflects conditions across the industry, not just one segment.
For anyone buying a new home, the situation is straightforward. When the underlying materials become more expensive, someone in the chain eventually pays. Builders generally cannot absorb higher cost in quiet for long. As long as material prices continue moving upward, prospective buyers should expect the effects to show up in their prices.
In short, rising construction costs are real, widespread, and hitting smaller builders especially hard. Keep an eye on material prices, because they are a clear signal for margin and pricing trends in the housing market.
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