Home Construction Costs in 2026: Current & Upcoming Trends

Building a home is one of the most significant projects you can undertake, whether you're a seasoned builder or a first-time homeowner. 

But with material prices and labor costs constantly shifting, how do you plan a budget you can stick to? To avoid unexpected expenses and make informed decisions, it's crucial to understand the forces driving construction costs. This guide will walk you through the key trends and factors, empowering you to build with confidence. 

What Does the Building Process Cost?

Before we discuss the trends influencing construction costs, let's look at the primary cost components you should account for when budgeting for a new house. 

• Land cost, including land preparation: These encompass the purchase price of the land, as well as the costs for clearing, grading, and preparing the site for construction. Additionally, expenses for connecting utilities like water, sewer, electricity, and gas are included.
• Foundations: Costs in this category cover excavation, the materials required (such as concrete and rebar), and labor for pouring and constructing the foundation. The type of foundation (slab, crawl space, or basement) affects the material required per square foot and significantly impacts the cost.
• Framing: Framing costs include the lumber and other structural materials needed to build the house's skeleton and the labor to erect the frame. This stage also covers roof trusses and other structural components.
• Exterior and interior finishes: Exterior finishes involve the roofing, exterior siding, windows, and exterior doors. Interior finishes include insulation, drywall, painting, flooring, interior doors, trim, cabinetry, and countertops.
• Major systems installation: This category includes the installation of HVAC (heating, ventilation, and air conditioning), plumbing fixtures, and electrical systems.
• Building permits and fees: Obtaining the necessary building permits and paying associated fees is a mandatory part of the process, which also includes inspection fees and, in some cases, impact fees that contribute to local infrastructure.
• Professional services: Costs here cover the fees for architects or designers who create house plans and architectural drafts, engineers who ensure structural integrity, and project managers who oversee the construction process. These services ensure that the project meets all design and safety standards.
• Labor: Includes payments to general contractors, subcontractors, and tradespeople who work on different aspects of the project, from laying the foundation to installing major systems and finishing the interiors.

Understanding these cost centers helps home builders budget more effectively and prepare for the financial commitment required to build their dream home.

Construction Material Cost Trends

In 2026, global and domestic economic factors will continue to influence construction material prices. Labor shortages, rising costs for materials such as lumber, gypsum, and steel, and shifts in demand will all play a role in budgeting future home building projects.

Rising Prices

Many construction material prices have increased over the last year; specifically, the cost of imported materials. While prices are expected to continue rising, the industry is still seeing the same issues as the previous year, notably due to trade issues and labor shortages.

• Steel mill products: Not only is it becoming pricier to import steel, but even major domestic companies are increasing their costs by 16%. That’s because the industry is facing weakening demands and growing competition with international companies.
• Aluminum products: The price of aluminum is at a three-year high, costing on average $2,800 per ton. Supply issues are to blame, specifically when keeping up with the clean energy demand.
• Architectural copper: The price of copper is expected to reach $12,500/mt in the second quarter of 2026. This price increase is due to supply shortages that began in early 2025.
• Cement and concrete products: Imported cement will increase by $5-$10/t. Concrete products used in foundations, structural elements, and paving are used in nearly all construction projects, so the high average price of cement is particularly impactful. Cement has experienced price hikes due to high energy costs and increased transportation expenses.
• Insulation materials: The price of insulation depends on the chosen material. Certain materials, such as cellulose, are experiencing more demand, which will lead to higher production costs. Other insulation materials, such as fiberglass and foam boards, did face rising costs in 2025. That said, fiberglass is still the most budget-friendly insulation option.
• Construction machinery and equipment: Prices for imported construction machinery and equipment will rise by 45%, depending on its steel content. This machinery includes excavators, cranes, and loaders.
• Lumber and plywood: Lumber and plywood prices have been increasing, and prices will only rise more by Q2 2026. This is due to trade restrictions.

Uncertainty in the Industry

Uncertainty remains a defining characteristic of the construction industry. Material price volatility complicates project budgeting and financial forecasting, so keep these materials in mind when planning your building project.

• Plastic construction products: Prices for plastic construction products like PVC pipes and vinyl siding are remaining stable. That said, there is still a lot of uncertainty; the plastics industry is dependent on trade, but lower interest rates could also offer relief.
• Gypsum products: While gypsum has seen price increases over the past year, 2026 prices aren’t expected to change. That said, builders should still budget more, since the construction industry is facing heavy volatility.
• Asphalt felts and coatings: The cost of asphalt, specifically for roofing and siding, was volatile in 2025, and this same trend is expected to carry over in 2026. This is due to a tighter labor market, shifting supply chains, housing demand, and severe weather in various regions of the country.

Construction Labor Costs

The construction industry as a whole also faces uncertainty, specifically due to labor demand and costs. In 2025, 20% of subcontractors lost construction workers. This was largely due to a retiring workforce and less skilled labor among younger workers. As a result, construction employment will only increase by 0.3% in 2026.

Smaller crews don’t only equal higher costs, but potential construction delays. Builders should keep this in mind when planning a project.

Technology is also another key factor to budget for. Modern construction companies not only desire skilled labor but also demand workers that are experienced with technology like AI-based scheduling and project management software. This requires a hefty investment from subcontractors, and those fees will extend to the consumer.

Other Predictions for Construction in 2026

Looking ahead to 2026, there are other predictions that will impact the overall cost and volume of construction projects. Here are some of the biggest predictions for next year.

Reduced Interest Rates

In 2025, the Federal Reserve made three interest rates cut. For 2026, it’s anticipated there will be at least one more interest rate cut. Because of this, the housing market is expected to make a comeback after years of dealing with high interest rates—specifically, a 14% increase in home sales nationwide.

For home buyers who want to build their home, that means more demand from residential construction companies. This can cause a ripple effect, resulting in the additional problems we will discuss below.

Tariffs

As stated throughout this article, many of the most common building materials are imported from other countries. Since the U.S. is placing tariffs on several countries where these materials are procured, this will result in higher prices. For example, steel, aluminum, and copper all faced 50% tariffs.

Tariffs rose in 2025, but in 2026, there is a lot of uncertainty surrounding tariffs in building products. Because of aggressive trading policies, tariffs are still expected to increase building costs and delay projects for the next year. That said, construction is set to moderately expand in 2026, with nonresidential construction expected to grow by 3%. 

Competitive Hiring

One of the biggest reasons for construction price increases is a waning workforce. With many construction workers facing retirement, the industry is struggling to attract new workers.

To remain competitive, many construction companies are offering higher wages and expanded benefits. As a result, this will drive project costs even higher.

Increasing Market Demand

Rising prices and hesitant buyers are not encouraging for the construction industry, but the news isn't all bad. In spite of relatively expensive construction costs, demand for new homes is strong, driven by factors such as a housing shortage in many areas, remote work trends, and demographic shifts. Many people are now looking for homes that accommodate home offices and offer more living space.

Sustainability and Green Building

Homebuyers are also increasingly looking for properties that incorporate sustainable materials and energy-saving technologies. This demand for eco-friendly homes allows contractors who embrace green building to stand out from competitors, capturing a growing segment of environmentally conscious consumers.

Conclusion

The construction business and people looking to build their own house will face challenges in 2026, including rising material costs and labor shortages. However, interest rates are expected to decrease and demand for builders, general contractors, and tradespeople is surging.