The State of Construction Pricing: 2025 Predictions

As we settle into 2025, the question I hear most from clients—both current and prospective—is, “What’s happening with the construction market? Are prices trending up or down?” Frankly, it’s not a simple question to answer with certainty. Let’s dive into the trends and what they might mean for the year ahead.

A Year of Mixed Signals

Earlier in 2024, particularly in the second and third quarters, we saw notable reductions in market pricing from subcontractors and suppliers. Many companies, facing fewer opportunities, were eager to secure real sales. Here in Florida, for instance, we managed to meet an aggressive target budget by aligning with the right residential subcontractors and vendors hungry for work. It required significant effort, but the contract was signed, permits were pulled, and the project is underway.

However, the tide has shifted more recently. Subcontractors who had previously bid aggressively to win contracts are now becoming flush with work. As a result, they’re less inclined to compete on tighter margins, which could signal a cooling in labor market competitiveness.

The Annual Price Adjustments Are Here

This time of year, contractors typically receive notifications from manufacturers, vendors, and suppliers about pricing adjustments for the coming year—and those adjustments almost always point in one direction: up. Already, Owens Corning has announced a 6% price hike on many insulation materials effective January 2, 2025.

The big question is whether competitive labor pricing can offset these material cost increases. As of now, both our Ohio and Southeast offices are actively pricing multifamily, senior living, and skilled nursing projects, which will provide us with fresh data as we navigate through 2025.

Predictions for 2025

While industry reports like Dodge and ConstructConnect project an 8%+ increase in construction starts for 2025, growing uncertainties are tempering optimism. Recent interest rate cuts initially spurred hope for favorable conditions in the new year. However, fears of inflationary pressures and reduced government spending have begun to creep back into the conversation.

Arguably the biggest wildcard for 2025 is the potential implementation of significant tariffs by President-elect Donald Trump. In interviews leading up to the election, he emphasized plans to impose tariffs on imported goods, but the specifics remain unclear. These details are likely to emerge in the first quarter of the new administration.

If these tariffs come to pass, they will undoubtedly add pressure across the industry—impacting developers, general contractors, subcontractors, and suppliers alike. Supply chain disruptions, particularly with critical items like electrical equipment, have been a challenge over the past few years. The thought of additional cost impacts or delays in 2025 is less than appealing.

Share Your Perspective

What are your predictions for 2025? Whether you’re a developer, subcontractor, supplier, or manufacturer, we’d love to hear your insights. What excites you about the coming year? What challenges are you bracing for? Let’s navigate the year ahead together and continue building strong partnerships to tackle whatever comes our way.