I would like to make you aware that the cost to rebuild your home, in the event you suffer a catastrophic loss, has increased dramatically.
If you’ve shopped at Home Depot or Lowe’s lately, you’ve probably noticed that the price tag on building materials is higher than ever. In the first year of the pandemic, lumber prices alone jumped 42%. Concrete cost rose 14%. Steel mill products rose a staggering 81% in the first three quarters of 2021. Higher material costs naturally lead to more expensive bids on home repairs and new construction.
To make matters worse, the home-building industry is facing a shortfall of at least 200,000 skilled trade workers, which is driving up construction-related labor costs. About 60% of surveyed builders report a skilled labor shortage.
Why do I bring this to your attention? For many of you, your home is now underinsured. Before the pandemic and the current inflation, the cost to rebuild the average constructed home was approximately $175-$200 per square foot of living space. Today, after reviewing reconstruction appraisals of several of our current client’s homes, the number has jumped to $275-$300 per square foot of living space. If you have a custom built home or custom features the cost is even higher.
So let’s do a little math. Say you are living in a 2000 square foot house of average construction. You are probably insuring your home for around $400,000. If another fire hits Los Alamos this summer, like the Cerro Grande fire did, or like the one that ripped through Boulder CO at the beginning of this year, at the current construction costs, your 2000 square foot home with building materials and labor costs at $300 a square foot, would cost about $600,000 to rebuild.
A scary proposition.
What to do. You can increase the amount of insurance on your home at any time. You do not have to wait until your next policy renewal. Your insurance agent should be able to calculate the increase in premium to have your home properly insured. I would strongly advise you not to wait.
From what I have learned and have read, construction costs are not coming down anytime soon.