A single survey question, split by size

Building material costs rose 6.7% over the trailing twelve months according to the median builder responding to the July NAHB/Wells Fargo survey, in findings published August 26. That median conceals a spread that is the real finding.

Broken out by company size, the median reported increase ranged from 9.1% among builders that started five or fewer homes in 2025 to 1.8% among those that started more than 100. The smallest builders reported cost inflation roughly five times that of the largest.

Across all respondents, 72.9% reported cost increases of up to 15% over the year, with the most common bracket being 5% to 9.99%, cited by 28.4% of builders.

Why scale changes the price paid

Analysis: the same lumber, drywall and windows are available to every builder in a market, so a 7.3 point spread in reported cost inflation is not about the materials. It is about purchasing terms.

Large builders negotiate national supply agreements, commit to volumes months ahead, and in some cases hold contracts that fix prices for a period. A builder starting fewer than five homes a year buys at or near list price from a local supplier, with no forward commitment to trade against.

In a period of rising input prices that difference compounds. The large builder's contracted price lags the market upward; the small builder's price moves with it immediately. In a falling market the advantage reverses, which is part of why small builders can undercut on price in a downturn.

Corroboration from the price data

The 6.7% median figure matches the producer price index for goods used in new residential construction, which was also 6.7% higher year over year in July. Excluding energy, that PPI measure rose about 5%.

That correspondence is worth noting because the two measures are built entirely differently: one is a survey of builders' perceptions of their own costs, the other a statistical index of transaction prices collected from suppliers. Agreement between a subjective and an objective measure of the same quantity raises confidence in both.

The BLS construction materials special index moved in the same direction over the same months, rising from 355.5 in March to 374.0 in July.

The competitive consequence

Small builders account for a meaningful share of single-family construction, particularly infill and custom work in established neighborhoods where large builders' land-acquisition model does not apply.

A cost disadvantage of seven points in a single year, arriving at the same time as national data showing builders cutting prices by an average of 6% and offering incentives on two-thirds of sales, squeezes that segment from both ends. Small builders cannot match large builders' concessions from a higher cost base.

NAHB also reported on September 8 that it had begun fielding a new Cost of Constructing a Home survey. No updated dollar benchmarks from that effort had been published by the close of this edition's reporting window, so the per-house cost breakdown for 2026 is not yet available from that source.