Hurricane Ian and other pressures drive uptick in reconstruction costs

October 19, 2022 / 3 min read

Verisk recently released its latest 360Value^® Quarterly Reconstruction Cost Analysis, which offers an overview of current reconstruction cost trends at the national and state levels for the United States from October 2021 to October 2022.

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Costs remain high amid continuing inflation, supply shortages, and labor strains following catastrophic events like Hurricane Ian.

Total reconstruction costs, including materials and retail labor, increased by 9.3% from October 2021 to October 2022. This uptick follows the 3% jump from July 2021 to July 2022. Costs remain high amid continuing inflation, supply shortages, and labor strains following catastrophic events like Hurricane Ian. Lumber—a persistent cost driver in recent years—increased moderately at 6%, whereas interior trim and roofing components rose as high as 18%. Quarterly reconstruction costs increased by 1.1%, a slight shift from the 1% decrease last quarter.

Hurricane Ian spurs rising costs in states

Residential and commercial reconstruction costs increased in all states; with costs in Florida and South Carolina rising the most. Both states were significantly impacted by Hurricane Ian—which made landfall in Florida as a Category 4 storm on September 29 and again in South Carolina as a Category 1 on September 30. On a more regional scale, select cities in these states saw significant uptick, such as Ft. Myers, Sarasota, Spring Hill, Myrtle Beach, and Charleston.

For residential reconstruction costs, Florida and South Carolina rose at 13% and 12.6%, respectively. Louisiana's rank changed the most significantly, falling from the fourth-highest residential cost increase in July 2022 to the 51^st in October 2022 (the smallest increase). Residential costs were up 7.1% in Louisiana year-over-year.

Residential Reconstruction Costs

For commercial reconstruction costs, Florida and South Carolina led at 11.9%, and 9.9%, respectively. New Mexico rounded out the top three at 8.9%. Louisiana had the largest shift in rank, down from the second-highest cost increase in July 2022 to the 47^th in October 2022, with prices rising 6.1% year-over-year. In last place, Connecticut's costs increased by 5.5% between October 2021 and October 2022.

Commercial Reconstruction Costs

Lumber-derived goods still on trend

Combined costs for material composites increased 11.5% from October 2021 to October 2022—a strong surge following a 0.8% gain from July 2021 to July 2022. Interior trim and roofing were the primary drivers of increases across all categories; both rose by more than 18%. This is partly reflected in the costs of interior doors, crown molding, and wooden shakes, all of which are lumber-derived.

Drywall costs rose by 12.6%. Paint costs rose by 13.8%, driven by stains, sealers, and primers. Lumber costs rose by 6.3%, a moderate change compared to the 28.7% increase from April 2021 to April 2022.

Labor strains exacerbated

Combined hourly retail labor costs increased by 9.8% from October 2021 to October 2022, keeping pace with the increase recorded from July 2021 to July 2022. Labor costs reflect the strain in worker shortages following recent catastrophic events—particularly in states impacted by Hurricane Ian.Drywall installer/finisher and roofer costs increased the most: 11.6% and 10.4%, respectively.

How is your property book holding up to the latest inflation surges?

Ensuring insurance to value (ITV) is good for you and your policyholders: They’re better protected in the event of a total loss, and you collect premiums appropriate to the risk. Amid record-breaking increases in reconstruction costs and growing inflationary pressures, 360Value can deliver a review of your book of business. Sign up today if you are interested.