The cost of building materials has surged in recent years, putting real pressure on builder profits. According to the National Association of Home Builders (NAHB), construction expenses now make up more than 64% of the average new home price — the highest share on record.

When margins are tight, strategic planning and smart sourcing can keep your projects affordable without compromising the quality that buyers expect.

Design for efficiency

Significant cost savings start at the drawing board. Simple design choices can reduce material requirements while creating homes that buyers prefer.

  • Simplify layouts. Design homes with rectangular or square footprints. Straightforward designs with fewer corners, angles and complex roof lines need less framing lumber, roofing materials and labor.
  • Embrace open floor plans. Fewer interior walls mean less lumber, drywall, insulation and finishing materials, while creating a spacious feel for potential buyers. Open concepts also reduce the number of electrical runs and can simplify HVAC distribution.
  • Strategically place major systems. Centralize HVAC units and water heaters to minimize ductwork and piping runs. Similarly, grouping water-intensive areas like bathrooms, kitchens and laundry rooms lowers plumbing costs by keeping supply and drain lines concentrated rather than spread throughout the house.

Use modern construction methods

Modern construction approaches can slash both material and labor expenses and improve quality control.

  • Consider prefabricated construction. Factory-built components reduce on-site labor, shorten construction time and limit weather delays, lowering costs by up to 20%. This approach also typically produces less waste.
  • Explore alternative materials — such as engineered wood products instead of traditional hardwood and recycled steel, plastic or concrete — which can provide substantial savings while meeting building codes and performance requirements. These options also attract environmentally conscious homebuyers.

Optimize supply purchasing

Strategic procurement can make or break your project's profitability. The key is striking a balance between cost savings and maintaining a reliable supply chain.

  • Buy in bulk when your volume and storage capacity allow. Purchasing larger quantities during low-price periods protects against market spikes. Accurate forecasting and historical usage data help ensure you buy the right amounts at the right time.
  • Develop local sourcing relationships to cut transportation costs and support your local economy. Local suppliers often provide faster delivery, greater flexibility for urgent needs and valuable market insights about upcoming price changes or supply shortages.
  • Diversify your supplier network. You may be able to secure discounts by leveraging existing supplier relationships, but sometimes, buying dynamically based on cost and availability can make a substantial difference.
  • Secure long-term contracts to protect against fluctuating material prices. Locking in rates through these agreements safeguards budgets from sudden cost increases and ensures a more predictable expense structure for your projects.

Streamline operations

Operational efficiency often provides the quickest return on investment through waste reduction and error prevention.

  • Reduce material waste by ordering only what you need, storing supplies properly and recycling and reusing excess materials wherever possible.
  • Limit change orders after an order has already been placed. Design or material changes made after procurement can take a toll on your budget and timeline. Establish clear approval processes and reserve modifications for genuine emergencies or critical errors.
  • Leverage technology. Supply chain management software can help track inventory, anticipate shortages and find alternative materials when prices rise.

Turning strategies into savings

Rising material costs are a reality, but if you adapt, you can protect profit margins while still delivering quality homes buyers want. Start by implementing one or two of these approaches and track the results to identify which methods deliver the best ROI for your market and projects.