San Diego Construction Costs Rise 17%: Lumber Hits $872/MBF
TL;DR: Construction Costs Surge 17% in San Diego
Lumber prices hit $872 per thousand board feet (MBF) nationally—17.2% year-over-year increase—driven by 35.2% Canadian tariffs and lost mill capacity. San Diego labor costs rising 6-8% annually as workforce shortages intensify. Prefab construction offers 15-20% labor savings and 70% faster timelines. For cash buyers evaluating renovation properties, locking in Q1-Q2 2026 pricing beats waiting for the predicted Q3 lumber spike.
Lumber Prices Hit $872/MBF as Construction Costs Surge
San Diego builders and cash buyers are facing a perfect storm of rising construction costs in 2026. Framing lumber prices have reached $872.03 per thousand board feet (MBF) nationally, representing a 17.2% year-over-year increase that's squeezing renovation budgets and ADU development projects across Pacific Beach, La Jolla, and Mission Beach. While San Diego contractors report local pricing settling around $600/MBF, the trajectory points upward.
The culprit? Canadian lumber tariffs have doubled to 14.63%, creating a combined duty rate of 35.2% when factoring in existing anti-dumping measures. This comes as North American mills have lost 5 billion board feet of production capacity since 2023, creating supply constraints that industry analysts predict will trigger another price spike in Q3 2026. For cash buyers evaluating renovation properties in Ocean Beach or North Park, these material cost pressures directly impact flip profitability and ROI calculations.
Labor Costs Rising 6-8% Annually in San Diego Market
Material costs tell only half the story. Construction labor—which comprises 35-39% of total building costs in San Diego—is rising 6-8% annually as workforce shortages intensify. Skilled trade wages are climbing faster than inflation, with construction wages exceeding 4% annual increases even as broader economic wage growth remains more moderate.
The labor crunch hits particularly hard in California, where foreign-born workers constitute 35-40% of the construction workforce. Tighter immigration policies are further constraining labor supply just as San Diego's housing shortfall drives demand. For ADU developers in Hillcrest, University Heights, or Normal Heights, these dual pressures—rising lumber and escalating labor costs—are forcing a strategic pivot toward construction methods that reduce on-site labor requirements.
Prefab and Modular Construction Offer 15-20% Labor Savings
San Diego builders are increasingly turning to prefabrication and modular construction to combat cost inflation. These factory-built approaches reduce on-site labor needs by 15-20%, offering meaningful savings in a market where labor accounts for over one-third of project budgets. Modular construction also accelerates timelines—what once offered 40-50% time savings now delivers 70% faster completion compared to traditional stick-built methods.
For cash buyers purchasing properties in South Park or Pacific Beach for renovation or ADU development, the math has shifted. Locking in material pricing before the anticipated Q3 2026 lumber spike and leveraging prefab construction methods can mean the difference between profitable projects and budget overruns. The window for favorable pricing is narrowing as supply constraints and tariff impacts work their way through the construction supply chain.
FAQ: San Diego Construction Costs 2026
What's driving San Diego lumber prices higher in 2026?
Lumber prices reached $872/MBF nationally (and $600/MBF locally) due to three factors: Canadian lumber tariffs doubling to 35.2% total, 5 billion board feet of lost mill capacity since 2023, and persistent housing demand. Industry forecasts predict another price spike in Q3 2026 as these supply constraints intensify.
How much can prefab construction save on ADU projects in San Diego?
Prefab and modular construction reduces on-site labor needs by 15-20% in San Diego, with labor representing 35-39% of total construction costs. This translates to potential savings of 5-8% on total project costs, plus 70% faster completion timelines compared to traditional stick-built methods.
Should cash buyers delay renovation projects until lumber prices drop?
No—lumber prices are expected to fluctuate rather than fall significantly in 2026, with supply constraints and tariffs creating upward pressure. Combined with 6-8% annual labor cost increases, delaying projects likely means higher total costs. Locking in Q1-Q2 2026 pricing before the predicted Q3 spike offers better economics.
Rising construction costs making renovation projects financially unfeasible? Learn more about selling your San Diego property as-is to a cash buyer—no renovation budget needed, no construction delays, and you can close in as little as 7-14 days.