The nationwide impact of California wildfires on construction costs and supply chains
13 March 2025
Wildfires in California are not just a regional disaster; they have significant implications for construction costs and supply chains across the U.S. With 60% of the state's valuable forests located in high-risk wildfire areas and California supplying 10% of the nation’s lumber, the ripple effects of these fires extend far beyond state lines.
Price trends and market dynamics
History has shown that major wildfires can drive substantial cost increases in building materials, particularly lumber. After the 2017 Tubbs Fire, which destroyed over 5,600 buildings, lumber prices surged 50% within a few months. More recently, in just the past six months, lumber prices have fluctuated between $475 and $625 per thousand board feet. Expert Kyle Little, chair of the North American Wholesale Lumber Association, predicts that prices could rise another 25% to 40%, even without factoring in the new tariffs. Frank Addiego, president of All Bay Mill & Lumber Co., notes that if tariffs slow the economy, a decrease in homebuilding could prevent prices from rising significantly.
The impact of California’s wildfires on material costs goes beyond lumber. The combination of increased demand for rebuilding efforts, unstable supply chains, and tariffs is putting pressure on all building material prices, including insulation, drywall, steel, and concrete. For example, the push for more fire-resistant construction, stricter building codes, and a shortage of lumber for residential builds may lead to increased demand for steel, leading to price increases.
Currie & Brown’s analysis anticipates:
- Localized impact: California lumber costs will increase by 6% in the first six months following the Eaton and Palisades wildfires.
- National impact: U.S. lumber prices will rise by approximately 3.5% in the first 3 – 6 months and 15% over the next 15 months, driven by increased demand and reduced supply. This increase does not include the impact of tariffs.
- Tariff pressure: The newly implemented 25% tariff on Canadian lumber, though postponed at the time of writing, will put additional strain on supply chains already struggling following the wildfires, driving nationwide prices higher.
- Broader material costs: Insulation, drywall, and concrete costs are already showing early signs of movement. However, tariffs on Canada and Mexico, which at time of writing are postponed until April 2nd, are expected to have a greater influence on these materials than the fires alone.
What this means for clients
Clients, contractors, and developers alike must plan carefully and take a proactive approach to successfully adapt to these shifting market conditions. Securing materials early or negotiating fixed pricing with suppliers can help manage costs. Project budgets and bids should factor in potential price fluctuations, while contracts may require price adjustment clauses to prevent losses.
Our recommendations
- Diversify material sources: Exploring alternative materials can help mitigate supply chain disruptions.
- Embrace flexibility: Contractors will need to be flexible with their material choices based on supply and rising costs due to tariffs.
Key insight for California
Rebuilding strategies for California: For residential construction, consider using innovative low-carbon concrete or recycled metals for better fire resistance than lumber. Use renewable energy, reduce waste, and incorporate sustainable designs to boost energy efficiency. Choose water-efficient landscaping to conserve resources. The 2025 California wildfires serve as a stark reminder of the complex relationships between natural disasters, supply chains, and the built environment. Despite the challenges ahead, the construction industry can navigate these disruptions by prioritizing strategic planning, securing materials early, and being ready to adapt. Proactive measures will be key to maintaining stability and mitigating cost impacts—both in California and nationwide.
Contact us to discuss how our expertise and data-driven insights can support your projects this year.
Notes/sources
- Number of wildfire incidents & acreage
- Top 20 destructive wildfires with number of structures: "Structures" include homes, outbuildings (barns, garages, sheds, etc) and commercial properties destroyed.
- Disasters, FEMA/HUD applications, and federal recovery funding
According to the National Oceanic and Atmospheric Administration, three primary factors influencing wildfires — temperature, humidity, and lack of moisture in fuels such as trees and shrubs — each have direct or indirect ties to climate change.
The rising reconstruction costs explored in CoreLogic’s recent report are another concern, with the firm pointing out that a California home with a reconstruction cost value of $500,000 in 2018 would now cost $667,500 to rebuild. Increased materials costs and labor shortages are contributing to the issue.