Building costs are running about 2.5% higher than a year ago, according to eight construction cost indexes measuring the direct input costs for la-bor and materials. However, contractors on bid day are eating most of these higher costs as fierce competition cuts into margins and forces down the selling price of construction.

The Lee Saylor subcontractor index and the Turner and Rider Hunt general building indexes, which measure the selling price of construction, are up just 0.4% from a year ago. "Subcontractors and general contractors are both cutting margins to maintain their backlog," says Julian Anderson, president of Rider Hunt Levett & Bailey, Scottsdale, Ariz. "Our index indicates that the true bid cost of construction increased less than 0.1% over the last quarter."

Click below for more articles from Third Quarterly Cost Report>>

Summary: Cheap Money Heating Up Costs
Materials: Perfect Storm Blows Prices Sky-High
Equipment: Fighting Rising Insurance Rates
Labor: Unemployment Fails to Dent Wage Hikes
Insurane: Pressure Grows on Workers' Comp