Quarter three 2025 would best be described as “pretty flat” for custom homes in Prescott. Activity slowed, which matches the time of year, and uncertainty kept some buyers on the sidelines. Interest rates have come down from their highs, and affordability is slowly improving, yet many clients continued watching the market instead of starting a build. Behind that quieter surface, material costs stabilized, labor costs rose modestly instead of spiking, and the broader economy stayed positive. That combination sets up a more favorable environment for thoughtful, high-performance custom homes heading into 2026. (Source: Bureau of Economic Analysis)

Residential Construction Materials Prices

Materials no longer swing wildly month to month, and that helps us give tighter budgets and fewer surprises. National Producer Price Index (PPI) data show inputs to new residential construction up about 2–3% over the last year, with building materials themselves up roughly 3–4%. (Source: Eye On Housing)

Key categories we watch closely:

• Lumber: Prices have flattened compared to last year after the pandemic-era roller coaster, with softwood lumber only modestly higher year-over-year and trending down from spring peaks.(Source: Yield PRO)
• Steel: Steel mill products are up roughly 3–4% year-over-year as tariffs and tighter global supply keep pressure on metal components.(Source: baldwincpas.com)
• Concrete: Ready-mix concrete remains steady, with small monthly changes but still several percent higher than two years ago.(Source: baldwincpas.com)
• Paint and coatings: Architectural coatings continue to see low single-digit annual increases driven by resin and pigment costs, according to recent PPI releases and industry summaries.(Source: Bureau of Labor Statistics)
• Glass: Flat glass sits a few percent higher than last year, with prices up about 3–4% year-over-year.(Source: Yield PRO)
• Gypsum: Drywall and gypsum products are essentially flat to slightly up versus last year after several years of larger jumps.(Source: baldwincpas.com)
• Plastics: Plastic-based construction components track the broader “inputs to construction” index, which is up about 1.7% year-over-year.(Source: baldwincpas.com)

Land remains a major cost driver. Prescott still offers strong value compared to many Western markets, with large, buildable view lots available and custom home construction typically running in the $400–$600 per square foot range, depending on design and finishes. Custom Home Builders in Prescott AZ

Residential Construction Labor Costs

Labor costs continue to rise, yet the pace feels more manageable than in prior years. Nationally, total compensation for civilian workers increased about 3.6% over the 12 months ending June 2025, with construction-specific wages up roughly 4.2% over the year based on the Employment Cost Index. (Source: Bureau of Labor Statistics)

Locally, subcontractor availability has improved compared to the peak shortage years. Schedules still need careful coordination, but we see fewer “we’re booked for six months” responses and more realistic lead times. That stability helps us maintain our open-book, no-surprises approach and keep high-performance details—like spray foam insulation and efficient heat pumps—properly sequenced instead of rushed.

The Economy

Economic conditions matter for anyone planning a custom home. Real U.S. GDP grew at an annualized 3.8% in Q2 2025, and early estimates point to solid growth continuing into Q3.(Source: Bureau of Economic Analysis) Inflation has cooled to around 3% year-over-year, and the Federal Reserve cut its policy rate twice in 2025, bringing the federal funds range down near 3.75%–4.0%. (Source: Inflation Calculator)

Mortgage rates reflect that shift. Thirty-year fixed rates now sit in the low-6% range after spending much of the last couple of years above 7%. (Source: AP News) The move downlines up with what we are seeing on the ground: more inquiries, more design conversations, and renewed interest from clients who had paused their projects earlier. Prescott’s median listing price hovers around the mid-$700s with modest year-over-year declines, while median sale prices sit near $600,000 with days-on-market improving.(Source: Realtor.com)

Demand for well-built, energy-efficient custom homes remains steady, especially among clients relocating from California, the Northeast, and colder climates who value comfort, low operating costs, and durability over time.

Conclusion

Q3 2025 felt pretty flat overall, yet easing rates, stable material pricing, and modest labor inflation point toward better affordability for high-performance custom homes in 2026. Call our office today (928-776-0301) to discuss your project and check back here to get the latest numbers.

Building Tomorrow’s Homes Today.