Building Material Prices Climbing at Record Year-to-Date Pace

Filed in Economics, Material Costs, Trends by on August 16, 2021 22 Comments

Despite significant drops in framing lumber prices in recent months, overall building material prices have increased 19.4% during the past 12 months and 13% year to date, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. Prices paid for goods used in residential construction (excluding energy) rose 0.2% in July after climbing 3% in June (not seasonally adjusted). Building materials (i.e., inputs to residential construction less food and energy) prices have declined just twice since December 2019.

The record year-to-date increase stands in stark contrast with the same period in 2020, during which prices increased 1.1%. The average change in the building materials PPI between January and July was +1.2% from 2015 through 2019 (the most recent data available), less than one-tenth the gain thus far in 2021.

Price Data for Key Materials

Steel mill products prices climbed 10.8% in July following a 6.2% increase in June. The pace of increases has accelerated each of the last two months, and prices have climbed 108.6% over the past 12 months and 87.6% in 2021 alone.

The monthly change in the steel mill products PPI increased by more than 10% only three times (in 1947, 1948 and 2008) over the 80-year period ending in 2020. Monthly increases have already exceeded that mark four times in 2021.

The PPI for softwood lumber (seasonally adjusted) decreased 29.0% in July — the largest monthly decline since tracking of the series began in 1947. Prior to 2020, the largest monthly drop in the softwood lumber PPI was a -10.7% reading from April 1980. The steep decrease came on the heels of an unexpectedly mild 0.7% decline in June as the cash price of lumber began falling precipitously in mid-May. The PPI for softwood lumber has fallen 29.5% from its peak but remains 71.9% above its January 2020 level.

Although the direction of the softwood lumber index value change is encouraging, the continued volatility is not. Price volatility as measured monthly by the PPI or weekly by industry publications remains at an all-time high for a 12-month period.

Prices paid for gypsum products increased 2.5% in July and are up 15.8% year to date. Over the past 12 months, the index has climbed 21.7% — the largest 12-month increase since July 2006.

Ready-mix concrete prices were unchanged in July (seasonally adjusted) after increasing 1.1% in June.

NAHB economist David Logan provides more analysis in this Eye on Housing blog post.

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  1. Charles says:

    I think this article is a little out dated in this fast paced world. Here locally we have seen lumber prices tumble in the last 3 weeks. Home Depot had 7/16 OSB at $58 a sheet in July and yesterday it was $15. The local lumber yard is scrambling to figure out how to keep up.

    • John says:

      I think this article is a bit outdated as we have seen the price of 7/16 OSB in the $11 to $12 range per sheet at Menards on August 23rd. Local lumber yards (not big box stores) vary on their pricing so shopping prices is the name of the game these days. While I prefer to be loyal to my lumber yards pricing over the last few months forced me to shop. We are now including escalation clauses in our agreements to cover any future price increases.

  2. Margaret J Dunn says:

    The question I have for is how do these prices affect the contracts. My residence was scheduled for 3rd week of Feb,………..Now it is WHO KNOWS WHEN. I know prices are up but so us the waiting time. So WHATS UP

    • john newmyer says:

      Availability of materials is consistently inconsistent across the supply chain. Counter tops that were pre pandemic are now taking twice as long to have installed. The same is true for windows, doors, cabinets and other materials. Further price increases are pretty much constant.

      We are politely telling our new clients that a signing an agreement (contract) that:
      * What the current supply market conditions are.
      * We include an cost escalation clause in every project we are currently signing.
      * If they are not patient that they may want to delay the project until the supply chain and market conditions improve.
      * While we will do our best to deliver the project on budget and time, however current conditions will more than likely affect the timing and cost of the final project.

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