Residential Construction Inputs Higher Amid Record Material and Service Prices

Filed in Material Costs by on December 17, 2021 3 Comments

According to the latest Producer Price Index (PPI) report, released by the Bureau of Labor Statistics, the prices of goods used in residential construction excluding energy climbed 1.8% in November (not seasonally adjusted). Meanwhile, the price index of services inputs to residential construction decreased 0.8% in November, continuing a four-month trend during which the index has declined 10.1%.

The PPI for all inputs to residential construction — a weighted average of goods and services, which increased 0.3% in November — has climbed 17.3% over the past 12 months and is 22.7% higher than its pre-pandemic level.

Specific product breakdowns include:

  • Softwood lumber (seasonally adjusted) increased 6.9% in November and has gained 16.1% since September. The recent trend of mill prices suggests that the softwood lumber PPI is headed for another sizable gain in December. Visit nahb.org to see the latest framing lumber prices.
  • Steel mill products prices rose 2.4% in November, the smallest monthly increase since May 2021. The last monthly price decrease in steel mill products occurred in August 2020, and the index has climbed 151.4% in the months since.
  • Ready-mix concrete (RMC) gained 0.9% in November after increasing 0.1% in October. The index for RMC has risen 8.3% since January 2020 and 6.6% year to date — the largest year-to-date increase in November since 2005.
  • Gypsum products declined (-0.2%) for only the second time in 2021. Gypsum products prices have climbed 19.8% over the past 12 months and are up 18.8% in 2021.
  • Exterior and interior architectural coatings (i.e., paint) increased 1.5% and 0.2%, respectively, in November. Neither index has declined since January 2021.

Specific service breakdowns include:

  • Building materials wholesaling decreased 1.4% in November, and building materials retailing declined 1.6%. The wholesale and retail services indices measure changes in the nominal gross margins for goods sold by retailers and wholesalers. Gross profit margins of retailers, in dollar terms, have declined 22.1% since reaching an all-time high in June 2021, but remain 33.4% higher than the January 2020 level.
  • The prices of legal, architectural and engineering services rose 0.3%, 0.3% and 0.2%, respectively, in November. Although the year-to-date increase in prices of professional services used in residential construction are quite modest compared to that of materials, prices have increased more in 2021 than they had by November 2020.
  • Metal treatment services increased 0.7%, on average, in November. The services used to calculate the inputs to residential construction include plating and polishing, coating and allied services, and heat treating. Metal coating and allied services have increased the most — 14.1% (not seasonally adjusted) — since the start of 2021.

David Logan, NAHB director of tax and trade policy analysis, provides more in this Eye on Housing post.

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Comments (3)

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  1. Shawn Troutman says:

    As a builder I feel like our current administration is allowing this to happen by basically paying people to stay home as well as letting the lumber companies and others to price gouge the public like the pharmaceutical companies have been doing for year

  2. Mark Edy says:

    I have a real problem with the complaints about the high cost of lumber. When I started in the lumber business in 1972, the Random Lengths average price for Western softwoods was around $150 per Mbf. The average house price in America was $35,900, the average cost of a new car was $3,500 and the cost of a loaf of bread was ?$0.25. Today, the average house costs $408,800 or over 11 times more, an average new car costs $45,000 or nearly 13 times more, while a loaf of bread averages $2.50 or 10 times higher. At the same time the average price of lumber has soared to around $1,100 or 7.3 times higher! If anything maybe the builders have been to accustomed to prices that were always too low. In reality the average pri9ce of lumber should be more equivalent to that of bread or $1,500 per Mbf. You accept higher prices for other commodities, why not lumber?

  3. SULLIVAN D HANNA says:

    This didn’t just happen under this administration. If you’d like to go back to 2020 price increases , then
    re-elect the last administration in 2024.

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