Building material prices for home building and remodeling are up 20% year-over-year and 33% higher since the pandemic began. This will be a lagging contributor to higher rents, home prices, and inflation given ongoing affordability challenges.
According to the latest Producer Price Index (PPI) report released today by the Bureau of Labor Statistics, the prices of goods used in residential construction ex-energy (not seasonally adjusted) climbed 1.4% in March, following an upwardly revised increase of 2.2% in February and 4.1% in January. This adds up to an 8% jump in building materials prices since the start of 2022. Year-over-year, building materials prices increased 20.4% and have risen 33% since the start of the pandemic.
The price index of services inputs to residential construction registered even steeper increases, rising 3.2% in March, 5.1% in February, and 6.2% in January. As a result, the price index of services used in home building (including trade services, transportation, and warehousing) went up 15.2% since the start of the year. Year-over-year, the index increased 18.5%. Counting since the start of the pandemic, services prices are now 39% higher.
Softwood Lumber
The PPI for softwood lumber (seasonally adjusted) increased 6% in March following a 2.6% increase in February and a 25.6% jump in January. As a result, the index increased 36.7% over the first three months of 2022. Since reaching its most recent trough in September 2021, prices have almost doubled, rising 90.4%.
Steel Products
In contrast with the overall ongoing building materials price increases, steel mill products prices (NSA) declined 4.9% in March, the third consecutive monthly decrease after record-breaking increases over the prior 15 months. While the first three months of 2022 have been good months for the cost of derivative steel products, the price index more than doubled since the start of the pandemic.
Ready-Mix Concrete
The PPI for ready-mix concrete (RMC, SA) came down 0.6% in March but remains elevated after climbing relentlessly over the prior 13 months. It is 9% higher compared to January 2021 reading.
Gypsum Products
The PPI for gypsum products (SA) increased 1.6% in March. Year-over-year, gypsum products prices are 20.8% higher.
Randolph is a Multifamily Investment Sales Broker with eXp Commercial servicing Multifamily Buyers and Sellers in the Greater Chicago Area.