November 21, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for October. Producer prices for finished goods declined by 0.2% in October following a 0.1% decline in September. Increases in core prices (excluding food and energy) of 0.2% and food prices of 0.8% were offset by a 1.5% decline in energy prices, pushing the overall index down.
Wood products prices edged up as the monthly PPIs are beginning to reflect increases in weekly measures. Gypsum prices declined modestly from a recent May peak but the outlook is for higher prices in 2014 given announced planned increases for 2014 from National Gypsum.
September 13, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for August. Producer prices for finished goods rose 0.3% in August driven by increases in food (0.6%) and energy (0.8%) prices. Excluding food and energy, the core index was flat.
The PPI for softwood lumber rose 2.6% from July to August after declining 2.3% from June to July. Strong demand from China helped the rebound. Offshore markets have gained favor as recent price declines have triggered the return of the export tax on Canadian shipments to the US.
OSB prices declined 9.5% in August, bringing them to their lowest level since the run-up that began in early 2012, but leaving them still 34.6% higher than that low point.
Gypsum prices declined slightly in July and August, a two month decline of 1.8%, but the prospect of price relief was short-lived. Prices are currently at 92.6% of their peak housing boom levels and at least one major producer, National Gypsum, has announced a 20% price hike effective with 2014 shipments. This price increase is eerily similar to the hikes in early 2012 and 2013.
August 14, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for July. Producer prices for finished goods were flat in July after rising 0.8% in June and 0.5% in May. Excluding food and energy, the core index continued its recent stability rising 0.1%. A 0.2% monthly decline in energy prices and flat food prices held the headline index flat despite the 0.1% increase in core prices.
PPIs for softwood lumber and OSB continued the descent that began earlier this year. Softwood lumber prices declined 2.3% from June to July, extending the decline from the recent April peak to 16.6%. However, softwood lumber prices are still 9.9% above prices from one year ago before the sharp run-up in late 2012 and early 2013.
OSB prices declined 12.2% in July, extending the decline from the March peak to 28.4%. OSB prices remain 48.8% above prices prior to the housing recovery that began in 2012.
Weekly indicators show wood prices rebounding somewhat in recent weeks, but the sharp declines remain largely intact. These declines are based on significant increases in productive capacity in the lumber and OSB industries which are likely to be added to rather than subtracted from as the housing recovery continues.
The PPI for gypsum dropped slightly in June and July. There have been some plant re-openings and reconfigurations in the industry but it remains to be seen whether recent declines are the beginning of a normalization of gypsum prices. Gypsum prices remain 37.3% above housing bust lows and 98.2% of housing boom peaks.
July 18, 2013
After a period of significant increases, the growth in the prices of building materials has slowed according to June Producer Price data from the Bureau of Labor Statistics (BLS).
Year-over-year growth in gypsum prices slowed by 3.8 percentage points to 15.6%. Annual softwood lumber price growth decelerated by 8.7 percentage points to 8.0%. And Oriented Strand Board (OSB) prices grew by 37.0% year-over-year in June, still high, but 17.8 percentage points less than the year-over-year growth recorded in May.
The slowing of the growth of building material prices is good news for builders and bears watching for the rest of 2013.
For the economy as a whole, producer prices for finished goods rose by 0.8% on a seasonally adjusted month-over-month basis in June, the second consecutive month of growth.
June 21, 2013
The home building industry is facing emerging shortages of key building materials like lumber and wall board, according to surveys conducted by the National Association of Home Builders (NAHB) and National Lumber and Building Material Dealers Association (NLBMDA) in May.
Among builders, the highest incidence of shortages was for oriented strand board (OSB), with 22 percent of builders reporting shortages, followed by gypsum wall board (20 percent), framing lumber (18 percent) and plywood (also 18 percent). Except for wall board, the incidence of shortages for these products was higher among the lumber dealers, with 27 to 28 percent of dealers reporting shortages of OSB and plywood, and 36 percent reporting a shortage of framing lumber.
The builder and lumber dealer surveys both asked about shortages for the same list of 24 building products and materials. The top 12 (based on share of builders reporting shortages) are shown below.
For most of the 24 products, the share of builders reporting a shortage was considerably higher in May of 2013 than in 2011 or 2012. For example, the share of builders reporting a shortage of framing lumber jumped from 3 to 4 percent in 2011 and 2012 to 18 percent in May of 2013. The share had been as high as 24 percent in October of 2004, but starts at that time were over 2 million.
Although the shares of reported shortages are not as high now as they were in 2004 or 2005, the recent surges are significant when you take the early stage of the housing recovery into account. In 2004 and 2005 the home building industry was producing over 1.8 million new homes a year. Although the current rate of new housing starts is still below 1 million, supply constraints like shortages of materials, lots, and labor have emerged as barriers to a more robust recovery.
The final study, showing complete results from both surveys, is available HERE.
May 15, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for April. Overall, producer prices declined for a second month based on continuing declines in energy prices, but the sharp price increases for the building materials framing lumber and OSB may be nearing an end.
The PPI for finished goods declined 0.7% in April from March (seasonally adjusted) driven by a 2.5% decline in energy prices. Core prices (excluding food and energy) continued their modest pace, rising 0.1% in April. Declining food prices also contributed to the decline in overall producer prices.
The monthly PPIs for framing lumber and OSB increased from March to April, 3.2% and 6.5% respectively, but weekly price data from Random Lengths indicate that turning points during April may be the beginning of a reversal of the steep increases that have accompanied the housing market recovery. If sustained these declines should appear in the June release of the May data.
Indexing both the PPI and the Random Lengths framing lumber price to January 1995 shows that they move together closely, reflecting the same price dynamics, with the weekly data from Random Lengths showing a larger amplitude in the changes. Based on monthly prices the PPI indicates a 67% increase from the 2009 trough to April; the weekly data show a trough to April increase of 124% in lumber prices.
Price increases for OSB are even more dramatic. According to the PPI data OSB prices have increased 151% since bottoming out in the housing bust; the weekly Random Lengths data show a 206% increase.
A break in prices would be a welcome relief for builders. With house prices less than 10% above their housing bust lows, the impact of these rising input costs has presented a significant challenge for builders during the recovery.
April 12, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for March. Overall producer price increases have been relatively modest but prices for some building materials have soared in the last year.
The PPI for finished goods decreased 0.6% in March from February (seasonally adjusted) based on declines in energy prices, and prices are up 1.1% from one year ago (unadjusted). In comparison, the PPIs for gypsum, softwood lumber and OSB are up 18%, 30% and 68%, respectively, since last March.
In the case of gypsum and softwood lumber this brings price levels back to 93% of their housing boom highs, OSB (the most volatile of the three) is back to 65%.
The housing recovery that has gained strength since late 2011 is now putting pressure on a home building infrastructure that downsized during the housing bust. The increase in prices reflects the friction as supply chains and distribution networks are rebuilt. Lumber and wood products producers have begun to add back idled capacity but warn the process takes time.
Sharp price declines for these products in the near term are unlikely, but materials price have been vulnerable to market forces in the past. Positive signs for the future include producers’ recognition of the financial incentives to expand output, particularly given how much housing market recovery is still to come. Also, buyers in supply chains have been unwilling to overstock at such high prices. There is an expectation of price declines, the question is timing. There is a lot of uncertainty in the marketplace.
March 14, 2013
The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for February. Energy prices, rising 3.0% based largely on gasoline prices, pushed the overall index up 0.7%. Food prices declined 0.5% while the core price index (i.e., excluding food and energy) was stable, rising 0.2% since last month.
While overall producer prices have been relatively stable, the prices for certain building materials have risen rapidly as the housing recovery has gained momentum since the beginning of 2012. Overall producer prices are up less than 3% while softwood lumber, OSB and gypsum prices are 30%, 80% and 26% higher than at the start of 2012.
The rising prices of these building materials represent a significant challenge for home builders as they find themselves squeezed between rising input prices and a housing market where prices are only recently recovering from their steep declines.
November 16, 2012
The Bureau of Labor Statistics (BLS) has released the Producer Price Indexes (PPI) for October. Producer prices continued the recent pattern of following energy prices. The PPI for finished goods declined by 0.2% in October from September while the index for energy goods declined by 0.5%. The core index which excludes food and energy declined by 0.2%.
Turning to the inputs for home building, prices for gypsum declined slightly in October but are 13.8% higher than at the start of the year. Prices for softwood lumber have been volatile in recent months, declining in October but averaging roughly 10% above last year’s levels. Prices for OSB continued their climb and now stand 52.1% above levels at the beginning of the year. Reports of another round of increases in gypsum prices in 2013 as well as continued strength in OSB prices could pose challenges for builders in 2013.
November 16, 2012
In a recent article, NAHB asked who is most often responsible for choosing everything from wood products to electrical and plumbing fixtures, finishing materials, siding, windows and doors, and other items that go into a new home or home renovation. Then, the surveys went one step further and asked, regardless of who chooses these products, where are they generally purchased?
Perhaps not surprisingly, the results show that builders and remodelers themselves have the greatest influence on product selection. The main exceptions to this rule are products like appliances, flooring, lighting, countertops and cabinets, which are often chosen directly by the consumer, particularly in remodeling projects. Meanwhile, products chosen most often by subcontractors are limited to electrical and HVAC equipment and ducts.