Eye On Housing
Residential construction goods input prices declined, on average, in August as large monthly increases and decreases offset each other, according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics. Although the index for inputs to residential construction fell by 0.5% (not seasonally adjusted), it has increased more than twice as much in 2018 (+4.9%) as it did over the same period in 2017 (+2.0).
Perhaps the most concerning news in the report was the relatively sharp increase in prices paid for gypsum products. Prices have climbed 6.1% (seasonally adjusted) since a two-month reprieve that saw the gypsum index decline 3.3% between May and July. February to April 2016 was the last two-month period in which gypsum prices rose by 6% or more.
From January to August of 2017, the price index of gypsum products rose 3.9%. The index has more than doubled that pace in 2018, having increased 8.2%, year-to-date.
On a more sanguine note, softwood lumber and OSB prices each decreased substantially in August (not seasonally adjusted). Softwood lumber fell 9.6%, its largest monthly decline per the PPI in over seven years (May 2011).
Similarly, the index for prices paid for OSB (and waferboard) decreased by 11.8% in August, the largest such decline since July 2013.
As expected, the August PPI release captured more decreases in prices paid for softwood lumber that began in mid-June. Even after accounting for the most recent price movements, the average price paid for softwood lumber in 2018 remains the highest on record according to Random Lengths data—22.0% above the prior record set in 1997.
The index for ready-mix concrete (RMC) prices fell (-0.1%), the fourth consecutive monthly decrease after increasing in 10 of the preceding 11 months (seasonally adjusted). After an uncharacteristically large monthly increase in March—when the index rose 3.3%–the PPI for RMC has fallen back in line with its long-run trend.
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