Eye On Housing
Prices paid for goods used in residential construction continued their upward trend in August, increasing 0.9% (not seasonally adjusted) according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. It is the fourth consecutive monthly increase since the index declined three months straight and brings the index back to its pre-pandemic level. Prices of excluding energy increased 1.0% over the month.
The four-month increase is almost exclusively due to the dramatic rise in softwood lumber prices, which advanced 14.9% in August. Prices have increased nearly 50% since April, the largest four-month gain in the history of the unadjusted data series which dates back to 1949.
It is the second-largest increase since seasonally adjusted data has been available since 1975. The index has decreased 1.3% year-to-date (YTD), a larger decline than the prior record for a July YTD decrease (-0.9% in 2000). Prices paid for goods used in residential construction have only fallen five times between January and June since 2000.
In addition to nominal price increases and tariffs on Canadian lumber, cross-border purchasers have been hurt by a weakening U.S. dollar (USD) in recent months. Since late-March, the USD has depreciated nearly 10%.
Prices paid for gypsum products fell 0.2% in August following a 0.4% decrease in July (seasonally adjusted). The price index for gypsum products has risen 0.5% over the past 12 months and is 8.3% lower than the most recent peak reached in March 2018.
Gypsum product prices have declined 3.1% YTD. Prices paid for gypsum increased 8.6% per year, on average from 2012 to 2017. In contrast, prices decreased 4.0% and 2.8% in 2018 and 2019, respectively.
Nationally, prices paid for ready-mix concrete (RMC) fell 0.3% in August (seasonally adjusted), mostly offsetting a 0.3% increase in July.
Prices fell in the Northeast (-2.1%) and Midwest (-2.3%), were flat in the South region, and increased 2.5% in the West (not seasonally adjusted).
Other changes in indexes relevant to home building and infrastructure are shown below.
No one can build affordable housing at these high cost. What are we to do with our low income families who can no longer pay rent where they live? Affordable housing is needed and needed now.
I agree Diane! The mills need to work with us, these prices are uncalled for!
ICF construction (insulated concrete forms). Cement prices been flat.
Time to end the Trump tax on lumber coming in from Canada for starters. This also highlights the need for something other than the traditional stick by stick built single family dwelling which is grossly inefficient in every respect.
You are SO right about building with alternative methods that are quicker, more efficient, more affordable, and more pocket-friendly in every single way! Question is, who’s ready to join me in creating something new? Let’s call it the revolution in reinventing the home.
The savings could be in modular construction in a central plant or building area and right at the begining the WASTE will be a savings @ at least 25% and then the savings for building the stick walls in a controlled area.
Modular homes do not appraise the same as traditional homes. They are similar to trailers in design and upgrading them is very expensive. I call mine “my cardboard” house.
We will need to use our resources more efficiently. Precise engineering of the strength of materials so We can use less material and achieve the same strength….creative construction techniques, less waste on the job.
Of course, construction materials and methods have improved over the years…and the efficiency of our machines and appliances have come a long way, but, as the demand for resources rises and availability is limited, We will need to get creative and efficient in our ‘ways’.
Yes, it’s Trump’s fault, and one side of the moon is always dark, that’s Trump’s fault too. The CCP virus and ensuing mill shutdowns at a time when more and more people were staying home and starting projects created a perfect storm of decreased production just when demand was increasing. I’ll agree in retrospect that the Canadian tariffs were a little gas on the fire, but I salute the President for seeking tariff parity with our trading partners around the globe. Just wait till the vaccines or therapeutics become available and demand for oil spikes way up faster than oil companies can increase production – a similar price increase scenario to what we’re now experiencing with soft woods could become a reality at the pump. In the meantime, this is an opportunity for steel framing, 3cm porcelain pavers, and synthetic decking to garner increase market share. Will be interesting to see what happens.
Bob is spot on. Why not blame trump for everything. Quit blaming, get creative and most of all work harder…. that’s how American’s do it. There are no handouts.
there are plenty of hand outs. real estate magazine showed people’s income skyrocketed during the pandemic getting handouts. Sec8 housing, welfare, unemployment, food stamps and my favorite that pays a lot: disability–claim you get stressed thinking of work and they don’t argue. Works every time!
People are teaching their kids to do the same and it’s getting worse.
Will we see changes in building codes? Alternative building supplies? Perhaps 🤔. The cost of stick built homes is unsustainable at this rate.
Our lumber industry has been choked off by all of the tree huggers in this country. Poor management in our national forests have caused a multitude of disasters from wildfires to massive beetle kills because none of the timber has been harvested and thinned. If we would properly harvest this renewable resource, it would take care of the soaring prices and make for a more healthy forest.
Well said Joe.
This is not the fault of Trump, it’s a multifaceted cause and effect that directly and indirectly impacts supply and demand. If you are uneducated perhaps some comments can and should be ignored.
At the end of the day, we have a shortage of supply due to production output attributable to Covid and workforce for production and manufacturing and distribution, natural disasters due to hurricanes and fires, and individuals like myself wanting by to enhance their property by adding an addition and facing an additional 40% to the cost.
Has nothing to do with Trump policy.
Housing industries fixing to get a nose dive. More money to buy houses means less customers. Less lumbar yard visits. More people in debts. Investments with no returns. More people living in less standard houses.
I am getting tired of every industry jumping on the price increase train and blaming the coronavirus or Trump. I am skeptical about the need for all of the price increases and suspect good old greed is playing a factor.
It is also the perfect path for the Fed to dilute the massive debt that our government has added to our backs. Inflation makes this debt easier to pay off the borrowed money with deflated dollars.
Exactly.
With lumber prices increasing everyday, why not recycle the lumber when demolishing an old houses??