Building Material Costs Climb to Record Highs
The cost of construction materials is up across the board, putting a unique strain on homebuilders across the country.
The skyrocketing cost of lumber since the onset of the coronavirus pandemic has been one of the biggest stories in the homebuilding industry for more than a year. Though lumber prices dominate the headlines, the cost of other construction materials has risen as well, though not as dramatically. The industry then passes those costs along to consumers, creating problems.
“Rising materials prices are significantly driving up prices for single-family homes and apartments,” said Robert Dietz, chief economist for the National Association of Home Builders. “Combined with expectations of rising interest rates, these higher prices place additional pressure on housing affordability, which continued to decline in the first quarter.”
Here is a look at how the prices of key building materials has changed over the last year, based on data from the Bureau of Labor Statistics’ most recent Producer Price Index.
Price of Lumber
Lumber prices have had their most volatile year in history, thanks to supply-side constraints that limited production and unexpectedly high levels of homebuilding activity.
Softwood lumber prices increased more than 300 percent since April 2020. According to the PPI, softwood lumber prices jumped 6.5 percent from March 2021 to April 2021. That marked the third month in a row in which the month-over-month increase in lumber prices was a record high.
Price of Steel
The price of steel mill products has increased 55.6 percent over the last year. The month-over-month increase hit a record high in April for the third consecutive month, jumping up 18.4 percent from March.
“Steel mill products price volatility is greater than it has been at any time since the Great Recession,” said David Logan, senior economist for the NAHB. “Perhaps more concerning than rising prices is that the pace of price changes has quickened each of the past nine months.”
Price of Gypsum
Building materials that contain gypsum (like drywall, plaster, ceiling tiles and building blocks) have seen less dramatic but still substantial increases in prices over the last couple of months. After increasing by 4.4 percent from March to April, the PPI for gypsum building materials is up 13.3 percent year-to-date.
Price of Ready-Mix Concrete
Ready-mix concrete has not seen as steep a price increase as other materials, rising 1.2 percent from March to April. However, ready-mix concrete prices historically are incredibly stable, so even a small percentage change is noteworthy.
“RMC prices have exhibited unusual volatility since early 2018. increasing or decreasing by 1.0 percent or more five times during the period,” said Logan. “Since January 2000, RMC prices have moved by 1.0 percent or more 26 times and five have been over the past three years.”