At this point in the building supply chain miseries, if it’s any month, this must be a time for rising prices. That’s what January brought, according to the National Association of Home Builders.
The organization reported that residential construction costs were up 3.6% in January 2022. That didn’t include energy prices, which, as oil again nears $100 a barrel, promise additional pain.
The materials increase figure was not seasonally adjusted. Economics often make adjustments to account for regular variations, smoothing a data series for a better sense of trends. However, when changes rapidly move out of prior patterns, determining seasonal adjustments becomes difficult at best. Non-seasonally adjust figures can offer more insight for businesses in such situations.
Rapid and unpredictable changes are exactly where the industry has been. Back in October 2021, experts were starting to suggest that lumber prices might be rising to a new normal. By the end of last year, higher prices combined with volatility were the holiday present. As Mike Wisnefski, CEO of lumber digital marketplace MaterialsXchange, told GlobeSt.com at the time, if prices remained high through mid-January, they could kick up and “could go much higher because people won’t be able to hold off” buying what they need. More demand would act like a financial elevator for commodities.
Clearly, prices stayed around longer than the middle of last month. NAHB said that January’s producer price index from the Bureau of Labor Statistics pointed to a 25.4% jump in the software lumber used in framing. Paint, both indoor and outdoor, was up 9%.
Overall, building material prices increased by 20.3% year over year. The PPI has been up 8.4% over the last four months.
Material prices are a portion of construction costs. So are services and their contribution to residential construction were up 2.9% in January and 1.3% the month before. “The index is 8.9% higher than it was a year prior and 24.1% higher than the January 2020 reading,” the NAHB’s site stated.
There was a bit of relief for non-residential construction, as steel prices came down 1.9% in January, the first drop in 18 months. However, the comfort is small as prices are still roughly double those of a year ago.
Ready-to-mix concrete saw a 1.4% gain in January; gypsum products were at a 23% year-over-year increase.
Many of these gains are significantly higher than the country’s overall inflation numbers.