At this point in the miseries of the building supply chain, if it’s a month, it must be a time for rising prices. That’s what January brought, according to the National Association of Home Builders.
The organization said home construction costs rose 3.6% in January 2022. That did not include energy prices, which, as oil once again approaches $100 a barrel, promise additional pain.
The increase in materials figure has not been seasonally adjusted. Economics often makes adjustments to account for regular variations, smoothing a data series for a better sense of trends. However, when changes quickly move out of past patterns, determining seasonal adjustments becomes difficult at best. Figures not seasonally adjusted can offer more information to businesses in such situations.
Rapid and unpredictable changes are exactly where the industry has been. In October 2021, experts were beginning to suggest that timber prices could reach a new normal. At the end of last year, higher prices combined with volatility were the holiday gift. As Mike Wisnefski, CEO of digital lumber marketplace MaterialsXchange, told GlobeSt.com at the time, if prices stay high through mid-January, they could go up and “could go a lot higher.” high because people can’t wait” to buy what they need. Increased demand would act as a financial lift for commodities.
Clearly, prices have remained longer than in the middle of last month. NAHB said the Bureau of Labor Statistics’ January producer price index showed a 25.4% jump in software lumber used in framing. Painting, both interior and exterior, increased by 9%.
Overall, building material prices rose 20.3% year over year. The PPI has increased by 8.4% over the past four months.
Material prices are part of construction costs. Services too and their contribution to residential construction rose 2.9% in January and 1.3% the previous month. “The index is 8.9% higher than the previous year and 24.1% higher than January 2020,” the NAHB website said.
Non-residential construction saw some relief as steel prices fell 1.9% in January, the first drop in 18 months. However, comfort is low as prices are still about double what they were a year ago.
Ready-mixed concrete rose 1.4% in January; gypsum products increased 23% year over year.
Many of these gains are significantly higher than the nation’s headline inflation figures.