Rising building material prices spread

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The Bureau of Labor Statistics (BLS) released its Producer Price Index report for June 2021. It showed building material prices rose 3.2% in the month, adjusted for seasonal. The index was 20.4% higher than its level a year earlier.

Overall prices of processed goods for intermediate demand increased by 1.9%. This index was 22.6% higher than its level a year ago.

For reference, the variations in these indexes can be compared to a 5.4% increase in the all-items consumer price index (CPI-U) for the 12 months ending in June. CPI-U rose 0.9% for the month. Over the past 3 months, the unadjusted CPI-U has increased at an annualized rate of 10.3%.

The housing portion of the CPI-U rose 0.5% in June. It was up 2.6% from the previous 12 months.

Yield Pro (PRO) has compiled the price changes reported by the BLS for our standard list of construction products. These are raw materials whose prices directly impact the cost of building an apartment building. The two columns on the right of the table show the percentage change in price of the product compared to the previous year (12 MB PC Change) and the percentage change in price compared to the previous month (1 MB PC Change). If no price data is available for a given product, the change is indicated as N/A.

Commodity 12 MB Change of PC 1 MB Change of PC
Softwood lumber 125.3 -2.1
Hardwoods 37.4 0.0
General carpentry 8.0 1.5
Soft plywood products 207.1 20.2
Hot rolled steel bars, sheets and sections 35.6 3.5
copper wire and cable 39.8 1.8
Power wire and cable 41.8 9.7
Builder’s Material 9.4 5.9
Plumbing fixtures and fittings 2.8 0.3
Sanitary ware in enameled iron and metal 3.1 0.2
Furnaces and heaters 7.1 2.6
Sheet metal products 21.2 8.1
Electric lights 1.2 1.0
Nails 13.4 7.6
Major Appliances -0.2 -0.2
flat glass 9.5 4.0
ready concrete 3.1 0.8
Roofing and asphalt coating 12.1 0.5
Gypsum products 18.0 3.3
Mineral wool insulation 12.1 2.3

The first chart below shows the history of the Wood Products Price Index over the past 25 months. It should be noted that the prices used for the elaboration of the indices are recorded on Tuesday of the week containing the 13and day of the month. In June 2020, that would have been June 15. Because the prices of some of the products we track move rapidly, and the prices tracked here are at the wholesale level, changes in the indices may not reflect changes in retail prices.

wood price

The price of lumber on the wholesale market continued to decline from the peak reached in early May. The contract price hit a high of $1,686 on May 7, but was trading as low as $550 on July 14. That’s still significantly higher than its price in 2019, when it traded between $300 and $400 for most of the year. Wood prices on the futures markets have also fallen since last month. The January 2022 contract was trading around $650 in mid-July. The fact that this price is above the current spot price of lumber indicates that the futures markets think a price rebound is coming.

The price of soft plywood products jumped double digits again this month, according to the BLS. For the fifth consecutive report, its monthly and annual price gains exceeded those of lumber.

The following chart below shows the recent price history of several other building materials. Prices for electrical wires and nails rose sharply during the month. Prices for copper wire and hot-rolled steel also rose, but less sharply than in recent months.

price of building materials

The price of copper is also down from the peak reached in early May. It closed on July 12 at $4.35 per pound, down from its recent high of $4.76 but up 54% from its price in early January 2020. Copper futures prices remained in line with the spot price, with the January 2022 contract trading at $4.31 per pound.

The price of aluminum also peaked in early May, trading at $2,540 per metric ton. However, unlike the commodities discussed above, its price has not fallen appreciably. In fact, its price surpassed its May high when it closed at $2,556 on July 5. It is only slightly down from that high, closing at $2,490 on July 12.

The price of steel has been trading in a relatively tight range since the May 11 high. MarketWatch reports that it closed July 12 at $1,779, down 8% from its recent high. However, it was trading at just $1,091 at the end of 2019. Steel futures continue to indicate that the price will only gradually decline over the next 12 months, with the January 2022 contract trading around of $1,470.

The prices of most of the other commodities tracked in this chart have risen over the past 6 months at increasing rates. Although not shown in the chart, prices for sheet metal products and construction hardware are also rising rapidly.

The price variations of several of the most finished products in our sample are illustrated in the final table below. Based on recent price increases, inflation contagion could spread to furnaces and heaters as well as electric light fixtures. Interestingly, prices for major appliances and enameled iron and metal bathroom fixtures have been relatively stable despite widespread price increases elsewhere.

price of building materials

The full BLS report is available here.

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