Lumber costs – down 30% in July but 72% higher than in Jan. – suggest prices are going down. But they aren’t. Year-to-year steel costs are up 109% and gypsum is up 16%.
CHICAGO – Building materials prices climbed 19.4% over the last 12 months – 13% in 2021 alone – according to the Bureau of Labor Statistics data.
Buyers are seeing those higher costs in the price of new homes. In June, the median sales price for a new home was $361,800, up 6% compared to a year earlier.
Steel mill product prices increased 10.8% in July following a 6.2% increase in June. Prices have increased 108.6% over the past year and 87.6% in 2021. Steel import tariffs have largely been blamed for the price swing.
Prices for gypsum products, used for drywall, rose 2.5% in July and are up nearly 16% in 2021. Copper has also been in short supply, builders report.
Softwood lumber prices decreased 29% in July, for the largest monthly decline in records dating back to 1947. Lumber costs started to move lower in mid-May. However, the price drop still hasn’t returned lumber to levels close to what they were before the pandemic. It’s down almost 30% since its peak, but it’s still 71.9% above January 2020 levels, according to the National Association of Home Builders.
NAHB says the cumulative effect of all the material costs, based on declining availability, drive up the price of new homes. Some builders are even halting new orders because of the difficulty in pricing projects.
“New residential construction remains strong, but building material pricing and availability are likely to remain significant headwinds,” says Charlie Dougherty, an economist at Wells Fargo.
Source: “Building Material Prices Climbing at Record Year-to-Date Pace,” National Association of Home Builders’ Eye on Housing blog (Aug. 12, 2021); “Rising Cost of Steel, Lumber, and Copper Is Hampering Homebuilding—and Pushing House Prices Out of Reach,” NBC News (June 16, 2021)
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