The price of construction materials for new homes continues to escalate going into summer. On top of already volatile supply chain effects still lingering from the COVID-19 pandemic, material costs are now starting to be impacted as inflation impacts most sectors of the economy.
In 2021, the price of construction-related materials rose 15.9% throughout the year. Since the beginning of 2022, prices have continued that trend. Building materials prices increased 2.4% in February, 1.9% in March, and 0.5% in April, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics.
As mortgage rates continue to increase and overall inflation concerns rock the economy, demand for housing is beginning to soften. As a result, some material prices reflect this new decreased demand level.
Prices of softwood lumber continued to climb throughout the early spring months. Now, lumber costs are beginning to deescalate as housing demand softens. The PPI for softwood lumber fell 15.6% in April. This price relief comes after a volatile two years of prices, with increased costs adding up to an estimated $18,600 to the price of a new home, according to the National Association of Home Builders (NAHB).
“Lower single-family construction starts in April reflects our recent builder surveys showing notably weaker confidence in the single-family market, as rising mortgage rates and building material construction costs are driving more potential buyers out of the market,” said Jerry Konter, chairman of NAHB and a builder and developer from Georgia.
Month-over-month gypsum product prices were unchanged in April. However, they have increased 23.5% overall since January 2021.
Steel mill product prices rose 2.4% in April, which is the first monthly increase in price so far in 2022. The price of steel skyrocketed 128% in 2021, according to NAHB.