Building material prices continue roller coaster ride

The price of material for new homes continues to spiral up and down as the supply chain remains unstable following the impacts of COVID-19 and the pent-up demand for new housing.

Building materials prices increased 15.9% in 2021 and have climbed 18.6% since December 2020, according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics.

On the lumber side, just as homebuilders were starting to see some relief in costs, prices started to climb again. According to the National Association of Home Builders (NAHB), the PPI for softwood lumber (seasonally adjusted) increased 24.4% in December and has shot up 44.5% since September.

Source: NAHB

NAHB reports the volatility in lumber prices at this level has not been seen since prices were first recorded. The monthly change in softwood lumber prices averaged 0.3% between 1947 and 2019, according to NAHB. In contrast, the percent change of the index has averaged 12.0% since January 2020—the highest 24-month average since data first became available 1947 and nearly triple the previous record.

“The price and availability of building materials, and the supply chain in general, remains the most pressing, immediate challenge for builders as they seek to add housing supply,” said Chuck Fowke, chairman of the NAHB and a custom homebuilder from Tampa, Florida. “Policymakers must focus on easing production bottlenecks and eliminating tariffs on Canadian lumber to help address the issues builders are currently facing.”

Gypsum products prices ended the year 18.2% higher than they were in January of 2021, but they started a downward trend in November, according to NAHB.

Steel mill products prices rose 0.2% in December, which is the smallest monthly increase for the products since September 2020, according to NAHB. Monthly price increases have slowed in each of the past five months.