According to the latest Producer Price Index (PPI) report, homebuilding costs are on the rise. The cost of building materials rose 0.4% in July, 2022.
It’s no secret that home prices have been on the rise in recent years. However, the pandemic has caused a surge in building materials prices that were rising by 35.7% since January 2020. The majority of this increase has occurred since January 2021, as the demand for homes has continued to outpace the supply. The result is that home builders are facing unprecedented challenges. The cost of building materials has soared, and the availability of land is limited. As a result, homebuilders are struggling to keep up with the demand, and home prices are likely to continue to rise.
Concrete products:
Even though the experts from National Association of Home Builders say that the U.S. has entered into a housing recession, the prices for some building materials are still rising!
According to the latest data from the Producer Price Index, prices for ready-mix concrete climbed +2.5% in July, 2022 and have increased in 17 of the last 18 months. The latest increase is the largest since prices climbed 3.7% in March 2006. The index has climbed 6.8%, year-to-date, the largest YTD July increase in the series’ 34-year history.
Of course, higher prices for concrete products mean higher construction costs, which will eventually be passed on to home buyers in the form of higher prices. But for now, home builders are enjoying a period of strong demand and rising profits. So if you’re thinking about getting into the home building business, now might be a good time to pour yourself into it.
Pictured in the photo Concrete is being poured in. New Construction Homes development in Mustang Lakes Subdivision in Celina TX
Pictured in the photo Concrete is being poured. New Construction Homes development in Mustang Lakes Subdivision in Celina TX
Softwood Lumber:
The home building industry has been one of the hardest hit sectors of the economy during the pandemic, with new home construction plummeting and home prices falling as a result. However, there may be some relief on the horizon in the form of lower lumber prices. The PPI for softwood lumber saw a modest increase +2.3% in July, 2022, its second decline in three months. Prices have fallen 28.2% year-to-date, which should help to lower the cost of new home construction and home renovations. Of course, the extent to which this decrease will be passed on to home builders and remodelers is still uncertain. But if lumber prices continue to fall, it could provide a much-needed boost to the housing market.
Pictured in the photo the lumber is prepared for new home construction. New Construction Homes development in Mustang Lakes Subdivision in Celina TX
Pictured in the photo the lumber is prepared for new home construction. New Construction Homes development in Mustang Lakes Subdivision in Celina TX
Gypsum Building Products:
The homebuilding sector has been on fire over the past year, as low mortgage rates and a desire for more space have fueled a boom in home prices and construction. This has been good news for producers of gypsum building products, which have seen their prices soar 22.6% over the past year. The price of gypsum products climbed 23.0% in 2021 and is up 7.6% through the first half of 2022. The PPI for gypsum products held steady in July 2022. The gypsum producers are benefitting from strong demand for their products.
Pictured in the photo the sheetrock is prepared for new home construction. New Construction Homes development in Mustang Lakes Subdivision in Celina TX
Pictured in the photo the sheetrock is prepared for new home construction. New Construction Homes development in Mustang Lakes Subdivision in Celina TX
Freight Transportation:
Although the cost of truck transportation has decreased slightly in recent months (-0.3% in July 2022), it is still up significantly from pre-pandemic levels (local transportation +18.9% and long-distance transportation +22.6%). This is just one factor that is driving up the price of home construction. Home builders are also facing higher prices for building materials and services to arrange freight logistics. As a result, home prices are likely to continue to rise in the months ahead. For home buyers, this means that it may be a good time to start looking for a new home sooner rather than later. By beginning your search now, you may be able to find a home that meets your needs before prices increase even further.
Pictured in the photo the local delivery of brick for new home construction. New Construction Homes development in Mustang Lakes Subdivision in Celina TX
Pictured in the photo the local delivery of brick for new home construction. New Construction Homes development in Mustang Lakes Subdivision in Celina TX