Residential Building Materials Prices Up 23%

Prices paid for goods used in residential construction increased 22.5% compared to one year ago, with specific material prices advancing nearly 90%. The data comes from the Bureau of Labor Statistics’ recent Producer Price Index report. Building materials alone increased 9.4% year over year and increased just 0.4% in 2020, says the National Association of Home Builders. Steel products posted a 2.4% price increase just last month, but it’s a less intense increase from the previous three months when steel prices averaged 15.9%. For the past 12 months, steel product prices are up 75.4% and rose 59.4% this year alone.

Softwood Lumber

The PPI for softwood lumber (seasonally adjusted) rose 19.2%–the largest monthly increase since September 2020—and set a record high for the fourth consecutive month. Lumber prices have remained extremely volatile since the 88.5% increase between April and September 2020.

Since falling 22.9% between September and November, the softwood lumber PPI has risen 81.2%. However, recent data from Random Lengths suggests that the index will decline next month as weakening prices in late-May and the first half of June are captured by the BLS survey.

Lumber Futures

Good news has been found in the futures market of late, as July lumber futures have fallen precipitously in recent weeks.  Since May 10, the price of July futures has declined 44.2%.  It is worth noting the features of lumber futures as they explain why changes in the futures market may not be a practical leading indicator of how much builders will pay for framing packages in the months ahead.

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