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Increasing Housing Material Prices

The cost for home building materials has increased.  The cost of materials accounts for one third of a new home’s selling price.  When the costs of materials increases at 10 percent, the price increase per house is equivalent to $8,500.  However, in the current conservative appraisal environment the price increases are not always possible.  Two recent NAHB surveys highlight the extent of these trends and the materials that have been most affected.

The survey participants were builders and building material sellers.  The surveys asked about the types of commodities they bought and the degree of price change they experience over the last six months.

Builders confirmed that their main purchases included framing lumber, windows, doors, millwork, gypsum, and roofing materials.  The materials that experienced increases in price were framing lumber, OSB, plywood, gypsum, trusses, ready mix concrete, roofing materials, and cement.

Dealers confirmed that their main sellers were OSB, framing lumber, plywood, windows, doors, gypsum, and insulation.  Most of the dealers experienced an increase in prices charged.  Dealers were also more likely than builders to receive higher prices for doors, SIPs, windows, and insulation.

Five materials were most cited by builders as having price increases.  The survey also showed the greatest change in the number of builders experiencing increases.  In mid-2012, 58 percent of builders experienced price increases for framing lumber.  In mid-2013, the number of builders who experienced this increased to 92 percent.  Builders who experienced price increases in OSB and plywood increased one third.  Builders who experienced price increases for truss increased to 80 percent from 51 percent.

Supporting Indexes

What builders and dealers are experiencing was confirmed by independent measures that produce price indexes.  From May 2012 to May 2013, the price of softwood lumber increased 26 percent; the price of OSB increased 74 percent; the price of plywood increased 14 percent; and the price of gypsum increased 19 percent.

The materials that were purchased the most had the largest pricing increases.  According to builders, a typical home’s total building material costs increased 5 percent in a six month time-frame.  For larger builders (100 or more starts for year), material costs increased 5.6 percent.  And, material costs increased the most in the South and West.

According to building material dealers, they received more than a 10 percent increase in a six month time frame for the materials they sold.  Some of this differential is because most dealers concentrate on selling materials with the largest price increases.

Source: www.builderonline.com

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