Rise in building material prices despite falling timber prices
The Bureau of Labor Statistics (BLS) released its Producer Price Index report for August 2021. It showed prices for building components and materials rose 0.2% during the month, seasonally adjusted. The building materials and components index was 19.0% above its level of the previous year.
Aggregate prices of products processed for intermediate demand rose 0.9% during the month. The index was 23.0% above its level a year ago.
For reference, the changes in these indexes compare to a 5.3 percent increase in the All-items Consumer Price Index (CPI-U) for the 12 months ending in August. The CPI-U rose 0.3% for the month.
The shelter portion of the CPI-U was up 0.2 percent in August. It increased 2.8% from the previous 12 months.
Yield Pro (PRO) has compiled the price changes reported by the BLS for our standard list of construction products. These are raw materials whose prices directly impact the construction cost of an apartment building. The two right columns of the table show the percentage change in product price from the previous year (12 MB PC change) and the percentage price change from July 2021 (1 MB PC change). If no price data is available for a given product, the change is listed as N / A.
For this report, a new column, titled Pre-covid Change, has been added to the table. This column lists the evolution of current building material prices relative to average prices in the first three months of 2020, before the pandemic hit the economy. This may give a more accurate idea of ââthe magnitude of recent price increases for raw materials, such as lumber, which were already rising sharply last summer.
|Merchandise||PC change 12 MB||1 MB of PC change||Pre-covid change|
|Soft plywood products||87.3||-16.3||210.8|
|Hot rolled steel bars, plates and sections||49.0||2.4||44.3|
|Copper wire and cable||31.4||1.9||36.3|
|Power wire and cable||39.8||3.0||42.2|
|Plumbing fixtures and fittings||4.1||1.0||4.9|
|Enamelled iron and metal sanitary ware||6.4||0.7||3.9|
|Ovens and radiators||6.2||-0.7||8.9|
|Sheet metal products||25.7||1.9||25.1|
|Electric lighting fixtures||6.0||1.9||5.4|
|Asphalt roofing and cladding||15.8||3.5||16.5|
|Mineral wool insulation||21.9||5.8||19.6|
The first graph below shows the history of the wood product price index over the past 25 months. Note that the prices used for the compilation of the indices are collected on the Tuesday of the week containing the 13e day of the month. In August 2021, that would have been August 10.
While the BLS reported that the price of softwood lumber is down for the month and year, this is in part because the price peaked in August of last year. The price of softwood lumber is still significantly higher than the level observed before the pandemic.
The wholesale lumber market price has recently been between +/- $ 50 and $ 500. It closed on August 10 at $ 505 and closed on September 9 at $ 510. Lumber prices on the futures markets have strengthened slightly since last month. The January 2022 contract was trading around $ 607 in mid-September, up $ 60 from last month. The prices of more distant futures are lightly traded and therefore may be of limited use as a signal of market direction.
The price of soft plywood products fell this month, according to the BLS. However, the price of soft plywood products is still three times its pre-pandemic level. This is by far the highest rate of price appreciation of any building material we track.
The following chart, below, shows the recent history of several other building material prices. Prices were up for most products with a high metal content, with prices for electrical wires rising 3.0% in the month. Nail prices were the exception to this rule, falling 1.3%. However, nail prices have risen nearly 20% from pre-pandemic levels.
MarketWatch reports that the NYSE American Steel Index closed on August 10 at $ 1,899 but closed on September 9 at $ 1,729. Steel futures indicate that prices will only gradually decline over the next 12 months. The January 2022 contract was recently valued at $ 1,680, up $ 115 since our last report.
The price of copper fell to as low as $ 4.04 a pound in mid-August, but closed on September 9 at $ 4.29. This is a slight drop from its level last month.
The price of aluminum has continued to rise over the past month. It closed at $ 2,840 on September 9, up $ 265 from its level in our last report.
The prices of other building materials shown in this graph have been on the rise since the start of this year. Prices for gypsum products and asphalt roofing and siding posted double-digit year-over-year gains.
The price changes for many of the more finished products in our sample are shown in the final table below. While the prices of major appliances and electric light fixtures increased significantly for the month, the items in this chart include most of the building materials in our table whose annual price increases are still in single digits.
The full BLS report is available here.