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notes from jim haughey
materials cost for single family construction rising againMaterials cost for single family construction rising again
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Average May prices fell 2.4% for Gypsum products, 2.1% for softwood lumber and 0.7% for softwood plywood. In the past year lumber prices dropped 36%, gypsum products 22% and plywood prices 17%. Further small declines are likely in the next few months but the long price collapse is nearing an end now that housing starts have stopped declining and are set to increase steadily for several years.
The only significant price increases in May were for asphalt (at the refinery) 8.6%, diesel fuel 4.4% and concrete block 3.8%. Road asphalt prices have not yet caught up with the recent rise in crude oil prices so one or more big monthly jumps are still ahead. Similarly, diesel fuel price increases are lagging crude oil price increases because of high inventories of refined products. Generally, diesel prices will continue to rise at a 10-15% annual pace through next year although prices have been steady in the month since the May price survey was done. The increase in concrete block prices is due to temporarily lean inventories. Cement prices were unchanged in May and prices declined for most other concrete products.
For the whole economy prices increase 0.2% in May but were 4.7% below a year ago. The total construction materials index shows about the same pattern. Prices rose 0.6% in May but were 5.5% below a year ago. The recession has created enough slack to keep inflation in the 0.0-1.0% range for the rest of the year but it will be more for single family construction where spending is recovering earlier than in the rest of the economy.
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Member Comments
Boris poses a critical question. Massive foreclosures in the weakest housing markets have pushed existing home prices below equilibrium with new home prices even after homebuilders have trimmed features, wage rates and their own margins. This is temporary but it may persist for more than year more in the Southwest and Southeast and industrial Midwest. This imbalance will be solved initialy by more reductions in the value of land. Homebuilders, unfortunately, typically own the land. Builders who buy land now or build on customers’ land will not have this problem. Eventually, balance will be restored by rising prices for existing homes …
Sir, I am observing an interesting phenomena in the housing market. The recent price collapse in the existing homes and the wave of foreclosures led to a situation when existing homes are 10%-15% cheaper than a comparable new construction home. And the new construction contractors cannot budge as their costs are higher than the price of a comparable existing unit. Something’s got to give in the longer term (say 1-3 years). What is it going to be? The cost of the land, construction materials, labor? I appreciate your thoughts.
Thanks sir,
What about the construction material prices in this region especially for stainless steel are they expected to revive with the rise in stainless steel base price by many stainless steel majors, which is taking place off late.
Through May, construction starts in California are about even with the same period last year. for the whole country, nonresidential construction starts are down 13% year to date. But at the same time, california is losing construction jobs faster than the rest of the country. the intrepretation is that the construction recession began earlier in California and is ending a bit earlier. Again, at the same time, a large than usual share of started projects in California have been slowed or stopped accounting for the outsize drop in construction jobs in relation to projects started. Do not confuse California’s “worst in …
Sir,
I am ram working as a steel commodity analyst for Beroe Inc. At present I am working on U.S. construction industry segment. With your vast expertise, I kindly request you to provide an insight on how the construction industry segment is in CA.
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