Construction Material Costs Hardly Budge in Latest Quarter

The increase in RSMeans’ January 2008 Construction Cost Index (CCI) was 3.6% versus January 2007. The total CCI is based on a national 30-city average. Included with this report are charts showing the year-over-year results, back to January 1999, for 49 major cities in the United States.

The year 2004 was the period in which construction costs in the United States had their biggest increase in this latest cycle. At that time, RSMeans’ 30-city national average cost index climbed +10.5%. This shows up in the accompanying charts as January 2005 versus January 2004.

Since that time, construction costs have moderated in all cities. The crisis in housing starts has been a contributing factor. There can be some degree of substitution, both in terms of material and labor, between residential markets and the non-residential sector. The RSMeans index mainly focuses on non-residential building work.

Only Eight Cities Exceeded the Consumer Price Index (CPI)
In the accompanying charts, only eight cities had year-over-year construction cost increases above the gain in the all-items Consumer Price Index (+4.3%). The eight cities were: Las Vegas (+5.7%); New York (+5.4%); Chicago (+4.9%); San José (+4.9%); San Francisco (+4.7%); Austin (+4.5%); Washington (+4.5%); and Milwaukee (+4.4%).

On a year-over-year basis, installation costs (+3.8%), which are essentially labor costs, increased slightly faster than material costs (+3.5%). Furthermore, over the last three months, total material costs have hardly moved at all.

Some Significant Year-over-year Material Cost Increases
Some of the most significant material cost increases on a year-over-year basis in the latest CCI calculation were as follows: reinforced concrete, +7.8%; structural metal framing, +7.7%; and doors and frames, +8.9%. The largest decline came in plaster and gypsum board at -9.0%.

However, the annualized change in total material costs in the latest quarter was only +0.4%. The latest annualized change in labor costs was +3.5%, a figure that has not changed much over the last several quarters.

For more information on U.S. city construction costs, please also see Reed Construction Data’s story entitled, “Increases in Construction Costs Remain Low in RSMeans’ Latest Report”.