Building material prices increased 20.4% annually and have risen 33% since the start of the pandemic. Yet, a recent newsletter from Madison’s Lumber Reporter for the week ending on April 1, 2022, shows the price of softwood lumber was down 8% ($107) from the previous week at $1,303.
The latest producer price index (PPI) report from the U.S. Bureau of Labor Statistics (BLS) shows the price of goods used in residential construction ex-energy (not seasonally adjusted) jumped 1.4% in March, following an upwardly revised increase of 2.2% in February and 4.1% in January.
Particularly, the price index of services inputs (plating and polishing, coating and allied services, etc.) to residential construction registered an even steeper increase, rising 3.2% in March, 5.1% in February, and 6.2% in January. In all, the price index of services used in home building (including trade services, transportation, and warehousing) went up 15.2% since the start of the year. The index increased 18.5% year-over-year.
Since the start of the pandemic, services prices are now 39% higher. The PPI shift for individual building materials is as follows:
- Softwood lumber (the most common type of wood to build homes) increased 6% in March (seasonally adjusted) following a 2.6% increase in February and 25.6% jump in January. In all, the index increased 36.7% over the first three months of 2022. Since reaching its peak in September 2021, prices have almost doubled, rising 90.4%.
- Gypsum products (used to make plasters, drywalls, ceiling tiles, and more) increased 1.6% (seasonally adjusted) in March. Gypsum products prices are 20.8% higher year-over-year.
- Ready-mix concrete (used to build the foundation for a home) fell 0.6%. That is a seasonally adjusted figure for March but remains elevated after climbing the past 13 months. Now, it’s 9% higher compared to the January 2021 reading.
- Steel products (used for building structure) declined 4.9% (seasonally unadjusted) in a stark contrast to the rest of these building materials. This marks the third consecutive monthly decrease after record-breaking increases over the prior 15 months. Although the first three months of 2022 have been good months for the cost of derivative steel products, the price more than doubled since the start of the pandemic.
For the week ending on April 1, 2022, however, the price of lumber dropped to $829 per thousand board feet on Tuesday, Business Insider reported. Rising mortgage rates and growing inflation were cited as leading causes for the dip, along with a decline in home renovations. The drop in lumber prices could potentially be the boon home builders need to face persistent supply and demand issues that have been ongoing since the start of the pandemic.
In Canada, where the softwood lumber grows, full-year 2021 production volumes increased moderately as they had been throughout most of last year. It was smooth sailing until an incident occurred in November, significantly slowing down production. In November, highway washouts and mudslides occurred on the British Columbia railway, causing Canadian lumber production and capacity utilization rates to fall drastically in December 2021.
In December, when British Columbia sawmills could not ship wood due to the highway and railway damage, lumber manufacturing was down almost 24% to 573 million of foot board measures (mmfbm), compared to 753 in November. It was also down more than 23% compared to December 2020 when it was 748 mmfbm.
Ending the year with a huge decrease, Canada’s sawmill capacity utilization rate for 2021 was only 79% compared to 2020 when it was a very low 78%, according to Madison’s Lumber Reporter.
