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Construction input prices rising, impeding inventory

With the number of entry-level homes falling short of demand in the busy spring buying season, all eyes are on the construction sector to deliver inventory. Rising prices for construction goods, however, are impeding the addition of new homes.

The latest Producer Price Index released by the Bureau of Labor Statistics revealed that construction input prices are growing at a more rapid pace in 2019 than during the same period in 2018. Prices rose 2.3 percent over the first three months of this year, compared to 1.9 percent over the first quarter of last year.

For context, the average January-to-March increase since 2000 is 1.1 percent. Construction goods prices are now at their highest level since last October.

Those gains persist despite recent price moderation for both lumber and gypsum. After climbing 2.3 percent in February, prices for softwood lumber grew at a milder 0.5 percent rate in March. And gypsum, which is used to make drywall, has seen a downward trend since last year, falling a total of 10.1 percent since August 2018.

Rising prices, along with the mounting cost of labor, remain a big concern for builders — and the entire housing sector because of it.

“If builders could build more affordable housing tomorrow, they would,” explained National Association of Home Builders researcher Rose Quint in a Scotsman Guide News Q&A last month. “The reason they haven't been able to ramp up production of those homes to a larger extent is because of the price constraints they have on at the input level of everything that goes into a home. Everything from steel and lumber and toilets just make it very difficult to buy materials that [allow them to] build a house at lower price point.”


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