Prices for Building Materials Posted Another Gain in May

Building materials prices have risen 5.4% year-to-date and were up 36.3% year-over-year in May after a 1.8% monthly increase, according to NAHB Eye on Housing. Prices have grown a whopping 40.4% since January 2020, pushing the cost of construction to new highs.

The PPI for gypsum products climbed 7.1% in May, reaching a 22.6% year-over-year increase after posting solid gains in 2021. The price of exterior paint has risen 50% in the months since January 2021 and 14.5% in the first five months of 2022. Softwood lumber has been one of the most closely watched building products prone to frequent price fluctuations over the last two years, and it seems the days of irregularity aren’t yet over. The seasonally adjusted PPI for softwood lumber rose 0.4% in May after a 15.6% decline in April, while the “mill price” of framing lumber has dropped by more than 35% since mid-May.

The price index of services inputs to residential construction was driven 0.4% lower in May by decreases in the building materials retail and wholesale trade indices. The services PPI is 8.3% higher than it was 12 months prior and 42.9% higher than its pre-pandemic level.

The PPI of most durable goods for a given month is largely based on prices paid for goods shipped, not ordered, in the survey month. Combined with survey timing issues, this can result in lags relative to cash market prices, suggesting a large decrease in the softwood lumber producer price index may be reflected in next month’s release.