Builders Report Easing Prices, Fewer Shortages
by Lew Sichelman
After being hit by "a huge increase" in the cost of many building materials this summer, builders throughout the country are now reporting easing prices and fewer shortages.
That doesn't mean the cost of new homes will be coming down, according to Michael Carliner, an economist with the National Association of Home Builders. But at least the pressure on builders to raise their prices won't be as great, he said at the NAHB's annual convention in Orlando last week.
During the past year, new home construction has been running at a record pace, and the cost of the wood, cement and other materials needed to erect the typical single-family home has escalated significantly.
In July, the NAHB said that the availability and cost of many products had become "a serious concern." In the case of lumber and cement, suppliers were being blocked by import barriers; in other instances, such as oriented strand board (OSB), which is now used in place of many plywood applications, there just wasn't enough capacity to keep up with demand.
Whatever the reason, the NAHB estimated that in July, higher construction costs had pushed the price of the average house up from $5,000 to $7,000.
Now, though, the situation is easing, Carliner said at the big NAHB conclave, which ended Sunday. "We won't be seeing the kinds of price increases this year that we saw last year," he told reporters.
Lumber prices already are falling in anticipation that Canadian export duties will be eliminated, he said. And new OSB and wood panel factories will be coming on line soon.
As of late December, supplies of concrete products were still "an issue" in 35 states, and Edward Sullivan, chief economist at the Portland Cement Association expects demand to remain strong "for the foreseeable future."
But he also pointed out that domestic producers are expanding their capacity as rapidly as possible. "Fourteen major expansions" are planned in the 2005-2010 time period, he said -- and should be able to keep pace with demand going forward.
[14 expansions planned after this runup. sheeesh mish]
Foreign suppliers, who produce about a quarter of total U.S. consumption, will continue to be hindered by a lack of ships to bring their products to the states, Sullivan also reported. Nevertheless, thanks in part to the weak dollar abroad, he said import volumes into U.S. markets "have increased significantly" during 2004's last quarter.
According to NAHB's latest poll, not as many builders are seeing shortages of cement, ready-mix concrete or concrete brick and block. The availability of such other key products as clay brick, insulation, gypsum wall board, roofing materials and windows and doors is greater than it was as recently as October, the survey also found.
Builders were still seeing price increases in these and other materials, however. The cost of steel reinforcing bar, commonly referred to as rebar, was up 28 percent. The price of lightweight steel for framing was up 27 percent, and the price of steel beams has jumped by 22 percent.
But for wood products, which account for the lion's share of a typical new home's cost, "the worst is over," Carliner said.
Indeed, though builders who responded to the survey continued to gripe about escalating costs -- builders always need something to complain about, the NAHB economist said -- the majority reported that obtaining the framing lumber, trusses, OSB and plywood they need is not as big a problem as it was just three months earlier.
Published: January 19, 2005
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