Want to learn about price trends in construction?
We track material shortages & labor shortages, plus how interest rates alter demand.
Many people who are planning a construction project have seen recent headlines showing that lumber prices (and overall prices for building materials) have fallen since the peak in 2022. That’s true.
The price of construction materials is way down from the peak in March of 2022 (when it was up 94% since March of 2014) to only being up 56.8% since 2014.
However, many other materials are rising in price. See chart below.
Material prices remain volatile
| Material | Volatility | Price index YOY % change | Lead times | |
|---|---|---|---|---|
| Flat glass | Low | 8.2% | Increased | |
| Lumber and plywood | Low | -26.9% | Stabilizing | |
| Aluminum mill shapes | Low | 20.3% | Increased | |
| Insulation materials | Low | 16.0% | Increased | |
| Plastic construction products | Moderate | 27.0% | Increased | |
| Steel mill products | Moderate | 22.4% | Stabilizing | |
| Concrete products | Moderate | 13.5% | Increased | |
| Gypsum products | High | 18.9% | Increased | |
| #2 diesel fuel | High | 111.1% | N/A | |
| Copper and brass mill shapes | High | 0% | Increased |
A property owner wrote this to me on August 12, 2023:
Material costs have dropped and construction labor is about to be cheap (rising interest rates will create less demand), again. I can wait.
I replied with the following information.
If you are interested in the correlation between rising interest rates and construction labor costs, let’s review some data.
First, here is about 20 years of the Fed’s prime lending rate, with two very big increases (one in the last few years, plus another one from mid-2004 to mid-2006). Next, here is about 20 years of data on construction labor costs:
This next report from about 6 weeks ago has more background data, including on the origins of the latest shortage in labor for construction in the US… plus the data showing that the shortage continues to get worse, although less quickly than in 2022 (which was a period of a large and rapid increase in interest rates). It is now growing at a net rate of only 54,000 new unfilled jobs per month.
the link: https://buildertrend.com/blog/construction-labor-shortage/
Here is a chart from that article. While demand for residential construction is not increasing as fast as in other parts of the construction industry, the overall demand for construction labor has been rising (again, yes, even across a period of rapid and large increases in interest rates). So, once again, lately the labor shortage has been growing at only 54,000 jobs per month, which is slower than it had been growing prior to that.
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